Euro fails to extend earlier strength and retreats today as the day goes on mild concern of political turmoil in Ireland. Irish Prime Minister Brian Cowan resigned as head of Fianna Fail party at the weekend.

The Greens also pulled out of the ruling coalition even though they indicated support to crucial finance bill. The news so far has little impact on the expectation for the pace of austerity. However, it's seen as sign of deepening political problems in Ireland and gives markets some reason to take profits on Euro longs. In any case, the retreat is so far mild and there is no change in the near term bullish outlook in Euro against dollar.

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Reactions to Eurozone data is mild today. Eurozone PMI manufacturing missed expectation and dropped slightly to 56.9 in January while PMI services beat expectation of rose to 55.2. German PMI manufacturing dropped slightly to 60.2 while PMI services rose to 60. French PMI manufacturing, though, dropped sharply from 57.2 to 54.3 but services PMI jumped sharply from 54.9 to 57.1. Eurozone industrial new orders rose 2.1% mom, 19.9% in November.

Australian dollar was mildly lower in Asian session today as PPI report missed expectations. But the Aussie quickly regained some strength later in the day. Producer prices rose 0.1% qoq, 2.7% yoy versus expectation of 0.5% qoq, 3.2% yoy. Economists said that strength in the Aussie was one of the major factors in limiting the gain in PPI. More focus will be on tomorrow's CPI data which is expected to accelerate to 0.8% qoq, 3.0% yoy in Q4. Markets expect that the jump in CPI partially reflects the flooding that put upward pressures on food prices. While tomorrow's CPI might surprise on the upside, the RBA won't be raising rates yet until at least getting full assessment on the economic impact of the Queensland flood.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3504; (P) 1.3564 (R1) 1.3681; More.

EUR/USD's mild retreat today suggests that a temporary top is in place at 1.3623 and intraday bias is turned neutral for the moment. Some consolidations would be seen first. But after all, there is no change in the near term bullish outlook as long as 1.3245 support holds. That is, whole decline from 1.4281 has completed with three waves down to 1.2873 already. Break of 1.3623 will bring rise resumption to retest 1.4281 resistance.

In the bigger picture, main question remains on whether medium term correction from 1.6039 has finished with three waves down to 1.1875. The firm break above 1.35 psychological level again affirm the case that fall from 1.4281 was merely a correction only and whole rise from 1.1875 is still in progress. Also, note that break of 1.4281 will revive the case that medium term correction from 1.6039 was completed with three waves down to 1.1875 and the long term up trend might be resuming. On the downside, though, below 1.2873 will turn focus back to 1.1875 low.

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Economic Indicators Update

GMTCcyEventsActualConsensusPreviousRevised
0:30AUDPPI Y/Y Q42.70%3.20%2.20% 
0:30AUDPPI Q/Q Q40.10%0.50%1.30% 
8:30EURGerman PMI Manufacturing Jan60.260.960.960.7
8:30EURGerman PMI Services Jan605958.359.2
9:00EUREurozone PMI Manufacturing Jan56.957.157.1 
9:00EUREurozone PMI Services Jan55.254.354.2 
10:00EUREurozone Industrial New Orders M/M Nov2.10%2.10%1.40% 
10:00EUREurozone Industrial New Orders Y/Y Nov19.90%17.50%14.80%