Euro surges against dollar today with the help of successful bond auction in Spain and France. Spain treasury sold all EUR 3b 15 year bonds, also known as obligacion, receiving a total of EUR 7.722b bids comparing to bid-to-cover ration of 1.79 in April. Average yield was at 5.116%, which was higher than April's sale at 4.434% but was below 5.20% secondary market level ahead of the auction. Also, in two tenders, the French Treasury Agency sold EUR 8.395b of short-term paper maturing 2012, 2013 and 2015, just below the maximum intended EUR 8.5b. It also sold EUR 1.77b of inflation-linked paper, maturing in 2019 and 2022. Markets viewed the solid result of easing funding stress and bids up Euro. EUR/USD breaks through 1.28 level to resume recent rebound, taking other European majors higher.

Markets sentiments were a bit weak earlier today as China's GDP expansion slowed more than expected to 10.3% QoY in Q2 while industrial production also slowed more than expected to 13.7% yoy in June. But sentiments recovered on Spain's bond auction as well as solid earning report from JPMorgan. In addition, jobless claims in US dropped more than expected to 429k, giving risk appetite another lift. Other data released from US saw PPI dropped -0.5% mom, rose 2.8% yoy in June with PPI up 0.1% mom, 1.1% yoy. Empire State manufacturing index was extremely bad which dropped sharply from 19.57 to 5.08 in July. Industrial production rose 0.1% in June.

BoJ left overnight call rte unchanged at 0.1% by unanimous vote as widely expected. Economic assessment is unchanged to as the bank noted that Japan's economy shows further signs of a moderate recovery, induced by improvement in overseas economic conditions. Growth projections for this fiscal year was revised up from 1.8% to 2.6%. However, growth projection for next year was cut from 2.0% to 1.9%.

Dollar index's strong break of 38.2% retracement of 74.19 to 88.70 at 83.15 solidify the case that fall from 88.70 is correcting the whole medium term rise from 74.19. Further decline should be seen to 80.04 support, which is close to 80 psychological level as well as 61.8% retracement at 79.73. We'll stay bearish as long as 84.56 resistance holds.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2692; (P) 1.2734 (R1) 1.2787; More.

EUR/USD rises further to as high as 1.2863 so far in early US session. Intraday bias remains on the upside and further rally should be seen to 1.3105/3123 cluster level next (38.2% retracement of 1.5143 to 1.1875 at 1.3123, 161.8% projection of 1.1875 to 1.2466 from 1.2149 at 1.3105). On the downside, below 1.2716 minor support will turn intraday bias neutral and bring consolidations. But downside should be contained by 1.2522 support and bring another rise.

In the bigger picture, the strong break of medium term falling trend line resistance indicates that whole decline form 1.5143 has made a medium term bottom at 1.1875 already. Rebound from there is viewed as a correction and could target 1.3266/3691 resistance zone. Nevertheless, we'd still maintain our bearish view that whole down trend from 1.6039 would extend as long as 1.3266/3691 resistance zone holds. Such decline is still expected to resume sooner or later to 1.1639 and below, after completing the current rebound.