EU's announcement of a EUR 750b funding package as well as ECB's U-turn on bond purchases had huge impact on the markets today. The news was well received by markets with CDS on Greece fell over 250 bps to 650 level while that CDS on Portugal and Spain also fell over 160 bps and 80 bps respectively. European stocks are broadly higher with FTSE up over 5%, CAC over 8% while DAX is also up above 4.9%. Dollar and yen reversed last week's again and investors quickly pared back the risk aversion trades. Commodities are generally higher with crude oil back above 78 level.

Among the major currencies, Canadian dollar is the biggest winner so far, supported by continuous speculation that BoE will start to normalize rates in on June 1 by hiking 25bps. Canadian housing starts rose slightly to 202k in April, basically inline with expectations. European majors lag behind commodity currencies, weighed down by disappointing data in general. Note that Eurozone Sentix Investor Confidence unexpectedly dropped sharply to -6.4 in May.

BoE left rates unchanged at 0.50% and keep the asset purchase program unaltered at GBP 200b as widely expected. There's no detail released with the statement and focus will turn to minutes to be released on May 19. Some important economic data will be released from UK later this week, including industrial and manufacturing production, employment report, trade balance, and more importantly BoE's quarterly inflation report. However, the biggest concern of the market will remain on how UK would cut its huge budget deficit. And there would be an answer before political leaders' talk on forming a coalition administration completes.

GBP/CAD's sharp fall from last week's high of 1.5879 argues that consolidations from 1.5114 might be finished already. We're cautiously bearish for the moment and anticipate a break of 1.5114 low in near term to resume the larger down trend. In such case, next target will be 61.8% projection of 1.7282 to 1.5114 from 1.5879 at 1.4539.

EUR/JPY Mid-Day Outlook

Daily Pivots: (S1) 114.10; (P) 116.31; (R1) 118.99;

EUR/JPY's rises further to as high as 122.27 today and retreats mildly after hitting 4 hours 55 EMA. At this point, further rise could still be seen as long as 117.39 minor support holds. The stronger then expected rebound from 110.69 dampens our immediate bearish view and we'll turn out focus to whether EUR/JPY could get through 127.88 resistance or reverse. On the downside, below 117.39 minor support will flip intraday bias back to the downside for retesting 110.69 low instead.

In the bigger picture, the break of 112.10 support indicates that whole long term down trend from 2008 high of 169.96 has resumed. Outlook will now remain bearish as long as 127.88 resistance holds and further fall should be seen to 61.8% projection of 169.96 to 112.10 from 139.21 at 103.45 which is close to 100 psychological level. However, note that we're slightly favoring the case that fall from 169.96 is corrective in nature. Hence, we'll start to watch out for reversal signal between 2000 low of 88.96 and 100 psychological level. On the upside, break of 127.88 resistance will argue that whole fall from 139.21 might be over and will turn outlook bullish for stronger rise.

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised 23:50 JPY Bank of Japan Meeting Minutes -- -- 01:30 AUD NAB Business Confidence Apr 13 -- 16 06:00 EUR German Trade Balance (EUR) Mar 17.2B 14.0B 12.6B 12.7B 08:30 EUR Eurozone Sentix Investor Confidence May -6.4 1.1 2.5 11:00 GBP BoE Interest Rate Decision 0.50% 0.50% 0.50% 11:00 GBP BoE Asset Purchase Target 200B 200B 200B 12:15 CAD Housing Starts Apr