Dollar is under renewed selling pressure as stocks are set to open higher in US session. ECB left rates unchanged as widely expected. In the following press conference, ECB President Trichet said that current interest rate of 0.1% is appropriate and pledged that monetary policy will do all that’s needed to maintain price stability over the medium term. Meanwhile, growth forecast of Eurozone is raised from 0.8% to 1% this year. But growth projections for 2011 was lowered from 1.5% to 1.2% due to weaker domestic demand. Inflation forecast was raised due to Euro's depreciation. CPI is expected to rise 1.5% and 1.6% in 2010 and 1011 respectively, up from prior projection of 1.2% and 1.5%. Regarding the bond purchase program, Trichet refused to reveal more information other than on what the bank has bought. Meanwhile, he also said there is no immediate plan to absorb excess liquidity. On the other hand, BoE kept rates unchanged at 0.5% and also left the target for its bond holdings unchanged at GBP 200b.
On the data front, US jobless claims was still high at 456k. trade deficit in US was basically unchanged at -$40.4b in April. Exports dropped -0.7% to $158.8b while imports dropped -0.4% - $189.1b. Canada recorded trade surplus of $175m in April but exports dropped CAD -1% while imports dropped -2.2%. Canadian new housing price index rose 0.3% mom in April. German CPI was finalized at 0.1% mom, 1.2% yoy in May. Japan Q1 GDP was finalized at 5.0% annualized rate, up from prior estimate of 4.9% and expectation of 4.2%. Household confidence rose slightly to 42.8 in May. Australian data showed more than expected 26.9k expansion in the job market in May. Unemployment rate dropped further from 5.4% to 5.2%. China exports jumped the most in six years by 48.5% yoy and trade surplus widened CNY 19.5B.
Among the major currencies, NZD is the best performer today, thanks to RBNZ rate hike overnight. NZD/USD is drawing strong support from 0.4890 to 0.7632 at 0.6585. Recent consolidations will likely continue further and will possibly bring stronger rebound towards 55 days EMA (now at 0.6943). But after all, we'd expect upside to be limited there and bring resumption of the whole medium term fall from 0.7632 after finishing the rebound.
USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 1.1413; (P) 1.1484; (R1) 1.1553;
Intraday bias in USD/CHF is mildly on the downside for the moment as consolidations from 1.1729 extends and deeper fall could be seen. But still, we'd expect strong support from 1.1244 (38.2% retracement of 1.0434 to 1.1729 at 1.1234) to contain downside and bring up trend resumption. On the upside, above 1.1554 minor resistance will flip intraday bias back to the upside first. Decisive break of 1.1729 will target 1.1963 next, 200% projection of 1.0131 to 1.0897 from 1.0434 at 1.1966.
In the bigger picture, as noted before, rise from 0.9916 is treated as resumption of the long term rise from 2008 low of 0.9634. Such rise is expected to have a test on 1.1963/2296 resistance zone first and then 100% projection of 0.9634 to 1.2296 from 0.9916 at 1.2578. On the downside, break of 1.0897 resistance turned support is needed to be the first sign of reversal. Otherwise, we'll stay bullish.
Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised 21:00 NZD RBNZ Interest Rate Decision 2.75% 2.75% 2.50% 23:50 JPY GDP Q/Q Q1 F 1.20% 1.00% 1.20% 23:50 JPY GDP Annualized Q1 F 5.00% 4.20% 4.90% 23:50 JPY GDP Deflator Y/Y Q1 F -2.80% -3.00% -3.00% 23:50 JPY Domestic CGPI Y/Y May 0.40% 0.30% -0.20% -0.10% 01:10 NZD RBNZ Governor Bollard Speaks -- -- 01:30 AUD Employment Change May 26.9K 20.0K 33.7K 35.3K 01:30 AUD Unemployment Rate May 5.20% 5.40% 5.40% 05:00 JPY Households Confidence May 42.8 42 42 06:00 EUR German CPI M/M May F 0.10% 0.10% 0.10% 06:00 EUR German CPI Y/Y May F 1.20% 1.20% 1.20% 11:00 GBP BoE Interest Rate Decision 0.50% 0.50% 0.50% 11:00 GBP BoE Asset Purchase Target 200B 200B 200B 11:45 EUR ECB Interest Rate Decision 1.00% 1.00% 1.00% 12:30 EUR ECB Press Conference -- -- 12:30 CAD Trade Balance (CAD) Apr 0.2B 0.7B 0.3B 12:30 CAD New Housing Price Index M/M Apr 0.30% 0.30% 0.30% 12:30 USD Trade Balance Apr -40.3B -$41.0B -$40.4B 12:30 USD Initial Jobless Claims 456K 447K 453K 14:30 USD Natural Gas Storage 91B 88B 18:00 USD Monthly Budget Statement May -$140.0B -$82.7B