Mid-Day Report

Dollar Stays Pressured Against Euro and Sterling as NFP Risk Cleared

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Dollar stays weak against Euro and Sterling in early US session as non-farm payroll risk is cleared. NFP showed 211k growth in the US job market in April, above expectation of 180k. However, prior month's weak figure was revised further down to 79k from 98k. Unemployment rate, however, dropped to 4.4%, down from 4.5% and below expectation of 4.6%. That's the lowest figure in nearly a decade since May 2007. Average hourly earnings showed 0.3% mom growth, in line with consensus. But prior month's wage growth was revised down to 0.1% mom.

Overall, the set of data does little to change the expected policy path of Fed. FOMC is expected to hike again in June, and another time possibly in September. Then Fed will take a brief pause to start the program to shrink its balance sheet. Markets will now listen to comments from Fed speakers, including Fed Chair Janet Yellen, Fed Vice Chairman Stanley Fischer, Boston Fed President Eric Rosengren, San Francisco Fed President John Williams, Chicago Fed President Charles Evans, and St. Louis Fed President James Bullard.

Canadian job data mixed, Loonie weak on oil price

Released from Canada, employment market grew 3.2k in April, well below expectation of 20.0k. Unemployment rate, however, dropped to 6.5%. Canadian dollar is set to end the week as one of the weakest major currencies, just next to Aussie and yen. Free fall in oil price is seen as the main factor driving down the Loonie. WTI crude oil dived to as low as 43.76 earlier today but recovers after drawing support from 44.09 fibonacci level.

OPEC hinted that it is likely for the output cut deal to be extended with the same terms, i.e. reducing production by 1.8M bpd, for 6 months. The market was disappointed as they had hoped for bigger reduction in the "new" deal. The goal of the output cut deal, announced late last year and effective in January 2017, is to rescue the massive selloff of oil prices. However, price performance signal that the cartel has probably lost control. The market is more concerned over the persistent increase in US oil production with the number of US oil rigs hitting a 2-year high last week.

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Euro strong on Macron set to win election

Euro is set to end the week as the strongest major currency. Markets are generally optimistic that pro-EU centrist Emmanuel Macron will win the French election on Sunday. And it's so overwhelmingly one-sided on such expectation that we have be to cautious on a sell of news reversal on Monday. Macron extended his lead over EU-sceptic far right Marine Le Pen. According to and Elabe poll for BFM TV and L'Express, Macron is set to get 62% of votes in the run-off. And Le Pen will only get 38%. That's a 24 pts lead, up 3 pts from the last Elabe poll. Macron was also voted as the most convincing one in the last pre-election debate earlier this week.

Elsewhere, Eurozone retail PMI rose to 52.7 in April. Swiss Foreign currency reserves rose to CHF 696b in April.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0909; (P) 1.0948 (R1) 1.1022; More....

Intraday bias in EUR/USD remains on the upside for the moment and further rally should be seen. Next target is 100% projection of 1.0339 to 1.0828 from 1.0569 at 1.1058. At this point, rise from 1.0339 is still seen as a corrective move. Hence we'd expect strong resistance from 1.1058 projection to limit upside and bring near term reversal. On the downside, break of 1.0874 support will turn bias back to the downside for 1.0569 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 RBA Statement on Monetary Policy
07:00 CHF Foreign Currency Reserves Apr 696B 683B
08:10 EUR Eurozone Retail PMI Apr 52.7 49.5
12:30 CAD Net Change in Employment Apr 3.2K 20.0K 19.4K
12:30 CAD Unemployment Rate Apr 6.50% 6.70% 6.70%
12:30 USD Change in Non-farm Payrolls Apr 211K 180K 98K 79K
12:30 USD Unemployment Rate Apr 4.40% 4.60% 4.50%
12:30 USD Average Hourly Earnings M/M Apr 0.30% 0.30% 0.20% 0.10%
14:00 CAD Ivey PMI Apr 62.3 61.1