Mid-Day Report

Euro Weakens Further as French Presidential Elections Looms

Typography

Euro dips further today as markets are lighting up positions ahead of the first round of French presidential election this Sunday. Far right Marine Le Pen and centrist Emmanuel Macron are still tipped to come out as winners and head to the run-off on May 7. But yesterday's terrorist attack in Paris could stir up some uncertainties. In particular, far left leader Jean-Luc Melenchon has rather strong momentum in the past two weeks and emerged as a real contender. Euro would very likely suffer if Melenchon could slip into the run-off and take Macron's place. Both Le Pen and Melenchon are euro-sceptic, just at two different extremes. But the common currency could have a relieve rally next week if the election delivers no surprise.

Eurozone PMIs came in strong

Eurozone PMI manufacturing rose to 56.8 in April, up from 56.2, and beat expectation of 56.1. Eurozone PMI services Rose to 56.2, up from 56.0 and beat expectation of 56.0. Germany PMI manufacturing dropped to 58.2, down from 58.3 but beat expectation of 58.1. Germany PMI services dropped to 54.7, down from 55.6 and missed expectation of 55.5. France PMI manufacturing surged to 55.1, up from 53.3 and beat expectation of 53.2. France PMI services rose to 57.7, up from 57.5 and beat expectation of 57.2. Markit noted that "there is a good outlook for the year - it looks like the upturn has legs. With numbers like these, people are going to start edging up their forecasts."

EU Brexit negotiation document leaked

According to a leaked draft EU Brexit negotiation document, UK will be required to pay off the obligations after Brexit, remain subject to EU court and, be required to let relatives of European immigrants settle in UK. And the keys of the negotiation would be about protecting rights of three million EU citizens living in UK. Meanwhile, EU will insist on having ECJ jurisdiction to enforce the rules during the transition period. And that would be in direct conflict with UK as Prime Minister Theresa May would seen to end that ECJ jurisdiction in UK. While EU might consider alternative dispute system for the treaty, it would be under the condition on equivalence to the ECJ.

Finnish RM Orpo: No one will want to follow Brexit

Finland's Finance Minister Petteri Orpo said that UK's "divorce" with EU is "inevitably going to be so painful that no one will want to feel it for themselves." And it's going to be a "precedent no one will want to follow." Meanwhile Orpro is confident that "there should be no slowdown in developing the EU because of Brexit." Instead, the member states should "push even harder". Separatrly, EU Brexit negotiator Michel Barnier said that the so called EUR 60b "Brexit bill" is not "revenge" no punishment" and he emphasized that "we don't want to ask the Brits to pay a single euro more than" their legal obligations.

On the data front...

Canada CPI slowed to 1.6% yoy in March, below expectation of 1.8% yoy. CPI core-trim slowed to 1.4% yoy, CPI core-medium slowed to 1.7% yoy, CPI core-common was unchanged at 1.3% yoy. UK retail sales dropped -1.8% mom in March. Japan PMI manufacturing rose to 52.8 in April, up from 52.4 and beat expectation of 52.5. Also from Japan, tertiary industry index rose 0.2% mom in February.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0688; (P) 1.0733 (R1) 1.0759; More....

EUR/USD's retreat from 1.0777 extends lower today but it's still staying above 1.0676 minor support. Intraday bias remains neutral and another rise is still in favor. Above 1.0777 will target 1.0905 and above. But still, choppy rise from 1.0339 is still seen as a correction. Hence, we'll pay attention to topping signal above 1.0905 again, as we'd expect larger down trend to resume later. On the downside, break of 1.0676 minor support will turn intraday bias back to the downside for 1.0569 instead.

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. However, considering bullish convergence condition in weekly MACD, break of 1.1298 will indicate term reversal. this would also be supported by sustained trading above 55 week EMA.

EUR/USD 4 Hours Chart

EUR/USD Daily Chart

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
00:30 JPY PMI Manufacturing Apr P 52.8 52.5 52.4
04:30 JPY Tertiary Industry Index M/M Feb 0.20% 0.30% 0.00% -0.20%
07:00 EUR France Manufacturing PMI Apr P 55.1 53.2 53.3
07:00 EUR France Services PMI Apr P 57.7 57.2 57.5
07:30 EUR Germany Manufacturing PMI Apr P 58.2 58.1 58.3
07:30 EUR Germany Services PMI Apr P 54.7 55.5 55.6
08:00 EUR Eurozone Manufacturing PMI Apr P 56.8 56.1 56.2
08:00 EUR Eurozone Services PMI Apr P 56.2 56 56
08:00 EUR Eurozone Current Account (EUR) Feb 37.9B 26.3B 24.1B
08:30 GBP Retail Sales M/M Mar -1.80% -0.30% 1.40%
12:30 CAD CPI M/M Mar 0.20% 0.40% 0.20%
12:30 CAD CPI Y/Y Mar 1.60% 1.80% 2.00%
12:30 CAD CPI Core - Trim Y/Y Mar 1.40% 1.60%
12:30 CAD CPI Core - Median Y/Y Mar 1.70% 1.90%
12:30 CAD CPI Core - Common Y/Y Mar 1.30% 1.30%
13:45 USD Manufacturing PMI Apr P 53.9 53.3
13:45 USD Services PMI Apr P 53.7 52.8
14:00 USD Existing Home Sales Mar 5.61M 5.48M