German government approved the country's contribution of at least EUR 123b to the massive EUR 750b emergency funding packaged agreed by EU and IMF. But the news provide no support Euro as markets doubts that the package only postpones the debt crisis in Eurozone, rather than solves it. Investors are still concerned that while immediate default of Greece is avoided, new issues might arise as the huge fiscal deficits in the region continue. Euro is back pressing 1.27 level against dollar while major stock indices in Euro pare yesterday's gains. Nevertheless, we're not seeing strong enough momentum in dollar and yen to stage a breakout and hence, markets will possibly stay in range for a while first.
UK industrial production jumped sharply by 2.3% mom in March, largest increase since July 2002. Manufacturing production also grew 3.3% mom in March, the largest rise since October 2005. but the data also gives little support to Sterling so far. Prime minster Gordon Brown announced he would quit as Labour leader in the hope of overseeing a deal with the Liberal Democrats. Meanwhile, Liberal Democrat said talks to form the government were entering the final stage as Conservatives pressed for a decision on coalition. Traders will probably continue to hold their bets on Sterling before the political situation is cleared.
Dollar and yen stage strong rebound earlier today as Asian stocks pared back much of Monday's gain and closed sharply lower. Selloff was triggered by stronger than expected data from China which saw CPI jumped to 18 month high of 2.8% in April, new lending rose to CNY 774b which beat market estimate and property prices jumped by 12.8% to new record high. The data argues that effect of recent measures to cool inflation and growth was disappointing and raised speculations of more tightening from China.
Looking at the dollar index, the rebound from 82.93 extends further to as high as 84.73 so far today but upside momentum is not too convincing yet. Intraday bias will remain on the upside as long as 83.83 minor support holds and a test of 85.25 resistance is still in favor. However, below 83.83 will indicate that the third leg of the correction from 85.25 has started and could bring another fall to 82.93 and below. But after all, strong support should be seen at 61.8% retracement of 80.04 to 85.25 at 82.03 to contain downside and bring up trend resumption.
EUR/JPY Mid-Day Outlook
Daily Pivots: (S1) 117.45; (P) 119.86; (R1) 121.69
EUR/JPY's fall from 122.27 continues in early US session and the break of 117.39 minor support indicates that rebound from 110.69 is finished. Intraday bias is flipped back to the downside and further fall might be seen to retest this low. Though, break there is needed to confirm down trend resumption. Otherwise, some choppy sideway trading would likely be seen between 122.27 and 110.69 first.
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 -- GBP NIESR GDP Estimate Apr -- 0.40% 23:01 GBP RICS House Price Balance Apr 17.00% 11.00% 9.00% 23:01 GBP BRC Retail Sales Monitor Apr -2.30% -- 4.40% 5:45 CHF SECO Consumer Confidence Apr 14 -1 -7 6:00 EUR German CPI M/M Apr F -0.10% -0.10% -0.10% 6:00 EUR German CPI Y/Y Apr F 1.00% 1.00% 1.00% 6:00 EUR German WPI M/M Apr 1.70% 0.90% 1.30% 8:30 GBP Industrial Production M/M Mar 2.00% 0.30% 1.00% 0.90% 8:30 GBP Industrial Production Y/Y Mar 2.00% 0.60% -0.10% -0.30% 8:30 GBP Manufacturing Production M/M Mar 2.30% 0.30% 1.30% 1.40% 8:30 GBP Manufacturing Production Y/Y Mar 3.30% 1.60% 1.50% 1.30% 9:30 AUD Annual Budget Release -- -- 14:00 USD Wholesale Inventories Mar 0.50% 0.60%