Risk trades finally gave up some ground as concerns about bank stress tests outweighed better economic data and a ''hopeful'' Fed Chairman. The rumor mill continued to churn and news that at least 10 of the 19 banks being scrutinized will need to raise more capital weighed on equity marts. US stocks shed a modest -0.4% and the S&P managed to close above the crucial 900 short-term support, nonetheless. Data continued to show signs of a bottoming economy with the ISM services index jumping more than forecast to 43.7 in April from 40.8 prior. Fed Chairman Bernanke's testimony before the JEC rang a cautiously sanguine tone as well. Overall, Bernanke's optimism is based on the premise that the stimulus package will boost the near-70% chunk of the US economy called consumer spending. Students of permanent income hypothesis, however, would say that any one-time handout is more likely to be saved rather than spent – especially when you throw in the fact that job losses have yet to slow.

The flight to safety kept the US dollar better bid and the greenback rallied more than 0.5% broadly. EUR/USD sank more than -60 points towards 1.3330/40 and the pair remains heavy while below 1.34 here. The 100hr lurks into 1.3300 and stops are likely sitting near that area as well, so look for good short-term support on a move into that zone. The yen crosses were mixed as USD/JPY was practically unchanged near 98.90 while EUR/JPY shed -50 pips into the 131.90/95 area. Commodity currencies were just modestly lower on the back of the small decline in oil prices to just below $54/bbl. USD/CAD recovered a mere 30 pips to 1.1750 while AUD/USD sank a slight -15 pips to 0.7430. Australian retail sales and trade data are due now in the Asia session. Look for better than expected results to see AUD/USD better bid on the follow.  The pair sees hourly up-channel support into 0.7390 and good resistance by the 0.7500 level.

Upcoming Economic Data Releases (Asia Session) prior expected

  • 5/5 23:01 GMT UK  Nationwide Consumer Confidence  APR  41  43
  • 5/6 1:30 GMT AU  Retail Sales s.a. (MoM)  MAR  -2.00%  0.50%
  • 5/6 1:30 GMT AU  Trade Balance  MAR  2109M  1700M
  • 5/6 2:30 GMT US  Fed's Yellen Speaks in Berkeley, California on U.S. Recession  6-May
  • 5/6 3:00 GMT NZ  Private Wages Inc Overtime QoQ  1Q  0.70%  0.60%