Euro dives versus Dollar and Sterling on news that ECB orders Austria to nationalize Hypo bank, that ran into trouble on hidden losses in Eastern Europe. Hypo bank is the sixth largest lender in Austria with assets of EUR 42b. Finance minster Josef Proll said that the risk of the situation of Hypo bank created an an enormous threat to Austria, to its future as a financial center, and to the whole economic region in recent days and weeks.
Elsewhere, dollar remains generally in range against other major currencies after mix US data. Producer inflation in US came in much stronger than expected at 1.8% mom, 2.4% yoy versus expectation of 0.8% mom, 1.7% yoy. However, empire state manufacturing index dropped sharply to a five month low of 2.55 in December. Industrial production rose more than expected by 0.8% in November.
Other data released today saw German ZEW dropped slightly from 51.1 to 50.4 in Dec but was better than expectation of 50.1. However, Eurozone ZEW dropped sharply from 51.8 to 48 versus consensus of 50.9. UK inflation reading was slightly higher than expected in November with CPI at 1.9% yoy comparing to consensus of 1.8%. RICS house price balance improved less than expected to 35% in November.
Aussie remains soft after release of slightly dovish RBA minutes which hinted at a pause in the rate hike cycle. The minutes said that the three interest rate hikes since October is now giving it greater flexibility at future policy meetings and imply the possibly of slowing the pace. RBA emphasized that the rate adjustment would not be intended to slow demand compared with the current forecast path, but aimed simply at keeping the stance of policy appropriate for improving economic conditions.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.4606; (P) 1.4645; (R1) 1.4695; More
At this point, intraday bias in EUR/USD remains on the downside and the current fall from 1.5140 is still expected to continued to 1.4483 cluster support (23.6% retracement of 1.2329 to 1.5143 at 1.4479) next. On the upside, above 1.4658 minor resistance will turn intraday bias neutral and bring consolidations. But upside should be limited by 1.4828 support turned resistance and bring fall resumption.
In the bigger picture, current development indicates that EUR/USD should have topped out in medium term at 1.5143 already. We're talking about bearish divergence conditions in daily MACD and RSI and a break of 1.4626 support. Also, EUR/USD is sustaining below 55 days EMA with daily MACD turned negative too while weekly MACD has also crossed below signal line. Beside, the three wave consolidation pattern that started from 1.2329 should have finished too. Next focus is 1.3737 cluster support (50% retracement of 1.2329 to 1.5143 at 1.3736). Decisive break there will further confirm the bearish case and argue that whole medium term fall from 1.6039 is likely resuming for a new low below 1.2329. On the upside, above 1.5143 is needed to invalidate this view. Otherwise, outlook will now remain bearish.