Euro weakens further today as weakness in crosses continues. Markets remain cautious on the common currency ahead of bank stress test result. Meanwhile, Euro is weighed down mildly by poor bond auction result by Portugal. Yield on the EUR 1.253b 12-month bill sold today more than doubled that was sold in March and averaged as high as 2.452%. Bid to cover ratio was at 1.3, which was also much lower than 3.2% in March auction.

BoE minutes revealed that the MPC voted 7-1 to keep rates unchanged in July, with Andrew Sentance as the lone dissenter and voted for a 25bps hike again for the second consecutive time. The minutes noted that prospects for GDP growth had probably deteriorated a little over the month. Meanwhile margin of spare capacity was likely to bear down on inflation and bring it back to the target in the medium term once the impact of temporary factors had worn off. After all, the minutes suggested that BoE is in no hurry to remove policy stimulus. Meanwhile, one thing to note is that MPC member Posen said yesterday that more than 50% likelihood in my estimation the right next move will be to loosen rather than to tighten. Sterling is volatilie after the release but shows no clear direction so far.

The Committee of European Banking Supervisors would detail three scenarios together with the bank stress tests results this Friday. The three scenarios would include a benchmark for 2011, an adverse scenario as well as a case with sovereign shock. It's believed that markets would be most interested in the last scenario where estimated losses of sovereign debts would be revealed in the worse case.

Bernanke will have his first day of the semi-annual testimony before Congress today. Recent data from US were generally soft. Fed has somewhat downgraded the economic outlook for this year in last week's statement. Some people are speculating that there will be a second round of quantitative easing from Fed going ahead. Bernanke's comments today will be heavily scrutinized on hints of further easing.

Developments in GBP/CHF delayed our bearish view but after all we remain bearish on the cross with 1.6298 resistance intact and would expect a break of 1.5825 support sooner or later. Whole decline from 1.8111 is still expected to have a test on 2008 low of 1.5111.

EUR/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.3480; (P) 1.3578; (R1) 1.3656; More

EUR/CHF's fall from 1.3674 extends further to day and intraday bias is mildly on the downside for the moment. Break of 1.3434 support turned resistance will indicate that rebound from 1.3072 is finished and will target 1.3072 low first. Break will confirm down trend resumption for 1.3 psychological level next. On the upside, above 1.3578 minor resistance will flip intraday bias back to the upside for another rise. Nevertheless, we'd expect strong resistance below 1.3733 to bring reversal finally.

In the bigger picture, EUR/CHF's down trend from 2007 high of 1.6827 is still in progress and accelerated after breaking out 1.4315 support. Next target will be 100% projection of 1.8234 to 1.4391 from 1.6827 at 1.2984, which is close to 1.3 psychological level. On the upside, break of 1.4002 resistance is needed to be the first signal of medium term reversal. Otherwise, outlook will remain bearish.