Archive for May, 2008
May 30th, 2008 at 04:04pm
Under Daily Forex Commentary
Forex Market Commentary for May 30, 2008 Forex Rates Today
Forex Rates Today Daily Market Commentary
The dollar surged on Thursday despite a large drop in crude oil and gasoline supplies last week, as the Energy Department blamed the change ontemporary unloading delays on the Gulf Coast. Today should see consolidation, but the multitude of US data on month end may create temporary havoc. Be on the lookout for personal income and spending, the Chicago PMI and the University of Michigan survey.
Euro/dollar
Euro/dollar collaped to a near two-week low on Thursday and slightly pierced the support of the 60-day moving average at 1.5518. The downside looks limited here.
Immediate support looms at 1.5460. below 1.5415, distant support is seen at 1.5287 from a pivot low. It’s unlikley to dip that low.
The resistance at 1.5570 may hold on Friday. If it doesn’t, then look for a rally to 1.5650. Distant resistance is perched at 1.5817.
Oscillators are falling.
NEAR-TERM: Mixed
MEDIUM-TERM: Mixed to slightly bullish
LONG-TERM: Bullish
Dollar/yen
Dollar/yen surged to a three-month low on Thursday, but this upmove looks ready to peak.
Initial support is pegged at 105.18. Below 104.60 there is distant support at 103.60. Don’t expect to see it though.
Above 105.87, resistance is seen at 106.30. A further spike up to 106.85 is unlikley today.
Oscillators are rising.
NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bearish
Sterling/dollar
Sterling/dollar has been alternating up and down days for the past six days, so if this quasi-pattern continues, then Friday should be an up day. This actually makes sense, given the heavy retracement of the losses on Thursday.
Initial resistance is at 1.9820. Above 1.9850, there is further resistance at 1.9880, 1.9910 and 1.9935. Distant resistance follows at 2.0005.
Support is first seen at 1.9715. Below 1.9675, cable has support at 1.9615.
Oscillators are mixed.
NEAR-TERM: Mixed
MEDIUM-TERM: Bearish
LONG-TERM: Mixed
Dollar/Swiss franc
Dollar/Swiss soared for the third consecutive day on Thursday, but stopped just short of the 100-day moving average at 1.0533. Only a break above it would warrant further strength and Friday doesn’t seem the day to do it.
Immediate support is seen at 1.0460. Below 1.0375 there is support at 1.0310. Distant support follows at 1.0215.
Initial resistance is pegged at 1.0533. A break above it would signal a spike up to 1.0622, but this unlikely today.
Oscillators are rising.
NEAR-TERM: Mixed
MEDIUM-TERM: Slightly bullish
LONG-TERM: Bearish
By admin
May 30th, 2008 at 09:49am
Under Daily Forex Analyses
Confusion reigns
Releases from Europe:
April Forecast Actual
German Retail Sales (MoM) +0.6% – 1.7%
German Retail Sales (YoY) – 2.0% – 1.0%
French Producer Prices (MoM) +0.6% +0.7%
French Producer Prices (YoY) +5.1% +5.4%
Following yesterday’s remarkable retail PMI’s from Europe it is rather difficult to reconcile April’s crash in German retail sales. The PMI numbers were for May but the contrast is so stark it almost begs asking whether they published last year’s PMI stats! Very clearly the numbers do reflect the cut backs in household spending in order to pay for energy and food related products.
The French producer price figures also suggest there is no let up in inflationary pressure but there may even being comments offered once again that the ECB could now consider a rate hike which could see the seesaw route the Dollar is taking extend for some while to come…
The following economic releases are due today:
April
Italian Producer Prices (MoM) +0.7%
Italian Producer Prices (YoY) +6.5%
Euro-zone Unemployment Rate 7.1%
U.S. Personal Income (MoM) +0.2%
U.S. Personal Spending (MoM) +0.2%
U.S. Core PCE (MoM) +0.1%
U.S. Core PCE (YoY) +2.1%
May
Euro-zone CPI (est) (YoY) +3.5%
Italian CPI (MoM) +0.3%
Italian CPI (YoY) +3.3%
Swiss KOF Leading Indicator 1.09
U.S. Chicago Purchasing Manager 48.8
U.S. University of Michigan Confidence 59.5
The market seems to have interest rate fever under the skin today. The Dollar moves higher following treasury yields edging upwards. However, yesterday’s Dollar strength began much before the interest rate move began so the correlation is slightly strained.
Just what caused the move appears to have eluded the market and frankly this promises further erratic trading, probably reacting to numbers as they are released. The problem with economic releases right now is that they are volatile, demonstrated quite clearly this week with poor European stats until last night.
The rebound in the retail PMI was nothing short of astounding considering prior confidence numbers were also creaking under the strain of inflation. But yesterday’s confidence numbers, with the exception of the consumer confidence, mostly recorded solid gains.
And yet the Dollar went up.
U.S. numbers have begun to show a semblance of stability, still subject to the odd wobbler that undermines, but this is a common factor at turns in growth and perhaps points to the fiscal stimulus cheques being more likely to provide a lift.
Still, it’ll not be a one-way street while employment numbers show such weakness so the outlook is probably the same for the Dollar over the coming month.
Today shouldn’t see the same degree of directional move but should cause a little more Dollar buying later in the day.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 106.41-82 1.5594-16 1.0592-23 1.9849-80
Res: 105.86-04 1.5536-73 1.0526-64 1.9770-01
Spt: 105.00-05 1.5447-71 1.0470-00 1.9671-84
Spt: 104.29-66 1.5397-09 1.0405-31 1.9604-47
See Also
By admin
Continue Reading European Mid Morning Update 30th May 2008
May 30th, 2008 at 07:27am
Under Daily Forex Analyses
Dollar edges lower in Asian trading
Releases from Australia:
Forecast Actual
Private Sector Credit (MoM) +0.8% +0.4%
Private Sector Credit (YoY) 14.5% 14.1%
Releases from Japan:
April Forecast Actual
Unemployment Rate 3.9% 4.0%
Jobs-to-Applicant Rate 0.94 0.93
Household Spending (YoY) - 0.7% – 2.7%
Industrial Production (MoM) - 0.5% – 0.3%
Industrial Production (YoY) +1.6% +1.8%
National CPI (YoY) +0.9% +0.8%
National CPI ex food & energy (YoY) +0.0% – 0.1%
Vehicle Production (YoY) +2.3% (prior) +5.4%
Housing Starts (YoY) -11.8% - 8.7%
Annualized Housing Starts 1.111mn 1.151mn
Construction Orders (YoY) -16.0% – 8.4%
May
Nomura/JMMA Manufacturing PMI 48.6 (prior) 47.7
Tokyo CPI (YoY) +0.8% +0.9%
Tokyo CPI ex food & energy (YoY) +0.0% +0.1%
Higher unemployment, fewer available jobs for applicants and the manufacturing PMI moving further below the 50 boom/bust equilibrium hardly bodes well for the Japanese economy and the BOJ know it. Just a few months ago they were still uttering positive comments saying how the growth trend was still intact. Those positive comments have all but faded into memory as the global slowdown deepens and the already flat domestic economy begins to buckle under the strain of inflation.
The more positive signs are that industrial production hasn’t suffered as badly as feared and the decline in the housing market appears to be moderating but these are still under pressure.
Releases from U.K.:
Forecast Actual
GfK Consumer Confidence – 25.0 – 29.0
The following economic releases are due today:
April
German Retail Sales (MoM) +0.6%
German Retail Sales (YoY) – 2.0%
French Producer Prices (MoM) +0.6%
French Producer Prices (YoY) +5.1%
Italian Producer Prices (MoM) +0.7%
Italian Producer Prices (YoY) +6.5%
Euro-zone Unemployment Rate 7.1%
U.S. Personal Income (MoM) +0.2%
U.S. Personal Spending (MoM) +0.2%
U.S. Core PCE (MoM) +0.1%
U.S. Core PCE (YoY) +2.1%
May
Euro-zone CPI (est) (YoY) +3.5%
Italian CPI (MoM) +0.3%
Italian CPI (YoY) +3.3%
Swiss KOF Leading Indicator 1.09
U.S. Chicago Purchasing Manager 48.8
U.S. University of Michigan Confidence 59.5
Dollar strength was seen and actually exceeded my initial targets. It raises the likelihood that the Dollar has seen its lows and therefore the question is now more of whether the medium term rally can resume directly or whether we will see a longer sideways consolidation develop.
From what I can see the latter scenario of a sideways consolidation is quite strong. What did strike me yesterday was the inability for Cable to lose out along with the Euro and has remained at relatively high levels. It does bring the stronger bullish scenario back into my mind. However, it still seems to have potential for one further dip.
Indeed, the Euro appears to require that also, and the Swissie on the topside. The follow-through higher today for the Dollar may not be direct with the chance of a pullback quite high. However, I look for an eventual dip in the Euro to around the 1.5409-19 area while the Swissie will either get stuck around 1.0564 or possibly it could retest, but not break the 1.0623 high.
On the assumption that the above occurs it will raise the risk that we shall see the medium term consolidation. If not, well the Dollar could just keep going…
Much can be said for Dollar-Yen too which almost met its 105.95-05 target but there is probably chance for that later today. However, this should be seeing a pullback soon and I suspect to the broad 104.29-66 area at least. Once this correction is complete the long standing 106.82 target is then attainable.
This brings confusion for Euro-Yen and while my main view has been to look for a deeper move lower the manner in which it has remained aloft suggests out of prudence to wait for confirmation. Until that comes possibly we can see it edge erratically higher again…
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 106.41-82 1.5594-16 1.0592-23 1.9849-80
Res: 105.86-04 1.5536-73 1.0522-31 1.9770-01
Spt: 105.00-05 1.5471-84 1.0431-52 1.9671-84
Spt: 104.29-66 1.5409-47 1.0350-55 1.9604-47
See Also
By admin
Continue Reading European Morning Update 30th May 2008
May 30th, 2008 at 01:12am
Under Daily Forex Analyses
Bewitched, bothered, bewildered and bemused
Releases from Europe:
May Forecast Actual
Italian Bloomberg Retail PMI 31.4 (prior) 38.8
French Bloomberg Retail PMI 46.2 (prior) 59.6
German Bloomberg Retail PMI 44.6 (prior) 56.6
Euro-zone Bloomberg Retail PMI 41.8 (prior) 53.1
Euro-zone Business Climate Indicator 0.41 0.54
Euro-zone Consumer Confidence - 12.0 – 15.0
Euro-zone Economic Confidence +96.8 +97.1
Euro-zone Industrial Confidence – 2.0 – 2.0
Euro-zone Services Confidence +7.0 +8.0
U.K. CBI Distributive Trade Report - 20.0 – 14.0
Releases from the States:
Q1 Forecast Actual
U.S. GDP Annualized (QoQ) +0.9% +0.9%
U.S. Personal Consumption (QoQ) +1.0% +1.0%
May
U.S. Initial Jobless Claims (24th) 370K 372K
U.S. Continuing Claims (17th) 3080K 3104K
Yesterday was a day most would have not predicted given the surprising strength in the European releases, the modestly better (but still weak) U.S. GDP and the relentless rise in continuing claims.
What is more Bernanke repeated statements from a few weeks ago that “at this stage conditions in financial markets are still far from normal.” He confirmed that the Fed’s interventions have helped and resulted in narrower credit spreads. However, he also pointed out that some securitization markets are “moribund,” and risk spreads are elevated as are term LIBOR spreads.
Given any foresight that these would be released the market would normally have sold the Dollar with vengeful glee.
That the opposite occurred has the market searching for reasons. Some point out the pullback in oil prices but the Dollar/oil correlation is so erratic it serves a purpose only when it fits and commentators are struggling for other reasons to quote.
Some suggest the growing concerns over inflation are hitting treasury prices and will force the long end of the curve higher which will attract funds back into the Dollar. Certainly the signs are that the Fed’s burst of easing is probably over and that is causing the market to reappraise the possibility of interest rate hikes.
Technically, while the short term was uncertain Dollar cycles were definitely pointing to a recovery and it certainly seems possible that we have seen the low for now – and probably for the rest of the year.
The only uncertainty is whether we enter into further range trading for a month or so before a stronger push higher is seen by the Greenback. While economic numbers from the States are improving they are still not of sufficient strength to warrant a stronger rally and this does put the weighting more on the side of continued range trading.
Month end provides another rash of numbers from Japan and if recent history serves as a forecast then we can expect further softness that should the Yen to soften over the coming week. Meanwhile, further unwinding of Dollar short positions is likely but a bemused market may well be forced to tread carefully today.
More later once the daily analysis has been done…
The following releases are due from Asia due today:
Australia
Private Sector Credit (MoM) +0.8%
Private Sector Credit (YoY) 14.5%
Japan – April
Unemployment Rate 3.9%
Jobs-to-Applicant Rate 0.94
Household Spending (YoY) – 0.7%
Industrial Production (MoM) – 0.5%
Industrial Production (YoY) +1.6%
National CPI (YoY) +0.9%
National CPI ex food & energy (YoY) +0.0%
Vehicle Production (YoY) +2.3% (prior)
Housing Starts (YoY) -11.8%
Annualized Housing Starts 1.111mn
Construction Orders (YoY) -16.0%
Japan – May
Nomura/JMMA Manufacturing PMI 48.6 (prior)
Tokyo CPI (YoY) +0.8%
Tokyo CPI ex food & energy (YoY) +0.0%
U.K.
GfK Consumer Confidence – 25.0
See Also
By admin
Continue Reading Asian Morning Update 30th May 2008
May 29th, 2008 at 10:04am
Under Daily Forex Analyses
Big day for European confidence numbers…
Releases from Europe:
Q1 Forecast Actual
Swiss Employment Level (Q1) 2.6% 2.8%
Swiss Employment Level (Q1) 3.894mn 3.90mn
April
German Unemployment Rate 7.8% 7.9%
German Unemployment Change – 25K +4K
May
U.K. Nationwide House Prices (MoM) – 0.5% – 2.5%
U.K. Nationwide House Prices (YoY) – 2.1% – 4.4%
U.K. property prices posted a record one-month drop in prices in May to push home the fact that the bubble has burst and the drop in prices appears to be gathering pace. The credit crunch and the weakening economy were slated as the guilty parties as householders see inflation eating into their monthly budgets.
It will pose a question for the BOE in terms of whether to slash rates like the Fed or to retain a stiff upper lip and vote for the test book stable price affirmation with inflation expected to top 3.0%.
The following economic releases are due today:
Q1
U.S. GDP Annualized (QoQ) +0.9%
U.S. Personal Consumption (QoQ) +1.0%
May
Italian Bloomberg Retail PMI 31.4 (prior)
French Bloomberg Retail PMI 46.2 (prior)
German Bloomberg Retail PMI 44.6 (prior)
Euro-zone Bloomberg Retail PMI 41.8 (prior)
Euro-zone Business Climate Indicator 0.41
Euro-zone Consumer Confidence – 12.0
Euro-zone Economic Confidence +96.8
Euro-zone Industrial Confidence – 2.0
Euro-zone Services Confidence +7.0
U.K. CBI Distributive Trade Report
U.S. Initial Jobless Claims (24th) 370K
U.S. Continuing Claims (17th) 3080K
Stats out so far today have been repeats of the same old stuff. Australians reduced private capital spending in Q1 while the Japanese consumer is conspicuously absent from retailers as more budget is having to be directed towards fuel and food.
Following yesterday’s weaker European releases versus the mildly stronger from the States Asia has followed through with modest Dollar buying as the market continues to react to each figure coming out. Clearly the sentiment is confused and this is clear from statements that identify reasons to sell the Dollar one day and buy the next.
Today’s release calendar is a typically busy month-end barrage of European data that could well provide more decisive direction should the data be mostly weak. We see the Bloomberg retail PMI numbers followed by a big glob of confidence numbers from the Euro-zone and this does seem to carry risks of Euro weakness.
Much of the correction higher in the Euro has been based on the threat of higher interest rates from the ECB. A more consistent show of weak confidence running from the consumer through to business, economic and industrial confidence would place a big question mark over the ECB’s resolve in the face of a weakening economy.
Perhaps it will begin to encourage them to understand that price stability also requires a confident consumer.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 105.68-96 1.5737-59 1.0526-64 1.9826-51
Res: 105.18-30 1.5665-70 1.0452-86 1.9735-48
Spt: 104.37-44 1.5549-63 1.0348-57 1.9630-51
Spt: 103.48-87 1.5485-13 1.0263-93 1.9535-67
See Also
By admin
Continue Reading European Mid Morning Update 29th May 2008
May 29th, 2008 at 07:34am
Under Daily Forex Analyses
Dollar firm in Asian trading
Releases from Australia:
Forecast Actual
Q1 Private Capital Expenditure +3.0% – 2.5%
That’s quite a shortfall against forecasts and raises a lot of questions for growth prospects over the rest of the year. However, to offset this it still seems as if Australian businesses still retain a mildly bullish outlook and still expect to raise CAPEX over the rest of the year. This comes predominantly from mining and manufacturing although retail & financial remain soft.
Thus the main risks to look out for are from lower consumer confidence and spending together with rising input costs being passed into inflation which could stifle domestic demand.
Releases from Japan:
April
Large Retailers’ Sales (YoY) - 1.2% – 2.2%
Retail Sales (MoM) +0.0% – 0.1%
Retail Sales (YoY) +0.6% +0.1%
Undoubtedly the downward pressure on spending is already in place here in Japan as retail sales slipped to a mere +0.1% YoY and kept up only by the high level of fuel costs. The Ministry of Economy, Trade and Industry surprisingly maintained their assessment of sales as “showing a sign of picking up.”
However, this is the worst reading since last July and the +0.1% YoY rise can hardly be described as “picking up” when so much is being diverted into rising fuel and food costs. Fuel retailers recorded a rise of 3.4% over the month while cars were on demand following the petrol tax expired at the end of March. It has since been reintroduced.
We should remember that consumer confidence is at a five year low, the outlook for exports remains weak and the prospects for sales to “pick up” are very unlikely.
The following economic releases are due today:
Q1
Swiss Unemployment (YoY) 2.6%
Swiss Unemployment (Q1) 3.894mn
U.S. GDP Annualized (QoQ) +0.9%
U.S. Personal Consumption (QoQ) +1.0%
April
German Unemployment Rate 7.8%
German Unemployment Change – 25K
May
U.K. Nationwide House Prices (MoM) – 0.5%
U.K. Nationwide House Prices (YoY) – 2.1%
Italian Bloomberg Retail PMI 31.4 (prior)
French Bloomberg Retail PMI 46.2 (prior)
German Bloomberg Retail PMI 44.6 (prior)
Euro-zone Bloomberg Retail PMI 41.8 (prior)
Euro-zone Business Climate Indicator 0.41
Euro-zone Consumer Confidence - 12.0
Euro-zone Economic Confidence +96.8
Euro-zone Industrial Confidence – 2.0
Euro-zone Services Confidence +7.0
U.K. CBI Distributive Trade Report
U.S. Initial Jobless Claims (24th) 370K
U.S. Continuing Claims (17th) 3080K
The Dollar started the day as expected, bouncing from the resistance levels seen soon in the Asian day and looked quite soft for some while before the sharp reversal took it back above those resistance levels. My first view of the charts made me wonder whether I’d misread the wave structure and could there possibly be yet another round of softness. Having gone through more thoroughly, while I can’t 100% rule it out, the implication does seem to suggest that we may have seen the end of the Dollar’s corrective weakness.
However, there are some levels we need be mindful of and given the situation in the Aussie and possibly Cable too the Dollar’s upside may begin a little more erratically for a day or two.
The Aussie is bubbling just below the key 0.9666 & 0.9720 targets, the lower seeming more likely. The Pound actually held up quite well but an alternative larger picture does suggest fairly good resistance between 1.9880-1.9909 and while this holds the downside begins to beckon.
As for Dollar-Yen it reached the 105.33 resistance almost perfectly and I still see potential for another rally here to 105.68-00 at least. I’d still prefer 106.82 but I’ll wait for that one.
So if anything is favored today it is a little more upside for the Dollar followed by a correction. Key Dollar resistance levels seem to be around 1.5549 Euro (max 1.5513) and 1.0452-86 Swissie. While these hold a pullback is possible else the Dollar could well accelerate quite strongly higher…
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 105.68-96 1.5737-59 1.0526-64 1.9880-09
Res: 105.09-30 1.5665-70 1.0452-86 1.9826-49
Spt: 104.37-44 1.5549-88 1.0348-57 1.9732-64
Spt: 103.48-87 1.5485-13 1.0263-93 1.9630-51
See Also
By admin
Continue Reading European Morning Update 29th May 2008
May 29th, 2008 at 05:31am
Under Daily Forex Commentary
Forex Market Commentary for May 29, 2008 Forex Rates Today
Forex Rates Today Daily Market Commentary
The dollar rallied on Wednesday as well versus all majors but cable, in part because of a better than expected durable goods orders report. But the crude oil made an aggressive recovery. The US currency should only consolidate today.
Euro/dollar
The euro/dollar sank to an over one-week low on Wednesday and my model remains short. Only a break below 1.5600 signals more weakness; if not, the medium-term upmove should resume.
Key support is at 1.5600. A close below this level would signal a sustained decline and the next level would become 1.5550. This is followed by 1.5460.
Initial resistance is now seen at 1.5690. The next levels are 1.5740 and 1.5811. Above 1.5865, euro/dollar has distant resistance at 1.6020.
Oscillators are mixed.
NEAR-TERM: Mixed to slightly bearish
MEDIUM-TERM: Mixed to slightly bullish
LONG-TERM: Bullish
Dollar/yen
Dollar/yen rallied broke out of an inside range on Wednesday on its way to a two-week high. My model remains long. Expect another attempt on the upside today, only that this looks tough to break now.
Immediate resistance is now at 105.30. Above 105.70, there is further strong resistance at 106.35.
Below 104.50 from a 50-point pivot, which targets 104.00 and 105.00, distant support follows at 103.40 from a 50-point pivot, which targets 102.90 and 103.90.
Oscillators are rising.
NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bearish
Sterling/dollar
Sterling/dollar reversed early losses to close higher on Wednesday, but remained in an inside range. My model remains long, but the immediate outlook is mixed.
Initial resistance remains at 1.9850. Above it, there is further resistance at 1.9910. Distant resistance is at 2.0030.
Immediate support is at 1.9760. This is followed by 1.9645. Only a break below 1.9545 would jeopardize the cable’s recovery.
Oscillators are mixed.
NEAR-TERM: Mixed
MEDIUM-TERM: Bearish
LONG-TERM: Mixed
Dollar/Swiss franc
Dollar/Swiss reversed early losses in a dramatic fashion to close higher on Wednesday, and my model went long. But it moved up too much too fast, and the immediate outlook is mixed to slightly bullish.
Initial resistance now comes at 1.0425. If this level is surpassed, then expect a test of 1.0510. Distant resistance is perched at 1.0623.
Immediate support is still seen at 1.0305. This is followed by 1.0200, 1.0130 and 1.0105.
Oscillators are rising.
NEAR-TERM: Mixed to slightly bullish
MEDIUM-TERM: Slightly bullish
LONG-TERM: Bearish
By admin
May 29th, 2008 at 01:17am
Under Daily Forex Analyses
Dollar balancing on a knife edge
Releases from Europe:
May Forecast Actual
Italian Retailers’ Confidence General 106.2 (prior) 102.8
Italian Services Survey 4.0 (prior) 19.0
Releases from the States:
April
Durable Goods Orders (MoM) - 1.1% - 0.5%
Durable Goods Orders ex transp (MoM) - 0.5% +2.5%
Poor European data and positive durable goods orders from the States combined to trigger a further round of Dollar buying overnight that threatens to call an and to the correction from the 1.5283 Euro low.
What may provide the final nail in the coffin for the Euro are the series of retail PMI numbers and general confidence numbers from the Euro-zone later today. However, the line between Dollar buying and selling appears so fine at the moment that any better numbers than expected could take it higher for one last attempt.
What is very clear is that States figures are beginning to show a semblance of modest stability while European numbers continue to become more and more volatile. ECB officials have announced their resignation to a larger slowdown and this does seem to be the more likely medium term trend.
The only uncertainty for the market are the renewed hawkish comments as Trichet and Co. continue to threaten consumers that they shouldn’t expect to recoup the large dents to their budgets through wage settlements else they’ll hike rates.
Even if they did, to me it would be a very bearish sign indeed for the economy.
As for the States there appears to be a more “sit back and wait” attitude. The Fed appear (without verbally acknowledging as such) that they feel they have done enough for now and look towards the fiscal stimulation package to take over the process of reviving demand from an ever ill-confident consumer.
Recent housing figures have been less negative (not yet positive) and signs from the Fed regions have been cautiously positive, although still fragile. Cutting interest rates will not bring confidence back to the consumer and this must be the focus for the administration in the drive to encourage a sustainable recovery.
Dollar-wise the outlook remains mixed in the short term but it shouldn’t be too long before it manages to confirm further gains and this time it should be sustainable beyond the highs seen so far…
More later once the daily analysis has been done…
The following releases are due from Asia due today:
Australia Q1 Private Capital Expenditure +3.0%
Japan – April
Large Retailers’ Sales (YoY) – 1.2%
Retail Sales (MoM) +0.0%
Retail Sales (YoY) +0.6%
See Also
By admin
Continue Reading Asian Morning Update 29th May 2008
May 28th, 2008 at 10:11am
Under Daily Forex Analyses
Mechanistic monetary policy could lead to recession
Releases from Europe:
April Forecast Actual
German Import Price Index (MoM) +0.7% +0.9%
German Import Price Index (YoY) +5.5% +5.7%
May
French Consumer Confidence Indicator – 37.0 – 41.0
Continuing stress is being shown in the correlation between price increases and the decline in consumer confidence. French consumer confidence is now at its lowest level since the inception of the series in 1987. Let’s put this in perspective. The highest level was in June last year when the indicator recorded a level of -13. That means in 10 months the indicator has reversed from a record high to a record low.
If the ECB can make statements about the undesired volatility in Forex rates then surely this puts the reactions to the burst of the globalization bubble into perspective. Current conditions are abnormal but the central bank fails to recognize a basic crisis in the midst of their economy…
And Germany’s first CPI numbers to come from Saxony have seen inflation push up to +3.1% and the import price index to a +5.7% gain over the year. All the ECB can do is threaten to hike rates if consumers push for higher compensation…
The following economic releases are due today:
April
U.S. Durable Goods Orders (MoM) – 1.1%
U.S. Durable Goods Orders ex transp (MoM) – 0.5%
May
Italian Retailers’ Confidence General 106.2 (prior)
Italian Services Survey 4.0 (prior)
There has been very little new information to enter the market domain during the Asian session but my attention was taken by comments made by the BOJ governor Shirakawa who spoke astutely about the impact of developing economic bubbles, much of it obviously from Japan’s experience since the early 90’s.
He called the potential for market bubbles to develop following periods of price stability and low inflation as “paradoxical” and warned that focusing “narrowly on the current observed inflation rate” would risk “necessary monetary policy adjustments being delayed, including large fluctuations in economic activities.”
Clearly he cited Japan’s long period of low inflation and interest rates following the 1990 crash which ended in a bubble since earlier this decade. Perhaps the term “bubble” is not quite appropriate since there was never any excess. However, the point should be well taken.
With the credit crisis having grabbed most of the attention for several months the issue of externally generated inflation has almost been glossed over. Of course central bankers say it’s a concern but this has been caused by the globalization bubble and has become the number one threat to the global economy.
CB officials are also approaching the issue of inflation from a single perspective: it needs to be controlled by interest rates and to “punish” high wage settlements by loading on more pain onto the already stressed consumer.
This emphasizes a mechanical attitude towards monetary policy and fails to recognize that not only are markets are a factor of emotion but also consumers’ emotions are a factor in the way prices develop.
People react emotionally. When forced these emotions become strong enough to force a confrontation that will cause the mechanism of the economy to change. This will come through reduced spending as the public act to protect their wealth as best they can and to protest against the stress they endure as they find bills harder to meet.
By taking a pure text book mechanical approach to current economic conditions the central banks are going to stoke the fuel for their own problems and risk consequences that could escalate both inflationary pressures and a severe economic slowdown, possibly recession.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 105.33-68 1.5817-45 1.0354-72 1.9909-50
Res: 104.32-46 1.5762-95 1.0310-30 1.9849-74
Spt: 103.44-79 1.5670-30 1.0214-40 1.9740-80
Spt: 102.56-72 1.5588-13 1.0127-34 1.9685-13
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Continue Reading European Mid Morning Update 28th May 2008
May 28th, 2008 at 07:49am
Under Daily Forex Analyses
Last gasp attempt lower for the Dollar?
Releases from Australia:
Forecast Actual
Q1 Construction Work Done +2.3% +2.3%
March Westpac Leading Index +3.6% (prior) +3.3%
May DEWR Skilled Vacancies (YoY) – 0.8% (prior) – 0.1%
The Australian economy isn’t collapsing but it is moderating from its peak much as the European economy started to do late last year. The symptoms are much the same having seen a period of sustained, but reasonably controlled growth and now experiencing the same withdrawal of available spending money as consumers route funds more into energy and food.
The Westpac Leading Index reflected this back in March as it declined to +3.3% in March and with recent numbers it is likely to have weakened further under the weight of higher interest rates and tighter credit.
The bank described the results as pointing to as an abrupt slowdown in economic activity but also forecast inflation to ease back below 3.0% though the word “eventually” was used and that is open ended. Indeed, it may well have to be open ended with no sign that oil has reversed its uptrend.
As conditions tighten and less of the household budget is made available for real economy product spending the softening will accelerate as the year progresses.
The following economic releases are due today:
April
German Import Price Index (MoM) +0.7%
German Import Price Index (YoY) +5.5%
U.S. Durable Goods Orders (MoM) – 1.1%
U.S. Durable Goods Orders ex transp (MoM) – 0.5%
May
French Consumer Confidence Indicator – 37.0
Italian Retailers’ Confidence General 106.2 (prior)
Italian Services Survey 4.0 (prior)
On the one hand I am quite satisfied with yesterday’s moves but on the other hand there seems to be a growing number of conflicts between basic expectations for the coming week which means something, somewhere has to give way.
First of all Cable has struggled more than I’d like and any expectation of further strong gains is withering away by the day. Dollar-Yen has made a deeper than expected recovery which I could accept though the cyclic argument is strengthening for the downside to come under pressure. This should come hand in hand with a lower Euro-Yen but even this has steadfastly refused to show any overt signs of the weakness I have been looking for.
I am pretty satisfied with the Euro and Swissie moves but any higher for the Dollar against these two will begin to suggest the probability that the Dollar’s weakness is over. I would still like to feel that there is still another leg lower for the Dollar before we find a larger reversal but I wouldn’t really want to see any higher against the Swissie in particular and there’s precious little wiggle room left on the downside for the Euro either…
For the moment I’m going to stick with the view that the Dollar should come under pressure for one last attempt lower. This does seem to have more correlation with gains in Cable (but possibly limited now) and would keep Dollar-Yen potentially in a range, possibly allowing Euro-Yen also one more attempt higher.
However, the overwhelming analysis I have is that the Dollar is due to recover again and therefore be aware of the levels that would imply a stronger recovery for the Dollar…
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 105.33-68 1.5817-45 1.0393-09 1.9909-50
Res: 104.32-46 1.5735-62 1.0325-54 1.9805-49
Spt: 103.44-79 1.5648-63 1.0240-75 1.9703-32
Spt: 102.56-72 1.5534-69 1.0186-14 1.9610-51
See Also
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Continue Reading European Morning Update 28th May 2008
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