ASIA session review: Euro firm on expectations of inflation uptick

Data released: 

06:00 GMT Germany Import Price Index (MoM) (Mar) -0.6% -0.2% -0.1% 

06:00 GMT Germany Import Price Index (YoY) (Mar) -3.3% -2.8% -2.7%

The euro rose to a two-week high against the dollar on Monday, supported by expectations inflation in the euro zone will tick up and ease pressure on the European Central Bank to loosen monetary policy.

Policy reviews by the U.S. Federal Reserve and Bank of Japan (BoJ) will keep the market cautious in a holiday-shortened week. Many centres in Europe and Asia will be shut on Thursday for Labour Day. Japan will be closed on Tuesday.

Pro-Russian rebels paraded European monitors they are holding in eastern Ukraine on Sunday. They had freed one but said they had no plans to release another seven. Meanwhile, the United States and Europe prepared new sanctions against Moscow.

EURO

Expectations that euro zone consumer price inflation could rise when data is released later this week were helping the single currency. Euro zone inflation for April, due on Wednesday, is forecast to rise to 0.8%, year-on-year, from 0.5%, previously.

EUR/USD holds within the former range with initial resistance comes at $1.3850 (Monday’s high), then - at $1.3900 with a break above targets $1.3965 (Mar 13 high). Below $1.3800 minor support comes at $1.3740 (Apr 8 lows), extending to $1.3670 (Apr 4 lows).

POUND

Sterling rose to a 4 1/2-year high against the dollar , boosted by robust UK data and expectations of merger and acquisition inflows, after U.S. drugmaker Pfizer confirmed it had made a bid approach to Britain's second-biggest drugs group, AstraZeneca.

U.S. pharmaceutical group Pfizer Inc. on Monday confirmed that it has made a fresh approach to AstraZeneca PLC over a tie-up. In a statement Pfizer said the first approach was in January 2014, but after "high-level discussions," AstraZeneca ended the talks. Pfizer said "in light of recent market developments," it had approached its rival a second time, on April 26, seeking to renew discussions, but AstraZeneca again declined to engage.

Pfizer's January proposal involved a cash/share offer worth 46.61 pounds ($76.61) per AstraZeneca share, and a 30% premium to the company's closing price of £35.86 on Jan. 3.

GBP/USD rallied to $1.6815 from session lows on $1.6780 (initial support) with $1.6840 still may resist the bulls. Further resistance comes at $1.6880 (Nov 15’2009 high). Below $1.6780 support comes at $1.6700 and around Tuesday’s lows on $1.6660 with a break under widens losses to $1.6620 (trend support line from Nov 12’2013).

YEN

The yen holds within the range.

USD/JPY tries to recover, holding above Y102.00. Below support comes at Y101.30 (Apr 10 lows) and Y100.70 (Feb 7 lows). Initial resisatance is around Y102.70. Further resistance comes at Y103.40 and around Y104.00. Stronger one remains at Y104.30/80.

DATA AHEAD

Monday, Apr 28, starts at 14:00 GMT, when US report Mar Pending Home Sales.
At 22:45 GMT New Zealand releases Mar Trade Balance with $937M expected after $818M.

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