Dollar is sharply lower today on the back of strength in Euro as well as commodities. In particular, crude oil climbs to new high of 74.48 which indicates that medium term rebound isn't over yet. Stocks open higher with DOW back above 9400 level and and makes a new high following stronger than expected existing home sales which rose to 5.24M in July. Yen remains in tight range against most majors though, supported by strength against dollar.

Euro was boosted by stronger than expected PMI readings released earlier today. Manufacturing and services both improved more than expected to 47.9 and 49.5 in August respectively. Most importantly, Germany Services PMI rose sharply to 54.1, first expansion reading in a year. French Manufacturing PMI also rose to 50.2.

Technically, deeper than expected fall from 79.51 in dollar index dampened the view that 77.43 is the bottom already. Favor is shifts back to the case that medium term fall from 89.62 is heading to a new low below 77.43 before completion. Further decline is now expected as long as 78.67 resistance holds.


EUR/USD Mid-Day Outlook

 EUR/USD's rise from 1.4050 extends further to as high as 1.4351 in early US session. Break of 1.4326 resistance indicates that fall from 1.4446 has completed with three waves down to 1.4045 already and the corrective structure in turn indicates that medium term rally is still in progress for another high above 1.4446. Short term outlook will remain bullish as long as 1.4208 support holds and EUR/USD will target a retest of 1.4446 first.

In the bigger picture, while current development indicates that EUR/USD has not topped out yet, there is not change in the view that rise from 1.2456 is the third leg of the whole consolidation pattern that started at 1.2329. Hence while another high above 1.4446 could be seen, strong resistance should be seen as EUR/USD approaches 61.8% retracement of 1.6039 to 1.2329 at 1.4622 and finally bring reversal. On the downside, below 1.4045 will revive the case that EUR/USD has already topped out.


Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised
07:30EURGerman PMI Manufacturing Aug P4947.145.245.7
07:30EURGerman PMI Services Aug P54.148.848.448.1
08:00EUREurozone PMI Manufacturing Aug P47.947.84646.3
08:00EUREurozone PMI Services Aug P49.546.645.645.7
14:00USDExisting Home Sales Jul5.24M5.00M4.89M 
14:00USDBernanke Speaks at Kansas City Fed's Jackson Hole Conference ----