Mid-Day Report: Dollar Rally Extends after Non Farm Payroll

Dollar is sharply higher in early US session after Non-Farm Payroll came in much better than expected. Even though a contraction of -20k in the job market is still recorded in the month of Apr, it's much lower the consensus of -75k. Prior month's contraction was just slightly revised from -80k to -81k. Unemployment rate also gives market a positive surprise by dropping from 5.1% to 5.0% instead of climbing to 5.2%. Dollar's strengthen is particular seen against yen, swissy and euro. On the other hand, Aussie and, to a lesser extend Sterling, are being supported by strength in yen crosses due to massive yen and swissy selling on further improvements in risk appetite.

Released earlier today, Germany retail sales unexpectedly dropped -0.1% mom in Mar, with yoy rate dived to -6.3%. Eurozone PMI manufacturing dropped slightly from 50.8 to 50.7 while Germany PMI manufacturing was unchanged at 53.6. UK construction PMI dipped from 57.2 to 46.1 in Apr. Australian retail sales rebounded stronger than expected by 0.5% mom in Mar.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.5545; (P) 1.5594; (R1) 1.5671; More

EUR/USD's fall from 1.6019 extends sharply lower to as low as 1.5360 in early US session touches mentioned 1.5342/66 cluster support zone. At this point, intraday bias remains on the downside as long as 1.5498 minor resistance holds. Sustained break of 1.5342/66 cluster support zone will set the stage for further decline to next short term target of 1.4966 resistance turned support. On the upside, above 1.5498 will turn intraday outlook neutral first. But another fall is still expected as long as recovery is limited below 1.5644 resistance.

In the bigger picture, as mentioned before, EUR/USD's rise from 1.4309 should have completed with a diagonal triangle pattern that started at 1.5342. Firm break of 1.5342 support, which will also have EUR/USD sustaining below 55 days EMA (now at 1.5490) too, will confirm that rise from 1.4309 has completed with bearish divergence condition in daily MACD and RSI too. In such case, deeper decline should then be seen to 1.4309 and 1.4966 support zone.

However, strong rebound from there, followed by break of 1.5644 resistance, will suggest that price actions from 1.6019 is probably just developing into another sideway consolidation. But still, risk is on the downside before sustained break of 1.6019 high.