Mid-Day Report: Euro Rises after US CPI, Gold and Stocks Recover

Euro jumped in early US session as inflation data from US showed CPI dipped more than expected to 1.5% yoy in March while core CPI also slowed to 1.9% yoy. Housing data from US were mixed with housing starts rose to 1036k annualized rate in March but building permits dropped to 902k. Industrial production rose 0.4% in March. EUR/USD broke last week's high of 1.3137 which in turn confirmed resumption of recent rebound from 1.2746. USD/CHF tracked lower and dipped through last week's low too. Meanwhile EUR/GBP's break of 0.8560 resistance should be noted, which indicates near term reversal. The common currency had be steady in spite of this week's risk market selloff. Euro is somewhat benefited from the rebound in Gold after it fell sharply to as low as 1321.5 earlier today while DOW is set to open higher as Coca Cola, Goldman Sachs topped earning expectations.

Eurozone data saw German ZEW economic sentiment dropped more than expected 36.3 in April. Current situation gauge also dropped more than expected to 9.2. Eurozone ZEW also dropped more than expected to 24.9. ZEW President Clemens Fuest noted that the data raises doubts about the strength of German economy and is "another piece of evidence that euro-area weakness is affecting Germany." UK CPI unchanged at 2.8% yoy in March as expected while core CPI unexpectedly rose to 2.4% yoy. PPI input dropped to 0.4% yoy, PPI output dropped to 2.0% yoy, output core was unchanged at 1.3% yoy. Swiss PPI dropped more than expected to -0.3% yoy in March.

BoJ Governor Kuroda said today that "public finances in their current state are unsustainable, so the revenue side and the spending side need to be addressed," and he noted that sales tax is part of the solution. Meanwhile he also noted that it's far to early for BoJ to debate exit strategy for the monetary easing as it's still far away from in 2% inflation target.

The RBA minutes for the April meeting suggested that Australia's economy has improved as helped by reduction in interest rates over the past months. Policymakers saw investment has improved in areas outside of the mining sector while housing and retailing sectors have also improved. Policymakers viewed that inflation remained benign, with inflation expected to remain within the target range of 2-3% for the foreseeable future and further easing remains possible. More in RBA Minutes Signaled Economic Improvement, Further Easing Still Likely.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3055; (P) 1.3090 (R1) 1.3144; More....

EUR/USD's break of 1.3137 in early US session indicates that recent rebound from 1.2746 is resuming. Intraday bias is back on the upside and current rise would target 61.8% retracement of 1.3710 to 1.2746 at 1.3342 next. On the downside, break of 1.3021 is needed to signal short term bottoming. Otherwise, outlook will stay cautiously bullish in case of retreat.

In the bigger picture, current development mixed up the outlook in EUR/USD with major question on whether rebound from 1.2042 has completed at 1.3710. Note that as long as 1.2661 support holds, such rebound could still extend above 1.3710 to 1.4939/5143 resistance holds. However, break of 1.2661 will confirm completion of such rebound. And more importantly, the corrective three wave structure will then indicate that deeper medium term weakness would be seen for a new low below 1.2042.

IMOH, Clement I.
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