Archive for April, 2008
April 30th, 2008 at 11:20pm
Under Daily Forex Analyses
Better GDP and lower rates … but the market remains unmoved
European releases overnight
March Forecast Actual
Euro-zone Unemployment Rate 7.1% 7.1%
April
Italian CPI (MoM) +0.3% +0.5%
Italian CPI (YoY) +3.4% +3.5%
Euro-zone CPI estimate (YoY) +3.4% +3.3%
Euro-zone Business Climate Indicator 0.69 0.44
Euro-zone Consumer Confidence -13.0 - 12.0
Euro-zone Economic Confidence 98.9 97.1
Euro-zone Industrial Confidence - 1.0 - 2.0
Euro-zone Services Confidence +9.0 +7.0
Swiss KOF Leading Indicator 1.46 1.20
U.K. GfK Consumer Confidence - 20.0 - 24.0
European data continues to confirm higher inflation and weaker business & consumer confidence. The April figures appear to highlight a mild acceleration of the softening in confidence and on the assumption that the trend is more likely to persist than reverse, it does provide a potential background of instability.
The weakness compounded with continues inflation does have the potential to cause more damage to the economy than just the credit crisis. It is still early days but it is something to watch out for.
Trichet maintains that the Euro-zone economy is holding up, which in the circumstances is valid. It remains at a vulnerable juncture where minor price shocks could still wreak more damage.
States news overnight:
Q1 Forecast Actual
U.S. GDP Annualized (Q1 A) +0.4% +0.6%
U.S. GDP Price Index (Q1 A) +3.0% +3.5%
U.S. Personal Consumption (Q1 A) +0.7% - 1.0%
April
U.S. ADP Employment Change - 60K +10k
U.S. Chicago PMI 48.0 48.3
And so we have the two most critical bits of data out of the way. GDP was slightly better than expected and the Fed cut rates by 0.25% again.
The FOMC statement read:
“Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters.
Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months.
The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully.”
The market had discounted the cut and thus this event has limited impact. The question that remains is whether the Fed will call a pause or halt to the cuts. Some point to the fact that a phrase in the March statement included the phrase “downside risks to growth remain” but was absent in this month’s statement.
In many ways it would have been foolish for the Fed to make any definite statement which could put them in a straightjacket for future decisions. The basic fact is that the economy remains highly vulnerable to new shocks. The Fed will wish to retain the ability to react with appropriate actions if circumstances dictate.
Clearly the fiscal stimulation checks are in the post but it will take some while to make any meaningful impact on the economy. However, recent figures, housing market excepted, have shown tentative signs of a steadying and if this continues the pressure on the economy could decrease.
The Chicago PMI was slightly better than expected. It is nothing to get wildly excited about – it was the first time that the figures have seen 3 consecutive months below 50 since Q2 2003. However, there is still mixed news. Employment is looking weak and domestic demand remains timid and these are key to any recovery.
The headline Q1 GDP was better than expected but it wasn’t all rosy. Consumer spending, which accounts for two-thirds of economic activity, grew at the weakest rate since the second quarter of 2001 and in the light of the weak employment numbers this remains a big issue.
The housing market continues to plumb new depths and isn’t expected to recover until next year. Inventories were also high and accounted for 0.8% of the rise which leaves Q2 on rocky ground.
So in the end all we can say is that it was better than expected but in no way provides sufficient confidence to provide any great confidence in a recovery that is required to avoid two consecutive quarters of negative growth. Almost certainly Q2 will be one of those quarters so it’ll still go down to the line.
The Dollar gained a bit in early trading but suffered following the FOMC decision and we’re probably back to arguing what will happen next.
The market will consequently attach greater importance to tonight’s ISM manufacturing and tomorrow’s non-farm payroll numbers to justify the next directional move. Signs of greater stability from both will be required to stop the market from beating the Dollar bearish drums again.
More later once the daily analysis has been done…
The following releases are due from Asia due today:
Australia
March Building Approvals (MoM) - 0.5%
March Building Approvals (YoY)
April AiG Performance of Manufacturing Index
See Also
By admin
Continue Reading Asian Morning Update 1st May 2008
April 30th, 2008 at 01:05pm
Under Daily Forex Commentary
Forex Market Commentary for April 30, 2008 Forex Rates Today
Forex Rates Today Daily Market Commentary
The dollar rallied versus the European and the antipodean currencies on Tuesday, while closing flat against the yen. Obviously, the weak US data was ignored. All eyes are on statement from the Federal Reserve after cutting its rates by 25 bps at 14:15, so expect directionless trading until then.
Euro/dollar
Euro/dollar sank to its lowest level since April 3 and the selling pressure continues. My model is short, but this afternoon and Friday AM, there will be upside risk.
Initial support is at 1.5540. The next level is 1.5480. Distant support is 1.5355.
Immediate resistance is at 1.5600. A break above 1.5645 would signal a more aggressive recovery to 1.5690. Distant resistance is at 1.5790.
Oscillators are falling.
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Dollar/yen
Dollar/yen recouped early losses to close basically flat on Tuesday. The pair remains in an uptrend, but the immediate outlook is mixed.
Immediate resistance is at 104.50 from a 50-point pivot, which targets 104.00 and 105.00. The next levels remain at 105.20 and 105.60 from a 50-point pivot that targets 105.10 and 106.10.
Initial support is at 103.85. Strong support follows at 103.40 from a 50-point pivot, which targets 102.90 and 103.90.
Oscillators are rising.
NEAR-TERM: Slightly bullish
MEDIUM-TERM: Mixed to slightly bullish
LONG-TERM: Bearish
Sterling/dollar
Cable made an aggressive decline that erased the gains made the previous two days and took it to a near two-week low. My model went short, but the pair should bounce first before the next move lower.
Below the trendline at 1.5650, support comes at 1.5597. Distant support is at 1.5490.
Initial resistance is at 1.9760. Above 1.9820, strong resistance is perched at 1.9964.
Oscillators are mixed.
NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Mixed
Dollar/Swiss franc
Dollar/Swiss struggled higher on Tuesday but remained within recent ranges. Choppy trading is expected today as well, I’m afraid.
Initial resistance now comes at 1.0400. The next level is 1.0440. This is followed by 1.0550. Distant resistance now comes at 1.0625.
Immediate support is now seen at 1.0317. The next level is 1.0260. This is followed by 1.0185. Support is then pegged at 1.0135.
Oscillators are rising.
NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bearish
By admin
April 30th, 2008 at 10:05am
Under Daily Forex Analyses
Counting sheep ahead of the FOMC and GDP info
Releases from Europe:
Forecast Actual
April U.K. Nationwide House Prices (YoY) - 1.0%
March German Unemployment Change - 30K - 7K
March German Unemployment Rate 7.8% 7.9%
Nationwide confirmed the HomeTrack report earlier in the week by reporting that they have seen house prices decline by -1.0% over the past year, the first YoY decline in 12 years. Prices were hit by a combination of higher mortgage rates and tighter lending criteria which have caused a drop in mortgage approvals seen over the past six months.
The supply of unsold properties is rising which also contributes to lower prices. Together with a generally weaker economy and softer consumer confidence the lender is now expecting losses in prices over the rest of the year.
German unemployment failed to decline by as much as expected. It would be possible to interpret that as being a reflection of a slowing but it is only one month and other stats have held up. However, given the IFO and GfK surveys it will raise eyebrows and it will be something to watch over the coming month or two.
If the CEO of Siemens is to be understood then he is obviously expecting a slowdown. In a prepared speech he declared that it was obvious that the global economy will slow down. He commented, “Obviously, opinions differ on the intensity and duration of this slowdown,” and added “We expect the consequences of the crisis in the finance sector to be felt in other sectors in the course of next fiscal year. We already see first signs of greater cautiousness on the part of customers in our standard products business here in Germany.”
The following economic releases are due today:
Q1
U.S. GDP Annualized (Q1 A) 0.4%
U.S. GDP Price Index (Q1 A) 3.0%
U.S. Personal Consumption (Q1 A) +0.7%
March
Euro-zone Unemployment Rate 7.1%
April
Italian CPI (MoM) +0.3%
Italian CPI (YoY) +3.4%
Euro-zone CPI estimate (YoY) +3.4%
Euro-zone Business Climate Indicator 0.69
Euro-zone Consumer Confidence -13.0
Euro-zone Economic Confidence 98.9
Euro-zone Industrial Confidence - 1.0
Euro-zone Services Confidence +9.0
Swiss KOF Leading Indicator 1.46
U.S. ADP Employment Change - 60K
U.S. Chicago PMI 48.0
And so both BOJ and government will pace their stony corridors awaiting the announcement of the States’ Q1 GDP praying for a number without a negative sign before it. They will also probably be wishing for an unchanged policy that signals the end of the Fed’s series of cuts as the marginal impact of each new 0.25% cut becomes wafer thin.
Even then the impact of higher oil prices is clearly having a deteriorating effect on consumer spending while lower industrial production will at the very least cause a reduction in overtime which has been the only element of wages that have brought any increase in household income.
What will the Fed do? Well, it has been debated to hell and comes down to one of two scenarios: either cut by 0.25% and call it a day or retain an unchanged policy. Frankly, given the impact of any cut in rates is limited there is probably little difference between the two.
That in itself should cause the market to reassess and probably cause the Dollar to gain further in the short to medium term. However, there has been no real reason to buy Dollars so any rally is unlikely to bite too deeply.
As for the GDP – well, it’s probably a tighter call than the FOMC decision and will go down to the wire with what could be a fairly strong knee jerk reaction but which will likely calm down until the FOMC makes its announcement…
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 104.81-17 1.5691-02 1.0470-10 1.9771-10
Res: 104.19-38 1.5595-20 1.0400-29 1.9700-10
Spt: 103.65-85 1.5497-39 1.0300-25 1.9590-33
Spt: 102.41-66 1.5404-38 1.0194-13 1.9480-95
See Also
By admin
Continue Reading European Mid Morning Update 30th April 2008
April 30th, 2008 at 07:48am
Under Daily Forex Analyses
Japan suffers while the market awaits tonight’s figures
Releases from Australia:
Prior Current
March Private Sector Credit (MoM) +0.8% +0.8%
March Private Sector Credit (YoY) 15.2% 14.9%
Australia’s private sector credit appears to be on the wane. While the March’s rise was in line with forecasts, the revision lower in February’s figure brought the YoY pace to 14.9%. Business credit growth did see a +0.9% rise which shows that while early signs are positive for the RBA there is still sufficient pace in the market to forestall a dramatic decline at this point.
Along with a more cautious consumer and the global slowdown there should be further easing across the board over the coming months.
Releases from Japan:
March Forecast Actual
Unemployment Rate 3.9% 3.8%
Jobs-to-applicant Ratio 0.97 0.95
Household Spending (YoY) +0.5% - 1.6%
Industrial Production (MoM) - 0.8% - 3.1%
Industrial Production (YoY) +2.0% - 0.4%
Vehicle Production (YoY) +9.0% (prior) +2.3%
Housing Starts (YoY) - 6.7% -15.6%
Annualized Housing Starts 1.20mn 1.088mn
Construction Orders (YoY) 18.4% (prior) +6.4%
April
Nomura/JMMA Manufacturing PMI 49.5 (prior) 48.6
Japan does seem on the brink of further doldrums with softness seen just about everywhere. The -3.1% drop in industrial production will leave a choke in the throat of both government and BOJ as it sees household spending burn and crash in March which will spell further problems for the already struggling domestic economy.
Unemployment may well have ticked lower but the jobs-to-applicant ratio dipped further highlighting the lack of jobs for the out-of-work. Lower housing starts, a reducing vehicle production and a continuing decline in the Nomura/JMMA manufacturing PMI complete a black day for Japan.
The BOJ unanimously retained an unchanged policy and it is widely believed that the new governor Shirakawa will downgrade the growth forecast for this year from the current +2.1% to around +1.5%.
With inflation at 10 year highs some expect the BOJ will hike rates. However, the risk is very low given the correct observation by Ota that the increase has not been driven by demand so that it makes no sense to hike rates against external factors – oil and foods prices.
The following economic releases are due today:
Q1
U.S. GDP Annualized (Q1 A) 0.4%
U.S. GDP Price Index (Q1 A) 3.0%
U.S. Personal Consumption (Q1 A) +0.7%
March
Euro-zone Unemployment Rate 7.1%
April
German Unemployment Change - 30K
German Unemployment Rate 7.8%
Italian CPI (MoM) +0.3%
Italian CPI (YoY) +3.4%
Euro-zone CPI estimate (YoY) +3.4%
Euro-zone Business Climate Indicator 0.69
Euro-zone Consumer Confidence -13.0
Euro-zone Economic Confidence 98.9
Euro-zone Industrial Confidence - 1.0
Euro-zone Services Confidence +9.0
Swiss KOF Leading Indicator 1.46
U.S. ADP Employment Change - 60K
U.S. Chicago PMI 48.0
Yesterday saw movement than I thought would happen and mostly in the wrong direction though not exceedingly so. What did come through was the decline in Euro-Yen of which I had warned and this was mostly driven by Dollar-Yen, less so by the Euro. The Pound declined nicely as expected but then exceeded target and has opened up potential for a possible different corrective pattern.
Almost inevitably the various moves have less clarified the current status of the Dollar but more allowed a greater variety of scenarios which tends to occur naturally at times when there is a potential larger pattern that could mean a decisive break. Given the U.S. GDP numbers out tonight together with the FOMC decision and tomorrow’s ISM data it shouldn’t really come as too much of a surprise.
Back to basics here. I remain with a 106.82 target for Dollar-Yen. The Swissie remains on a broad upward path and the bigger break picture for the Euro comes at around 1.5497-1.5510 and beyond that around the 1.5295-1.5340 area.
The question remains whether we’ll see direct Dollar gains or whether there will be a pullback. Frankly either could still fit into the broad bullish picture and therefore it’ll be wise to note the break levels that imply each scenario. However, if it does prove to be the downside I still feel it will be for a correction only. Daily & weekly cycles are now bullish Dollars and unless I’ve got them placed incorrectly we should see an eventual move higher.
Just to cover the Pound – the break of 1.9700 doesn’t appear to fit into a bearish scenario – unless it is very, very bearish which is something I doubt. Therefore I still feel we are in a correction that could conceivably still make its way back to 2.0025-47… The break levels are around the 1.9599 low but we should allow for 1.9436 though that seems to be pushing credibility.
Euro-Yen also looks as if it should remain below 162.48 and see additional losses – so something’s going down whether it be the Euro or Dollar-Yen…
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 104.81-17 1.5691-02 1.0470-10 1.9771-10
Res: 104.19-38 1.5595-20 1.0400-29 1.9700-10
Spt: 103.65-85 1.5497-39 1.0300-25 1.9590-33
Spt: 102.41-66 1.5404-38 1.0194-13 1.9480-95
See Also
By admin
Continue Reading European Morning Update 30th April 2008
April 30th, 2008 at 12:19am
Under Daily Forex Analyses
Perception shifts begin to appear
European releases overnight
March Forecast Actual
Swiss UBS Consumption Indicator 2.317 (prior) 2.289
Italian PPI (MoM) +0.5% +0.8%
Italian PPI (YoY) +5.8% +6.3%
April
French Consumer Confidence Indicator - 37.0 - 37.0
Italian Retailers’ Confidence General 110.6 (prior) 106.2
Italian Services Survey 3.0 (prior) 4.0
Bloomberg Italian Retail PMI 36.4 (prior) 31.4
Bloomberg French Retail PMI 53.3 (prior) 46.2
Bloomberg German Retail PMI 51.5 (prior) 44.6
Bloomberg Euro-zone Retail PMI 48.2 (prior) 41.8
U.K. CBI Distributive Trades Report +1.0 - 26.0
European retail PMI’s reveal further pessimism among consumers and the more this lasts the longer the problem will feed upon itself. Indeed, the prospect of a consumer led downturn is probably poses a much stronger risk to global economies outside of the U.S.
The Telegraph newspaper report that comments that the U.K. could be heading for an “avalanche of redundancies” in the coming months as economic reality finally catches up with the jobs market.
It may be that the BOE’s Blanchflower reads the reads the Telegraph too as he rather dramatically commented, “Developments in the UK are starting to look eerily similar to those in the United States six months ago. There has been no decoupling of the two economies: contagion is in the air.”
“We face a real risk that the UK may fall into recession, and aggressive action is required to prevent this from occurring. These risks to the downside have increased since the February Inflation Report.”
On inflation he commented, “There is a real risk that inflation may undershoot the target in the medium term, and take us into letter-writing territory.” However, he clearly feels this is temporary when adding, “The medium term risks to inflation to the downside, arising due to the likely slowing of the economy, outweigh those to the upside.”
I can understand the comments on the fear of recession but quite surprised at those covering inflation. Very clearly central banks worldwide have had the same view. Slowly but surely all are having to eat their words as inflation has become persistent and frankly partially de-linked from the performance of the global economy.
It may just be fanciful political-speak but with OPEC warning that prices to rise as far as $200pb without the group being able to help contain the problem the potential damage to the global economy the impact could be dire. Global stagflation would incur serious consequences.
It rather puts Wellink’s comment “Inflation has to come down first before a rate cut is considered” into a completely different perspective…
When considered along with Deutsche Bank’s first quarterly loss in 5 years due to writing down the value of loans for leveraged buyouts and asset- backed securities by EUR 2.7 billion one must wonder what further damage an oil price shock would impart.
States news overnight:
Forecast Actual
U.S. April Consumer Confidence 62.0 62.3
News from the States was fairly mild compared to that compared with Europe though still couldn’t shake the negativity that has become ingrained into expectations.
Consumer confidence provided an empty bowl in that it wasn’t as bad as feared but still dropped to a 5 year low. The “hard to get jobs” component was the worst since 2004.
Coupled with news from RealityTrac that foreclosure filings had doubled in the first quarter and more than doubled over the past year didn’t really offer any hopes of the bowl being filled. Furthermore RealityTrac offered no optimism in their comment, “We’re more convinced that we haven’t seen the peak of foreclosure activity yet, and the wave probably won’t crest until late third or fourth quarter of 2008.”
It was more a story akin to traders buying at the top of a trend as the group revealed “In most of the states with the highest levels of foreclosure activity, we’re still seeing the fallout from overheated home prices and people overextending themselves with risky loans to try to buy those properties.”
That the S&P/Case-Shiller home price index dropped 2.6% in February didn’t help the situation. Annually the index has declined by 13.6% but February saw this trend actually accelerate. Ironically we may need to wait until house owners sell out anticipating being able to buy in at lower prices for signs that the market has bottomed.
Overall the Dollar made marginal gains once again against mainland Europe while the Pound helped the process with its own weakness. However, Dollar gains weren’t uniform as it lost more strongly against the Yen.
The rather disparate performance probably has more to do with pre FOMC & GDP squaring of positions, possibly seeing more risk on the downside in the Pound.
In general the market has wavered between a 0.25% cut from the Fed and an unchanged policy as the market has begun to reassess both the wilting impact of lowering rates and the fact that monetary policy has limited reach when it comes to confidence. The fact that banks have been able to patch up their balance sheets with funding may have eased some fears and equity markets have not suffered as badly as feared.
More attention is being paid to the next real issues – jobs are under threat and confidence is still waning which threatens the underbelly of the economy. However, this is occurring to a lesser extent globally, but made more vulnerable with oil prices showing no signs of stalling their uptrend and how this will impact on demand from the rest of the world.
And within the entire equation is the uncertainty of just what impact the fiscal stimulation (in the mail) checks will have on an increasingly worried consumer.
Never-the-less, the market will probably now sit quietly and wait for the outcome of both main numbers today. Reaction will depend more on perception of what a positive GDP will mean in terms of the official definition of recession (two successive quarters of negative growth) and whether there will be any assessment of these fears.
As for the FOMC decision, the combination of the recognition of the fact that additional rates cuts would probably be ineffective and a possible unchanged policy may well provide the Dollar with a lift.
It will be temporary since the fears over the economy will not go dissipate into thin air, but a greater acceptance of the status quo may well cause a rethink…
More later once the daily analysis has been done…
The following releases are due from Asia due today:
Australia
March Private Sector Credit (MoM) +0.8%
March Private Sector Credit (YoY) 15.2%
Japan – March
Unemployment Rate 3.9%
Jobs-to-applicant Ratio 0.97
Household Spending (YoY) +0.5%
Industrial Production (MoM) - 0.8%
Industrial Production (YoY) +2.0%
Vehicle Production (YoY)
Housing Starts (YoY) - 6.7%
Annualized Housing Starts 1.20mn
Construction Orders (YoY)
Japan – April
Nomura/JMMA Manufacturing PMI
The BOJ begins a 2 day policy meeting
See Also
By admin
Continue Reading Asian Morning Update 30th April 2008
April 29th, 2008 at 09:11am
Under Daily Forex Commentary
Forex Market Commentary for April 29, 2008 Forex Rates Today
Forex Rates Today Daily Market Commentary
Dollar struggled higher versus the euro, franc and yen, but slumped versus the pound. Crosses came to the forefront, with the euro crosses stumbling – and remaining on their way down. The oil price rallied on cue, as adverse events appeared on cue, as not allow for hope to even a return to $100/barrel. The dollar should consolidate on Monday and slowly ease later in the week.
Euro/dollar
Euro/dollar added to its Thursday’s losses but at much slower pace. Again, it’s premature to call the end of the major uptrend, and the initial bias is up. My model remains short but the selling pressure should decelerate. Don’t leave your guard down, this pair may still bounce.
Initial resistance is at 1.5680. The next level is 1.5760. Distant resistance is at 1.5820.
Immediate support is now seen at 1.5600. The next level is 1.5556. Below the important level at 1.5480, euro/dollar has support at 1.5415.
Oscillators are falling.
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Dollar/yen
Dollar/yen struggled higher last week, but managed to finally exit from an inside range to reach a two-month high. My system is long. Today should see consolidation, as the risk on the upside looks limited.
Immediate resistance is at 105.00. The next levels remain at 105.20 and 105.60 from a 50-point pivot that targets 105.10 and 106.10.
Initial support is at 104.50 from a 50-point pivot, which targets 104.00 and 105.00. Strong support follows at 103.40 from a 50-point pivot, which targets 102.90 and 103.90.
Oscillators are rising.
NEAR-TERM: Slightly bullish
MEDIUM-TERM: Mixed to slightly bullish
LONG-TERM: Bearish
Sterling/dollar
Sterling/dollar rallied on Friday due to sales in euro/sterling and demand from an M&A, and with my model was forced to go long. The initial move should be up.
Immediate support is seen at 1.9815. This is followed by 1.9760.
Initial resistance now comes at 1.9865. The next level is 1.9915. Above 2.0000, there is a pivot high at 2.0046. Distant resistance looms at 2.0190.
Oscillators are mixed.
NEAR-TERM: Slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Mixed
Dollar/Swiss franc
Dollar/Swiss climbed to a seven-week high of 1.0430 on Friday and my model remains long. However, choppy trading with only some upside bias is expected today.
Initial resistance now comes at 1.0430. This is followed by 1.0550. Distant resistance now comes at 1.0625.
Immediate support is now seen at 1.0260. This is followed by 1.0185. Support is then pegged at 1.0135.
Oscillators are rising.
NEAR-TERM: Slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Bearish
By admin
April 29th, 2008 at 07:07am
Under Daily Forex Analyses
A waiting game…
Releases from Australia:
Prior Current
Q1 NAB Business Confidence +6 - 4
Confidence that has been waning around the rest of the globe has overtaken Australia also now with NAB’s index falling to its lowest level in 7 years. According to the bank this is due to “The combination of much tighter financial conditions, falling global equity markets and the
global credit crunch has produced a sharp fall in business confidence. The survey is signaling that the Australian economy may be slowing faster than we had expected.”
That echoes the stories elsewhere and highlights how former confidence has under-estimated the impact of the most significant economic crisis in many years.
However, the NAB retains a forecast for both this and next year that forecasts growth of 2.75%. Note that we have seen forecasts having to be downgraded across the globe. The bank also forecasts that the RBA will retain an unchanged interest rate policy through this year but make cuts of 1.25% next year.
The Aussie has been mildly soft on the back of the news but interest in opening positions is lacking due to tomorrow’s figures from the States.
The following economic releases are due today:
March
Swiss UBS Consumption Indicator
Italian PPI (MoM) +0.5%
Italian PPI (YoY) +5.8%
April
French Consumer Confidence Indicator - 37.0
Italian Retailers’ Confidence General
Italian Services Survey
Bloomberg Italian Retail PMI
Bloomberg French Retail PMI
Bloomberg German Retail PMI
Bloomberg Euro-zone Retail PMI
U.K. CBI Distributive Trades Report
German IFO Business Climate Survey by industry
U.S. Consumer Confidence 62.0
Yesterday was pretty much a nothing day. No critical levels that would confirm extension in either direction occurred and thus we’re left with pretty much the same picture as described yesterday. Well, having said that there are one or two pointers that provide more risk weighting in the Pound and Yen.
The Pound reached its target perfectly and does seem to provide a strong argument for a triangle under development. This implies more losses today with the 1.9780-00 and 1.9700-30 areas being the two support areas that should initially cause a pullback and the lower that should complete the 4th leg of the triangle and thus suggest one more correction higher before the entire picture becomes quite strongly Pound bearish.
The situation in the Yen is interesting. Well, really the clue is in Euro-Yen which again bounced nicely from the recent highs and this actually implies a quite strongly bearish outlook. However, this is unlikely to be totally direct. Today looks as if it could retest the 162.66 low and probably extend a little further to the 162.30-40 area. However, that should cause a pullback but which should find it tough to get back above 163.00 before the stronger part of the decline.
Now this clearly means that either my bullish Dollar-Yen view is incorrect or the Euro is going to take a dive. The latter is clearly my preference but timing is key here. It seems unlikely that the Euro can lose out that much ahead of tomorrow’s GDP and FOMC decision, but that causes some confusion over the intervening period and how Euro-Yen and its constituent parts develop.
My preference has been for a slightly deeper pullback in Dollar-Europe but that will mean that Dollar-Yen will need to ease off. That’s not impossible assuming the 104.81 high was a critical high but we’ll need to see a break below 103.48-73 to see those losses. If we do then a move back to 102.41 or as much as 101.84 could be seen.
If the Euro decides to collapse sooner then we’ll have to re-arrange the implications for Dollar-Yen vis-à-vis Euro-Yen.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 104.81-16 1.5733-86 1.0429-70 2.0025-47
Res: 104.30-40 1.5668-02 1.0380-00 1.9964-97
Spt: 103.48-73 1.5583-20 1.0300-25 1.9850-89
Spt: 102.66-17 1.5497-10 1.0213-50 1.9750-80
See Also
By admin
Continue Reading European Morning Update 29th April 2008
April 29th, 2008 at 12:19am
Under Daily Forex Analyses
Action and reaction are equal and opposite
European releases overnight
April Forecast Actual
German Regional CPI (MoM) +0.2% - 0.22% (avg)
German Regional CPI (YoY) +2.8% +2.57% (avg)
Italian Business Confidence 88.5 86.9
Away from the limited releases which were broadly mixed for the Euro, the European Commission has forecast the economic slowdown will stretch into next year. Indeed, they also forecast a growth rate of just 1.5% next year as the broader impact of lower consumer demand and tighter credit restrictions.
I have no argument with that…
ECB members continue with the repetitive rhetoric of sharp swings in Forex rate being a concern (Trichet) emphasizing longer term goal of price stability. They continue to recognize the fact that the world financial system faces real financial crisis (Mersch) but of course it’s all America’s fault. European banks will be able to absorb the resultant losses he claims.
States news overnight:
There were a couple of regional Fed index numbers from Dallas and Chicago Midwest Factories, both sliding further but it was interesting that Dallas saw CAPEX rising by 1.8 to 4.5. In Chicago machinery output was up as was the resource sector output.
Elsewhere S&P warned that the declining conditions in the economy raise the chances of U.S. bank downgrades. They commented, “If this credit cycle becomes more extreme than prior cycles, which promises to be the case for the mortgage sectors, we could lower ratings for at least some of these institutions.”
I have always gone by one of Newton’s law of physics: “Action and reaction are equal and opposite.” Watch the financial markets and you’ll see the same is true. The more excessive a trend moves the more excessive the resultant reversal.
Reference the Japanese economic bubble of the 1980’s. Now reference the globalization bubble. It is difficult to assess just how extreme globalization trend became. We can see the impact of the excesses in the financial markets which has burst with a resounding bang. As for industry the entire picture is less clear because of the wide reach into developing countries.
It did represent a series of swathing changes in global business but just what risks were taken are less clear. Just how much there was reliance on cheap funding, leverage and relatively low inflation is an unknown factor. As we move into higher inflation and higher infrastructure costs including oil prices the impact is far less certain. However, there will be impact.
As for currency levels tomorrow’s FOMC and Q1 GDP will continue to provide an overhang on the market’s desire to open risk. Yesterday was a particularly flat day and today risks the same.
If there is any potential move then it seems more likely for the Dollar to drift back lower as Friday’s long positions are squared ahead of the results. The high degree of uncertainty over whether the U.S. will actually register negative growth and just what the Fed will do and subsequently say regarding the future course of interest rates is big enough to cause most to prefer to sit and watch TV than play around with positions in a thinner than normal market.
However, perhaps “inaction and reaction are equal and opposite” with the resultant risk that the end of the week will see a much stronger reaction…
More later once the daily analysis has been done…
The following releases are due from Asia due today:
Australian HIA New Home Sales (MoM)
Q1 NAB Business Confidence
See Also
By admin
Continue Reading Asian Morning Update 29th April 2008
April 28th, 2008 at 10:23am
Under Daily Forex Commentary
Forex Market Commentary for April 28, 2008 Forex Rates Today
Forex Rates Today Daily Market Commentary
Dollar struggled higher versus the euro, franc and yen, but slumped versus the pound. Crosses came to the forefront, with the euro crosses stumbling – and remaining on their way down. The oil price rallied on cue, as adverse events appeared on cue, as not allow for hope to even a return to $100/barrel. The dollar should consolidate on Monday and slowly ease later in the week.
Euro/dollar
Euro/dollar added to its Thursday’s losses but at much slower pace. Again, it’s premature to call the end of the major uptrend, and the initial bias is up. My model remains short but the selling pressure should decelerate. Don’t leave your guard down, this pair may still bounce.
Initial resistance is at 1.5680. The next level is 1.5760. Distant resistance is at 1.5820.
Immediate support is now seen at 1.5600. The next level is 1.5556. Below the important level at 1.5480, euro/dollar has support at 1.5415.
Oscillators are falling.
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
Dollar/yen
Dollar/yen struggled higher last week, but managed to finally exit from an inside range to reach a two-month high. My system is long. Today should see consolidation, as the risk on the upside looks limited.
Immediate resistance is at 105.00. The next levels remain at 105.20 and 105.60 from a 50-point pivot that targets 105.10 and 106.10.
Initial support is at 104.50 from a 50-point pivot, which targets 104.00 and 105.00. Strong support follows at 103.40 from a 50-point pivot, which targets 102.90 and 103.90.
Oscillators are rising.
NEAR-TERM: Slightly bullish
MEDIUM-TERM: Mixed to slightly bullish
LONG-TERM: Bearish
Sterling/dollar
Sterling/dollar rallied on Friday due to sales in euro/sterling and demand from an M&A, and with my model was forced to go long. The initial move should be up.
Immediate support is seen at 1.9815. This is followed by 1.9760.
Initial resistance now comes at 1.9865. The next level is 1.9915. Above 2.0000, there is a pivot high at 2.0046. Distant resistance looms at 2.0190.
Oscillators are mixed.
NEAR-TERM: Slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Mixed
Dollar/Swiss franc
Dollar/Swiss climbed to a seven-week high of 1.0430 on Friday and my model remains long. However, choppy trading with only some upside bias is expected today.
Initial resistance now comes at 1.0430. This is followed by 1.0550. Distant resistance now comes at 1.0625.
Immediate support is now seen at 1.0260. This is followed by 1.0185. Support is then pegged at 1.0135.
Oscillators are rising.
NEAR-TERM: Slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Bearish
By admin
April 28th, 2008 at 09:06am
Under Daily Forex Analyses
Dollar remains in range, wary of Wednesday’s releases
Releases from Europe:
May Forecast Actual
German GfK Consumer Confidence 4.50 5.90
German consumers appear to be over their insecurity with the GfK measurement rising strongly to 5.9 in May. Gains were seen in all sub-indexes. Economic expectations rose to 23.3 points in April from 15.0 points in March, while the index showing income expectations jumped to 10.5 points from 1.5 points in March.
The following economic releases are due today:
April
German CPI (MoM) +0.2%
German CPI (YoY) +2.8%
Italian Business Confidence 88.5
May
German GfK Consumer Confidence 4.50
The week promises much. The market is bearish Dollars and has been provided with lower levels to buy. However, there is plenty of European news also and it could be a matter of which news provides the least disappointment.
U.S. Q1 GDP is expected to be just about flat with forecasts either side of zero. Without a doubt it was a bad quarter with just about nothing to suggest that there is any reason to look for anything but a negative to flat number.
The Fed is widely expected to cut rates by 0.25% again to 2.00% but then call and end to the day – that there is no reason to cut rates any further. Quite rightly so given that the series of cuts have provided little economic reaction – with only a temporary calming influence to the credit markets.
And the ISM is expected to register a mild slowdown. This may be the only possibility for a positive surprise with corporate results generally better than expected and talk that the lower Dollar is providing U.S businesses with a price advantage.
Bush provided a timely reminder that tax rebate checks are in the post and this will help boost the economy over the coming months.
Against this we have a range of European retail and manufacturing PMI’s, CPI and business confidence numbers. All appear under pressure right now due to a combination of a high Euro and languishing consumer demand.
Indeed, with the market having shown a distinct reluctance to maintain Dollar selling against all currencies except the Euro the market is primed for a big move.
The bears maintain that the States will merely show the extent of the deterioration in the economy while the bulls point out the lag of the European economy is now catching up and that a more sustainable slowdown is more likely under the pressure of high inflation and uncertainty.
Either way the move will likely be quite strong. Hold on to your hats…
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 105.56-98 1.5786-10 1.0429-70 1.9938-59
Res: 104.81-16 1.5702-33 1.0375-00 1.9869-89
Spt: 104.14-35 1.5554-83 1.0280-00 1.9775-04
Spt: 103.48-89 1.5497-10 1.0213-46 1.9710-46
See Also
By admin
Continue Reading European Mid Morning Update 28th April 2008
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