The yen remains the weakest currency this week and extends the pull back on strong risk appetite. Investors shrugged off the situation in Ukraine and pushed the Dow to new record close of 16695.47 overnight, up 112.13 pts or 0.68%. Asian equities follow with Nikkei up 295 pts, or 2.07% at the time of writing. Meanwhile, dollar index is facing some resistance below 80 level as it's pressing the 55 days EMA and lost some upside momentum. The development slowed down the decline in European majors against the greenback. Commodity currencies are also soft, in particular the Aussie after weak housing data.
Technically, the the Dow's solid rally overnight confirmed resumption of the long term up trend from 2009 low of 6469.95. Near term outlook stays bullish as long as 16357 support holds. Nonetheless, the Dow should be facing an important long term projection resistance at 100% projection of 6469.95 to 12876 from 10404.49 at 16810.54. Weekly MACD also shows bearish divergence condition. We'd remain cautious on reversal from the mentioned 16810.54.
As the Russia-Ukraine crisis continues, Russia's state energy giant Gazprom threatened that it may halt natural gas shipments to Ukraine on June 3 unless the country pays in advance its June deliveries because of debts amounting to USD 3.51b. At the same time, the two easternmost regions in Ukraine held referendums on Sunday. While some sources cited a rebel official saying that, in the Donetsk region, there were 80% "yes" votes and 10% "no" votes, no figures has been released for the Luhansk region. Shortly after the referendum, the self-declared authority called on Monday for their regions to become part of Russia. The proposal was rejected by Russia (for the moment). While there's no intensified military conflict between the Ukraine government and the rebels, the situation in the region has remained highly uncertain.
In Europe, the ECB governing council member Nowotny said yesterday that it's "reasonable" to put together a "package" rather than a single measure like rate cut in June to add more stimulus to the economy. He also noted there are "very strong elements of uncertainty" regarding inflation. Another governing council member Constancio said that medium term path of inflation will be the "main criteria" for ECB decision.
On the data front, Australia home loans dropped -0.9% in March versus expectation of 1.0% rise. House price index dropped -1.2% qoq in Q1 versus expectation of 3.0% rise. UK BRC retail sales rose 4.2% yoy in April. Released from China, industrial production rose 8.7% yoy in April, fixed asset investment rose 17.3% yoy,retail sales rose 11.9% yoy. German ZEW will be the main focus in European session. US will release retail sales, import price index and business inventories.