Dollar's rally against Euro and Sterling extend further today with EUR/USD breaches 1.28 level before recovering mildly. Yen crosses are generally lower and are back pressing yesterday's low. Nevertheless, USD/JPY remains relative firm above 85 level as the greenback also extends rally against European majors. Japan Finance Minister Yoshihiko Noda pledged to monitor economic conditions carefully and respond appropriately in an unscheduled press conference today but declined to comment on intervention. Also, Noda said there is no planned conference call with G7 FMs on currency volatility. That's somewhat disappointing to those who are at least looking for Japan to step up the rhetoric on yen's appreciation.

Euro is indeed the worst performer this week on concern that if global recovery slows, the situation in Eurozone will be worse due to the austerity measures to cut fiscal deficits. In the monthly report released today, ECB said that sustainability of the recovery in global and euro-area trade will depend critically not only on a further strengthening of private demand, but also on the robustness and health of the global financial system. Meanwhile, Eurozone banks are facing manageable risks to replace the EUR 1.3T of debt finance that's due next three and a half years.

Data released today saw US jobless claims rose back to 484k. Import price index rose 0.2% mom in July. Eurozone industrial production unexpectedly dropped -0.1% mom in June. Japan industrial production dropped -1.1% mom in June. Household confidence unexpectedly dropped to 43.3 in July. Looking ahead, Eurozone industrial production is expected to rise 0.7% mom, 0.9% yoy in June. Australia job market expansion slowed to 23.5k in July but was slightly better than expectation of 20k. However, unemployment rate unexpectedly jumped from 5.1% to 5.3%. Consumer inflation expectation also slowed to 2.8% in August. Meanwhile, New Zealand business manufacturing index dropped from 55.9 to 49.9 in July.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2753; (P) 1.2970 (R1) 1.3078; More.

EUR/USD's fall from 1.3330 extends further to as low as 1.2782 so far today. Intraday bias remains on the downside for 1.2731 support. As discussed before, decisive break there will suggest that whole rebound from 1.1875 is completed and will bring deeper decline to 1.2466 support next. On the upside, above 1.2933 minor resistance will turn intraday bias neutral and bring recovery. But risk will remain on the downside as long as 1.3330 resistance holds.

In the bigger picture, while the rebound from 1.1875 was strong, it's limited below 55 weeks EMA (now at 1.3434) and reversed sharply. Break of 1.2731 support will indicate that such rebound is completed and suggest that whole fall from 1.6039 is possibly resuming. Such decline is treated as correction to long term up trend in EUR/USD and would possibly make another low below 1.1639 support before conclusion. On the upside, though, above 1.3330 will turn focus back to 55 weeks EMA and sustained trading above there will pave the wave to further rise to upper trend line resistance (1.6039, 1.5143, now at 1.4699).

EUR/USD

EUR/USD