Forex News and Events:
It seems that the optimism generated by the Franco/German and IMF agreement is fading fasts. At the core, the structural problems are still well entrenched in Greece and will take more than just expensive capital to solve them, while focus on Ireland's recapitalization plan has revitalized EU concerns. In Ireland, the National Asset Management Agency announced that in order to purge the NPL from banks books and recapitalization costs would be roughly $30bn. Overall, the risk from a sovereign standpoint should be minimal as the government has the capability to intervene should the banks lack adequate capital and further government balance sheet erosion should be limited by creditable austerity program. However, the fluid situation in the EU will provided plenty of opportunity for participants to find fault and punish the EUR (including yesterdays less then stellar 12yr auction). Mixed news out of Australia have kept AUD stable but we believe eventually the slowing pace of positive economic data will hurt the AUD. Surging commodity prices (copper climbing to a new high) and M&A activity has clearly been positive. However, retail sales and building approvals unexpectedly collapsed. After retail sales fell -1.4% vs. 0.3% expected and home-building approvals unexpectedly declined -3.3% vs. 2.1% exp, expectations of further RBA tightening eased slightly (rates meeting next week). With the RBA getting closer to a normalized policy and China potential tighten (through CNY appreciation amongst others methods) the midterm looks rocky for the AUD. We will be focused on opportunities to sell the AUDNZD. The media was buzzing with speculation that China was preparing to expand the CNY trading band from its current 0.5% flexibility. As we have previously stated, we expect the adjustment to come right before the G20 meeting in June as a political statement as much as a policy tool. Today the markets' attention will be squarely focused on the US data including the always entertaining ADP report. Interestingly, this weeks official payrolls data will be released on a European holiday. Markets are expecting today's ADP employment report to turn positive for the first time since late 2007 (40k exp vs. -20k prior, upside skew) and reinforce the belief that Friday's NFP and employment rate will also show move into positive territory. If all goes as planned, we should see the USD well supported near term.

Today's Key Issues (time in GMT):

08:00 EUR GER Mar unemployment rate, change, 8.2% sa, +10k eyed; last 8.2%, +7k.
08:00 EUR
 GER Mar unemployment nsa, 3.62 mln eyed; last 3.643 mln nsa, 3.433 mln sa.
09:00 EUR
 Mar HICP - flash, +1.1% y/y eyed; last +0.9%.
09:00 EUR
 Feb unemployment, 10.0% eyed; last 9.9%.
09:00 EUR
 ITA Mar CPI - prelim, +0.2% m/m, +1.3% y/y eyed; last +0.1%, +1.2%.
09:00 EUR
 ITA Mar HICP - prelim, +1.3% m/m, +1.2% y/y eyed; last unch, +1.1%.
09:30 CHF
 Mar KoF sentiment indicator, 1.9 eyed; last 1.87.
12:15 USD
 Mar ADP employment, +80k eyed; last -20k.
12:30 CAD
 GDP Jan m/m 0.5% vs. 0.6 prior
13:45 USD
 Mar Chicago PMI, 63.5 eyed; last 62.6.
14:00 USD
 factory orders 0.5 exp, 1.7% last

The Risk Today:

EurUsd After a strong showing yesterday morning, EURUSD simply couldn't muster the momentum required to launch a serious attack on the long-term downtrend; and failure to consolidate above 1.3530 resistance meant the pair was quickly sold all the way back down to 1.3384 lows overnight. As both our short targets were met yesterday (at 1.3425 original break-out level and 1.3384 pivot), we now step aside and wait for a bounce to re-load shorts nearer to 1.3500. Obviously, with the medium term bearish bias fully intact, there is always the possibility of the slump continuing on through to the 1.3268 major support (25 March lows) without us, but given that we have had 2 separate attempts on the upper bound of the downtrend in just the past fortnight, we feel that it would be wise to tighten up the risk-reward on short trades until we see more downside price action. Given it is both month-and quarter-end today, money manager rebalancing flows at (and possibly before) the London 4pm fix could potentially add something unpredictable to the punchbowl; early rumours suggest majority will be buyers of EURUSD so looking on the topside, the 1.3530 resistance level represents a difficult hurdle for any rallies -doubly so considering that today it also coincides with the upper bound of the downtrend channel. Next resistance above will be the downtrend vibration of the last false break which comes in 1.3625, and beyond there the old resistance levels at 1.3730 and 1.3800.

GbpUsd Really heartening price action from GBPUSD yesterday; despite the collapse of EURUSD, the unexpected revision higher of Q4 GDP allowed GBPUSD to accelerate to highs of 1.5127. The pair is now in a consolidation mode, but we fully anticipate the break-out to eventually resume to the upside; next levels to watch up there are 1.5155 resistance (upper edge of the current short-term uptrend channel), then1.5215 former resistance, and 1.5350 pivot level. In terms of supports, the lower ledge of buying interest in this consolidation area is currently seen at 1.5040, and below there more support comes in at 1.4930 (lower edge of the uptrend channel), 1.4880 (back side of the former downtrend, and then the 1.48.50 pivot. Really, only a break back below the major 1.4780 support (1 March low) would negate our bullish bias on this pair.

UsdJpy Just what the doctor ordered after the break of the 3-year downtrend; USDJPY has burst upwards out of its narrow channel of consolidation and headed straight through 93.00 resistance to highs of 93.63. The 7 January highs at 93.77 represent the next barrier above, so unsurprisingly, the first visit has been met with selling interest and pared back the gains somewhat to 93.25 levels at the time of writing. Nevertheless, the textbook price action on the back side of each successive resistance level strengthens our conviction that this rally embodies a major reversal for USDJPY in the medium-to-long-term, so expect robust support levels below to attract plenty of others looking to buy on dips as we do. Those supports come in at 92.30 (back side of former downtrend) 92.15 major pivot, then the 200-day moving average at 91.45. In terms of targets, beyond the 93.77 level there is very little atmosphere until the August 2009 highs around 97.75.

UsdChf So it seems that yesterday's 10 pip dips through the uptrend was indeed a false break after all, and since that point we have rallied strongly back towards 1.0700 resistance levels (1.0685 the high). Price action getting a bit more choppy today with the month-and quarter-end, but until we see a confirmed breakdown of the uptrend, we still look for that line (coming in today at 1.0605) to provide some guidance of support. Further buying interest anticipated below around 1.0550 and the more established 1.0500 horizontal support, and then resistance still expected at the back of our former 1.0650 neckline, and beyond there the regularly spaced resistance intervals at 1.0700, 1.0750 and 1.0800.

Resistance and Support:

S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot