The pre US session selloff in dollar somewhat stabilizes after GBP/USD and AUD/USD hit key resistance levels. EUR/USD and USD/CHF indeed fail to take out Asian session high/low. In the testimony before Joint Economic Committee today, Bernanke said that recent data suggest that pace of contraction in the economy may be slowing, with tentative signs that household demand is stabilizing. Increased affordability helped stabilizing the housing markets. However, Bernanke also cautioned that job losses will likely continue and business investments will remain weak and real economic activity is likely to remain below its longer-run potential for a while. There are more speculations ahead of release of banks stress tests results on Thursday. Fed is expected to deliver the results to banks today and the result may show about 10 companies need additional capital.

ISM non-manufacturing index improved more than expected from 40.8 to 43.7 in April, comparing to consensus of 42. Looking the details, improvements are seen broadly with business activity up from 44.1 to 45.2, employment component up from 32.3 to 37.0. New orders also jumped from 38.8 to 47.0. The report echoed last week's ISM manufacturing report that recession in the US economy may be easing.

Euro continues to lag behind commodity currencies and Sterling in the rally against dollar. Eurozone's PPI surprisingly declined -3.1% yoy in March, worse than consensus of -2.9% and -1.8% in February.. This biggest drop in 22 years may trigger more aggressive easing policy by the ECB which will have meeting this Thursday and ix expected o lower interest rate by 25 bps to 1%. On monthly basis, PPI plunged -0.7% in March, following a -0.5% drop a month ago. Sterling is limited by better than expected PMI construction released earlier today. UK's PMI construction improved to 38.1 in April, compared with market expectation of 31.7 and 30.9 in March.

Overnight, RBA kept policy rate unchanged at 3% after 6 reductions in 8 months as policymakers would like to see the impact of previous cut of 425 bps and AUD 90B government spending. Moreover, Governor Glenn Stevens believed that aggressive monetary and fiscal policies, as well as pickup in China would also help the nation's economy. Aussie remains firm after the announcement. Earlier in Asia, New Zealand's ANZ commodity price rose 2.5% in April following a 1% increase a month ago.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3270; (P) 1.3347; (R1) 1.3483

EUR/USD turns into sideway trading after edging higher to 1.3436 earlier today. Upside momentum remains unconvincing. But after all, favor is still on the bullish case as long as 1.3211 minor support holds. That is, choppy consolidation from 1.3737 has completed at 1.2884 already and rise from there should be resuming whole rebound from 1.2456. Further rise could now be seen to 1.3737 resistance first and break will bring rally towards 100% projection of 1.2456 to 1.3737 from 1.2884 at 1.4165 next. However, note that a break of 1.3211 support will indicate that rise from 1.2884 has completed. More importantly, this will open up a few possibilities that suggest fall from 1.3737 is still in progress and could bring deep decline towards 1.2329/2456 support zone.

In the bigger picture, recent development dampens the bearish view that rise from 1.2456 has completed at 1.3737. On the other hand, the corrective look of the fall from 1.3737 to 1.2884 argues that such rise from 1.2456 is still in progress. Break of 1.3391 will raise the odds of this case and bring rally resumption for 100% projection of 1.2456 to 1.3737 from 1.2884 at 1.4165 or above before completion. On the downside, below 1.2884 will revive the bearish case and bring decline to retest 1.2329/2456 support zone. After all, whether completed or not, rise from 1.2456 is treated as part of medium term sideway consolidation pattern that started at 1.2329. Down trend from 1.6039 (08 high) is still expected to continue as long as 1.4867 resistance holds.

Economic Indicators Update

03:00NZDANZ Commodity Price Apr2.50%--1.00%
04:30AUDRBA Interest Rate Decision3.00%3.00%3.00%
05:45CHFSwiss SECO Consumer Climate Apr-38-25-23
08:30GBPU.K. PMI Construction Apr38.131.730.9
09:00EUREurozone PPI M/M Mar-0.70%-0.50%-0.50%-0.40%
09:00EUREurozone PPI Y/Y Mar-3.10%-2.90%-1.80%-1.70%
14:00USDU.S. ISM Non-Manufacturing Index Apr43.74240.8
14:00USDBernanke Testifies Before Joint Economic Committee----
Japan market holiday