Dollar pares some gains in early US session on much stronger than expected consumer confidence reading. Conference Board consumer confidence posted and strong upside surprise and rose from 39.2 to 54.9 in May, highest reading since last September. Little reaction was paid to downside surprise in S&P Case Shiller 20 city home price which dropped more than expected by -18.7% yoy in March. Stocks open nearly flat but gains momentum after consumer confidence data. DOW is holding on 8230 support despite breaking it briefly to 8226 earlier and today's rebound eases concern of a double top reversal pattern. Now it seems that consolidation from last week's high of 8587 is completing and near term focus will turn to back to this resistance.

Regarding the dollar index, as mentioned before, an intraday low is in place at 79.81 after drawing support from 100% projection of 89.62 to 82.63 from 86.87 at 79.88 and 80 psychological level. Nevertheless, there is not signal of reversal yet with 81.87/83.22 resistance zone intact. Judging from the development in DOW, some more weakness in dollar is likely, on risk appetite trades. A break below 79.81 will bring fall resumption towards 77.69 support. Nevertheless, we'd continue to look for reversal sign as dollar index re-enters into support zone between 77.69/80. Break of 81.87/83.22 will indicate that the index has likely bottomed out and will bring strong rebound to 86.87 for confirmation.

Eurozone's industrial new orders dropped -0.8% mom in March, worse than market expectation of +0.9% and -06% in February. However, the annual decline of -26.9% came in better than consensus of -30.2% and the revised -34.2% in February, signaling recession in the 16-nation region may have bottomed. Employment level in Switzerland rose +0.8% yoy to 3.96M in 1Q09, compared with consensus of -0.1% and +1.6% in the previous quarter. Germany's Q1 GDP was finalized at -3.8% contraction. Import price dropped -0/8% mom in Apr. Gfk consumer confidence was unchanged at 2.5 in Jun. New Zealand's trade surplus narrowed to NZD 276M in April from NZD 447Min the previous month as driven by decline in import. Japan's CSPI dropped -2.4% yoy in April, worse than consensus of -2.2% and -2.1% a month ago.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3771; (P) 1.3848; (R1) 1.3967

EUR/USD recovers after dipping to 1.3860 earlier today. Consolidation from 1.4049 might continue for a while with risk of another fall to 4 hours 55 EMA (now at 1.3776). But after all, downside is expected to be contained above 1.3724 support and bring rise resumption. Above 1.3999 will flip intraday bias back to the upside and break of 1.4049 will target 100% projection of 1.2456 to 1.3737 from 1.2884 at 1.4165 and possibly further to trend line resistance at 1.4461. However, note that a break of 1.3274 support will serve as the first signal that whole rise from 1.2884 has completed and will turn focus to 1.3423 support for confirmation.

In the bigger picture, price actions from 1.2329 are treated as consolidation to down trend from 1.6039 with rise from 1.2456 as the third leg. Such consolidation is possibly developing into triangle pattern and hence, upside of the current rise from 1.2456 should face strong resistance between 100% projection of 1.2456 to 1.3737 from 1.2884 at 1.4165 and 138.2% projection at 1.4654 and bring reversal. Focus will be on topping signal as EUR/USD enters into this resistance zone. On the downside, meanwhile, break of 1.3423 support will now be an important alert that whole rise from 1.2456 has completed and will then put focus back to 1.2884 support for confirmation.

Economic Indicators Update

22:45NZDTrade Balance (NZD) Apr276M250.0M324.0M447M
23:50JPYCSPI Y/Y Apr-2.40%-2.20%-2.10%
03:00NZDRBNZ 2-Yr Inflation Expectation Q22.20%--2.30%
06:00CHFUBS Consumption Indicator Apr0.92--0.985
06:00EURGerman GDP Q/Q Q1 Final-3.80%-3.80%-3.80%
06:00EURGerman Import Price Index M/M Apr-0.80%0.10%-0.40%
06:10EURGerman GfK Consumer Confidence Jun2.52.52.5
07:15CHFEmployment Level Y/Y Q10.80%-0.10%1.60%
07:15CHFEmployment Level Q13.96M3.920M3.963M
08:00EUREurozone Current Account (euros) Mar-6.5B-7.5B-8.1B-7.8B
09:00EUREurozone Industrial New Orders M/M Mar-0.80%0.90%-0.60%
09:00EUREurozone Industrial New Orders Y/Y Mar-26.90%-30.20%-34.50%-34.20%
13:00USDS&P/Case-Shiller Composite-20 Y/Y Mar-18.70%-18.40%-18.63%
14:00USDConference Board Consumer Confidence May54.94239.2