Risk appetite remains strong as lifted by China's announcement of letting Yuan gains. US stocks open higher with DOW up over 100 pts in initial trading, following broad based rally in European and Asian equities. Crude oil remains firm in early US session and trading around 78.5 level while gold makes another record high of 1266.5. Treasury yield has a rebound with yield on 10 years note climbs to 3.3% level but remains in familiar range so far. On the to note is that dollar manages to pare some of earlier loses as the day goes. EUR/USD is off intraday high of 1.2466 while USD/JPY is well above 90.28. Though, dollar remains weak against commodity currencies.

The People's Bank of China published a statement called 'Further Reform the RMB Exchange Rate Regime and Enhance the RMB Exchange Rate Flexibility' on Saturday and stated 'recovery and upturn of the Chinese economy has become more solid with the enhanced economic stability. It is desirable to proceed further with reform of the RMB exchange rate regime and increase the RMB exchange rate flexibility'. The statement was viewed as a vote on confidence in the economic recovery in Asia as well as a relief on dangers of trade war between China and US.

One of the main focuses of the week is UK's emergency budget. Chancellor of the Exchequer George Osborne said that the budget, will put beyond doubt his resolve to fill the deficit. Osborne said that it remains a rule of thumb that the deficit cut involves 80% spending cuts and 20% tax hike. While Sterling managed to rebound against dollar, it's indeed not that strong against other majors. GBP/AUD's sharp fall today indicates that rebound from 1.6128 is already completed at 1.7886 already and the cross should now head back to 1.6128 low.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2354; (P) 1.2385 (R1) 1.2418;

A temporary top should be in place at 1.2446 and intraday bias in EUR/USD is turned neutral. Above 1.2446 will possibly bring another rise to 38.2% retracement of 1.3691 to 1.1875 at 1.2569 and possibly further to 55 days EMA (now at 1.2656) but strong resistance should be seen at 1.2671 to limit upside. Below 1.2241 will argue that recovery from 1.1875 is over and flip intraday bias back to the downside for retesting this low first.

In the bigger picture, fall from 1.5143 is part of the whole down trend from 2008 high of 1.6039. Such decline is expected to develop into a five wave sequence and target 100% projection of 1.6039 to 1.2329 from 1.5143 at 1.1433. We'd expect the current rebound from 1.1875, which is viewed as the fourth wave inside the five wave sequence from 1.5143, to be limited by 1.2671 resistance and bring one more fall. Nevertheless, sustained trading above 1.2671 will be the first alert that EUR/USD has bottomed earlier than we thought and will turn focus to 1.3266/3691 resistance zone.

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised 23:01 GBP Rightmove House Prices M/M Jun 0.30% -- 0.70% 23:01 GBP Rightmove House Prices Y/Y Jun 5.00% -- 4.30% 4:30 JPY All Industry Activity Index M/M Apr 1.80% 2.00% -0.80% -0.70% 16:00 CHF SNB Chairman Hildebrand Speaks -- -- -- 16:30 EUR ECB President Trichet Speaks -- -- --