Mid-Day Report

Dollar Lower Despite Sharp Fall in Initial Jobless Claims, Euro and CAC Lifted by French Macron

Typography

Dollar trades softer against European majors as the brief lift from FOMC statement fades. Economic data from US are solid but provide little support to the greenback. Initial jobless claims dropped -19k to 238k in the week ended April 29, below expectation of 246k. Continuing claims dropped 23k ti 1.96m, lowest in 17 year. Challenger report showed -42.9% yoy fall in planned layoff in April. Trade deficit narrowed slightly to USD -43.7b in March. Non-farm productivity dropped -0.6% in Q1 while unit labor costs rose 3.0%.

French stocks and Euro surges

French stocks and Euro surges as pro-Euro centrist Emmanuel Macron performed well in the final TV debate against EU-sceptic far-right Marine Le Pen. CAC is trading up 0.95% at the time of writing and hit the highest level in more than nine years. According to a viewers poll by French broadcaster BFMTV, 63% of viewers voted Macron as the "most convincing" of the pair after the debate. According to latest running poll average, Macron is still having 18% lead over Le Pen and is still widely tipped to win the presidential election this Sunday. Released from Eurozone, retail sales rose 0.3% mom in March. Eurozone services PMI was revised higher to 56.4 in April. Italy services PMI rose sharply to 56.2 in April. Also from Europe, SECO consumer confidence dropped to -8 in April.

UK PMI services shone

UK PMI services rose to 55.8 in April, up from 55.0, and beat expectation of 54.6. That's also the highest level this year. Markit noted that "UK business activity growth gained momentum for a second successive month in April, with a hat-trick of faster growth signalled by the three PMI surveys." And, "the improvement in the survey data indicates that economic growth has revived after having slowed sharply in the first quarter of the year." Countering weakness in household-facing business, UK economy could achieve 0.4% growth in Q2 as a whole. Also from UK, mortgage approvals dropped to 67k in March. M4 Money supply rose 0.3% mom in March.

Aussie catching up the slump iron ore prices

Recent decline in Australian dollar is viewed as a catch-up of the selloff of the iron ore price from its February peak. Spot price for 62% benchmark iron ore slumped more than 30% in 2 months after reading a peak of US$90/tones on February 21. During the period, AUDUSD had been trading within a broad range and dropped around -2%. The relatively resilience in Aussie was likely driven by the broad-based weakness in the greenback as soft dataflow had diminished expectations of a rate June rate hike. Recall the selloff of iron ore prices accelerated in March, after China's pledge reduce steel capacity. The tighter liquidity conditions in China's money markets have reinforced concerns over the government's efforts to crack down the steel industry. More in

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0865; (P) 1.0900 (R1) 1.0919; More....

EUR/USD recovers strongly today after being supported above 4 hour 55 EMA. But it's staying below 1.0949 temporary low. Intraday bias remains neutral for the moment. At this point, further rise is still in favor as long as 1.0851 minor support holds. However, choppy rebound from 1.0339 is seen as a correction. Hence we'd look for topping again on next rise. Meanwhile, on the downside, break of 1.0777 will turn turn bias to the downside for 1.0851 support first.

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
01:30 AUD Trade Balance (AUD) Mar 3.11B 3.33B 3.57B
01:45 CNY Caixin China PMI Services Apr 51.5 52.6 52.2
05:45 CHF SECO Consumer Confidence Apr -8 3 -3
07:45 EUR Italy Services PMI Apr 56.2 53.7 52.9
07:50 EUR France Services PMI Apr F 56.7 57.7 57.7
07:55 EUR Germany Services PMI Apr F 55.4 54.7 54.7
08:00 EUR Eurozone Services PMI Apr F 56.4 56.2 56.2
08:30 GBP Services PMI Apr 55.8 54.6 55
08:30 GBP Mortgage Approvals Mar 67K 67K 68K
08:30 GBP M4 Money Supply M/M Mar 0.30% 0.20% -0.30% -0.20%
09:00 EUR Eurozone Retail Sales M/M Mar 0.30% 0.10% 0.70%
11:30 USD Challenger Job Cuts Y/Y Apr -42.90% -2.00%
12:30 CAD International Merchandise Trade (CAD) Mar -0.1B 0.3B -1.0B -1.1B
12:30 USD Non-Farm Productivity Q1 P -0.60% 0.00% 1.30%
12:30 USD Unit Labor Costs Q1 P 3.00% 2.60% 1.70%
12:30 USD Trade Balance Mar -43.7B -44.9B -43.6B -43.8B
12:30 USD Initial Jobless Claims (29 APR) 238K 246K 257K
14:00 USD Factory Orders Mar 0.60% 1.00%
14:30 USD Natural Gas Storage 74B