Euro got a boost from news that China is interested in buying "bailout bonds" for Portugal and rebounded broadly. On the other hand, the greenback is under some pressure as commodity also recovered where crude oil and gold are trading firm above 100 and 1500 levels respectively. The dollar index is showing sign of reversal currently but there is no confirmation yet. The development for the next few trading days could mark the end of dollar's rebound and resumption of down trend.
Financial times reported that the European Financial Stability Facility CEO Regling said China and other Asian investors may buy Portuguese bailout bonds when EFSF begins to sell the rescue funds in June and that could comprise a "strong portion" Regling has particular noted that China was "clearly interested" in the Portuguese auction and the overall strong interest from international investors is a sign of renewed confidence in euro. EFSF is expected to hold first auction to raise EUR 3-5b for the recently approved EUR 78b Portuguese bailout in mid-June. There will also be a second auction for Portugal by the end of the month, at EUR 6b.
Technically, CRB commodity index regained some strength this week. With daily MACD crossed above signal line, the pull back from 370.70 might have bottomed out, at least in near term, at 332.92 already, ahead of 38.2% retracement level at 323.54. And strong rebound could be seen. Focus will be on 348.62 minor resistance and a break there would pave the way for a retest on 370.70 high.
The dollar index also lost upside momentum as seen in bearish divergence condition in 4 hours MACD. Ideally, reversal should be around the corner even if 76.37 is not the top as dollar index is facing medium term trend line resistance (88.70 to 81.31 now at 76.66). A break of 74.96 will turn outlook bearish for 72.70 low again. Hence, 348.62 in CRB and 74.96 in dollar index will be closely watched for the next few days.
On the data front, Japan corporate service prices dropped less than expected by -0.8% yoy in APril. German import price, Swiss trade balance and employment level will be released in European session. From US, initial jobless claims are expected to drop slightly to 400k. Q1 GDP growth is expected to be revised upward to 2.2% annualized.
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