FOREX: Dollar Under Pressure as Bargain-Hunters Push Risky Assets Higher

The US Dollar is under pressure to start the trading week, with more of the same on tap as bargain-hunters push risky assets higher after last week's broad-based selloff.

Overnight Headlines

• US Dollar Slumps as Stocks Rebound Across Asian Bourses
• Euro Edges Higher Despite Greek Sovereign Debt Fears

Critical Levels

CCY	SUPPORT	RESISTANCE
EURUSD	1.4248	1.4250
GBPUSD	1.6345	1.6455

The Euro and the British Pound moved higher overnight, adding as much as 0.9 and 0.24 percent against the US Dollar, with the greenback broadly under pressure as markets digest last week's aggressive rally (the biggest in 10 months). We are looking for attractive EURUSD and GBPUSD selling opportunities in the days ahead.

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
23:01	GBP	Lloyds Employment Confidence (APR)	-58	-	-65
23:50	JPY	Bank of Japan Minutes of April 6-7 Meeting	-	-	-
1:30	AUD	Job Advertisements (MoM) (APR)	1.0%	-	1.3%
1:30	AUD	NAB Business Conditions (APR)	5	-	9
1:30	AUD	NAB Business Confidence (APR)	7	-	9

The US Dollar came under broad-based selling pressure in overnight trade, losing as much as 0.5 percent on average against its major counterparts as stocks rebounded across Asian bourses following last week's selloff – the largest in six weeks – sapping demand for the safety-linked US unit. The MSCI Asia Pacific regional benchmark equity index added 0.5 percent, with optimism chalked up to last week's better-than-expected US jobs report. The figures showed the world's top consumer market (and key demand source for Asian exporters) added 244K jobs in April, topping forecasts calling for an 185K increase. Private-sector employment grew 268K, the most in over five years.

Euro Session: What to Expect

GMT	CCY	EVENT	EXP	PREV	IMPACT
6:00	EUR	German Current Account (euros) (MAR)	13.3B	8.9B	Medium
6:00	EUR	German Trade Balance (euros) (MAR)	11.8B	12.1B	Medium
6:00	EUR	German Exports s.a. (MoM) (MAR)	1.1%	2.8% (R+)	Low
6:00	EUR	German Imports s.a. (MoM) (MAR)	0.8%	4.0% (R+)	Low
6:30	EUR	Bank of France Business Sentiment (APR)	110	110	Low
7:00	GBP	Halifax House Prices sa (MoM) (APR)	0.1%	0.1%	Medium
7:00	GBP	Halifax House Prices 3Months/Year (APR)	-3.0%	-2.9%	Medium
8:30	EUR	Euro-Zone Sentix Investor Confidence (MAY)	13.8	14.2	Medium

The economic calendar is relatively tame in European hours, putting the focus back on risk sentiment trends. With that in mind, stock index futures are painting a conflicting picture, with contracts tracking European bourses pointing aggressively lower ahead of the opening bell while those following US benchmarks are in positive territory.

On the Continent, pessimism is likely linked to renewed sovereign risk fears amid rumors that Greece may go so far as to pull out of the Euro Zone. Indeed, Greek CDS rates – a gauge tracking the cost of insuring against a default in the Mediterranean country – jumped 65.5bps overnight to hit the highest in nearly two weeks. Negative sentiment may be short-lived however after EU Finance Minister council leader Jean-Claude Junker dismissed the idea as “stupid” following a weekend sit-down on the issue, with press reports suggesting regional officials were prepared to extend Greece's lifeline in exchange for new fiscal measures.

On balance, this argues for a prompt return to the broadly risk-positive themes that proved dominant in Asia. While the US jobs report was cited as the catalyst, larger themes are also surely at work. The spectrum of risky assets fell last week while the US Dollar marked the largest advance in 10 months as traders began to price in the message from April's FOMC interest rate announcement where policymakers pledged to allow the QE2 program to expire. Facing the looming reality of higher US yields, investors that had capitalized on QE to finance bets on high-yielding assets with cheap borrowing in Dollars began to book profits, opening the door for short-term “bargain-hunting” before the larger risk-averse move resumes anew.

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