ACT: Mid-Day Report: Dollar Recovers after Job Data, But Stays Weak against Euro
Dollar recovers mildly after suffering much selling pressure against Euro but the greenback stays soft. Released from US, initial jobless claims dropped -8k to 276k in the week ended May 30. That was basically inline with expectation of 277k. That was the 13th straight week of sub 300k reading which was seen as sign of momentum in labor market improvement. The four-week average rose 2.75k to 274.75k. Continuing claims dropped 30k to 2.2m in the week ended May 23, the lowest since November 2000. Also released from US, non-farm productivity was revised down to -3.1% in Q1 while unit labor cost was revised up to 6.7%. So far dollar is holding above near term support against sterling, yen and aussie. The key to dollar's near term direction will lie on tomorrow's non-farm payroll report, where job growth, unemployment rate and wage growth will be released.
Euro remains the strongest major currency this week. In particular, EUR/JPY, EUR/AUD, EUR/CAD and EUR/CHF took out key near term resistance levels. Focus remains on the development in Greece. A Greek official was quoted saying that there were some convergence in a few points in Wednesday's negotiations but not on others. Greece is expected to submit a counter offer to the international creditors. European commission head Jean Claude Juncker also said he's preparing the next round of negotiation. The involved parties are now targeting to complete the agreement by June 14. In UK, BoE held interest rate unchanged at 0.50% and kept the asset purchase target at GBP 375b.
Elsewhere, Australian dollar is under some pressure after data release in Asian session. Retail sales was flat mom in April compared to expectation of 0.3% mom rise. Trade deficit widened to AUD -3.89b in April, much worse than expectation of AUD -2.11b. That's also the largest deficit on record. Exports slumped -9.1% yoy while imports rose 2.5% yoy. The set of data highlighted two challenges Australia is facing, including sluggish domestic growth and slower global demand.
Intraday bias in EUR/USD remains on the upside for the moment. Further rise should be seen to 1.1466 and above. At this point, the choppy rise from 1.0461 is viewed as a correction. Hence, we'd expect strong resistance from 38.2% retracement of 1.3993 to 1.0461 at 1.0181 and bring reversal. On the downside, below 1.1192 minor support will turn bias neutral first. But another rally will remain in favor as long as 1.0818 support holds.
In the bigger picture, overall price actions from 1.6039 long term top is viewed as a corrective pattern. Fall from 1.3993 is the third leg of such pattern. A medium term bottom is in place at 1.0461, ahead of 100% projection of 1.6039 to 1.2329 from 1.3993 at 1.0283. Some consolidations could be seen. But after all, break of 1.2042 support turned resistance is needed to indicate medium term reversal. Otherwise, outlook will stay bearish. We'd still favor another fall to extend the down trend.
