The dollar stays soft after Fed chair Yellen's dovish speech overnight. In a testimony to the Joint Economic Committee to Congress, Yellen reiterated that "a high degree of monetary accommodation remains warranted." Nonetheless, she remained optimistic on the economy as "with the harsh winter behind us, many recent indicators suggest that a rebound in spending and production is already underway." Meanwhile, she noted that there is "no mechanical formula or timetable" for when interest rate hike will happen but maintained that rates will stay near zero for a "considering time" after ending QE. The dollar index dropped to as low as 79.06 earlier this week and recovered slightly since then. Outlooks bearish and we'd expect the index to have a test on 2013 low of 79.00 soon and a decisive break there will carry larger bearish implications. Meanwhile, stocks staged strong rebound overnight and we'd possibly see the Dow retest historical high too.
The Aussie overtook Canadian dollar as the strongest currency this week so far with help from solid employment data. The job market grew 14.2k in April comparing to expectation of 7.5k. Prior month's figure was also revised up from 18.1k to 21.9k. Unemployment was unchanged at 5.8% versus expectation of a rise to 5.9%. Taking a look at the AUD/CAD's daily chart, a short term top is formed at 1.0349 after the cross hit upper channel resistance. Also, upside momentum is doubtful with bearish divergence condition in daily MACD. Hence, while the cross did draw support from 55 days EMA and recovered, we will stay neutral and expect more consolidative trading below 1.0349 first. As long as 1.0047 support holds, another rise is in favor at a latter stage. But, break of 1.0047 will likely reverse the near term trend.
The ECB rate decision and press conference will be the main focus today. April's inflation came in less than expected, signaling increase in deflation risks, while the bank lending survey showed improved loan demand but still-tight credit standards. However, both are unlikely to lead to any action from the ECB in the meeting next week. Last week, President Draghi attempted to tame appreciation of the euro. Yet, playing verbal tricks should not succeed in curbing the rise of the single currency if not accompanied by real stimulus. More in ECB: Slim Chance Of QE In May. BoE is also expected to keep policies and issue a brief statement.
Elsewhere, Swiss will release SECO consumer confidence and CPI. Canada will release housing starts and new housing price index and US will release jobless claims.