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The JPY advanced against all 16 major counterparts before reports this week forecast to show US existing home sales fell and Japan’s export growth slowed in July. Australia’s currency weakened after the election failed to deliver a majority government for the first time in 70 years. The EURUSD traded near a five-week low ahead of European data that may show growth in the EU’s services and manufacturing industries fell to 56.3 (prev. 56.7). The EURJPY dropped to 108.50, USDJPY fell to 85.36 and EURUSD traded at 1.2711 after it reached 1.2664 on Friday, the lowest since July 13, AUDUSD slipped 0.3% to 0.8911 and AUDJPY dropped 0.6% to 76.08. Sales of US existing homes probably dropped 12.9% to 4.68 million annual pace, Japan’s exports probably advanced 21.8% (prev. 27.7%) slower than last month according to data to be released on Aug. 25. Gains in the JPY were sustained after reports said currency intervention wasn’t discussed between Prime Minister Naoto Kan and BOJ Governor Masaaki Shirakawa in their telephone conference today. The Nikkei 225 retreated 0.8% to 9,108.58, the lowest since November, MSCI Asia Pacific Index fell 0.1% while S&P 500 Index futures climbed 0.2%.

The EURGBP declined to a seven-week low after France’s government last week cut its forecast for economic growth next year as President Nicolas Sarkozy prepares for the biggest budget squeeze in at least two decades. France will probably grow 2% (prev. 2.5%) in 2011, slower than previous forecast. France has pledged to cut the budget deficit to 6% of the GDP next year and to 3% by 2013 from about 8% in 2010. Europe’s sovereign risks may re-emerge amid lingering concerns about its fiscal health, giving further strength to a case of a weak EUR. ECB council member Axel Weber said on Aug. 20 that the ECB should help banks through end-of-year liquidity tensions before deciding when to withdraw emergency lending measures triggering concern about Europe’s recovery.

Currency Tech

EURUSD
R 2: 1.3250
R 1: 1.3000
CURRENT: 1.2725
S 1: 1.2680
S 2: 1.2540

USDJPY
R 2: 87.20
R 1: 86.80
CURRENT: 85.37
S 1: 85.00
S 2: 84.50

GBPUSD
R 2: 1.5925
R 1: 1.5750
CURRENT: 1.5608
S 1: 1.5525
S 2: 1.5350

AUDUSD
R 2: 0.9200
R 1: 0.9070
CURRENT: 0.8925
S 1: 0.8810
S 2: 0.8725

• S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot

Published on Mon, Aug 23 2010, 09:14 GMT

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From a look at the internals of the data we see that the gains were powered primarily by intermediate goods and a rise in capital goods. Energy output was down 0.9%. In a negative consumer goods (both durable and non-durable) were down. Still the fact that companies continue to invest in capital goods means they feel confident enough in the recovery to continue buying machinery.

What the data implies is that the worries around sovereign debt in the Euro-zone have so far not derailed the bloc’s recovery. That news is a welcome sign for the whole global economy and on the back of the better-than-expected release other currencies tied to global growth, like the Australian, New Zealand and Canadian Dollars, all rallied. The Pound got in the action as well with the GBP/USD regaining its losses from Friday on the back of its disappointing production data.

Equities rallied strongly in Asian markets and that carried over into the European session. Last week, the Dow industrial index closed 2.8% higher, and with a lack of negative news from the Euro-zone banking sector, markets shrugged off a weak US retail sales report to extend the rally in risk into this week.

Published on Mon, Jun 14 2010, 22:33 GMT

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The positive tone will continue today with the release of the March industrial production data, expected to show a strong gain over the month (consensus 0.7%), whilst both the Empire State and Philly Fed manufacturing surveys are set to post small gains in April, consistent with strengthening manufacturing activity in the months ahead.

Fed speakers have also been helpful for market sentiment. Fed Chairman Bernanke sounded a little more upbeat on the economy but highlighted the “significant restraints” remaining in the US economy. Bernanke maintained the “extended period” of low rates statement despite some speculation that the Fed was verging on removing this. The net impact of the testimony, improved data and earnings and firmer risk appetite is to keep the USD on pressure. In contrast, commodity currencies including AUD, NZD and CAD, will benefit, both from firmer risk appetite and an upturn in commodity prices.

Despite the positive reception to Greece’s debt auction there is not a lot of faith in the ability of Greece to weather the storm. Reports that Greece will need far more funding than has been initially promised by the EU/IMF – potentially as high as EUR 90 billion over coming years – together with worries about selling the loan package to the public in Germany and other eurozone countries, as well EU comments that Portugal will need further fiscal consolidation, have not done much good for confidence. Technically EUR/USD will see plenty of resistance around 1.3692.

After Singapore’s move to tighten monetary policy via the SGD revaluation, and following close on the heels of India, Malaysia and Vietnam, attention has turned to who’s next in line. South Korea must be a prime candidate, especially following data yesterday revealing a drop in the unemployment rate. Of course, China is very much in the spotlight and is set to embark on monetary tightening measures as well as CNY revaluation soon.

India is set to move again as early as next week, with inflation data today likely to seal the case for another hike (consensus 10.37% in March). The risk remains however, that many Asian central banks are moving too slowly to curb building inflation pressures and may find that they ultimately need to tighten more than they otherwise would have done.

China’s heavy slate of data released will if anything fuel greater expectations of an imminent CNY revaluation as well as monetary tightening. China’s economy grew a very strong 11.9% in Q1, above already strong consensus expectations, whilst CPI rose 2.4% YoY in March.

The growth data alongside further evidence of accelerating real estate prices highlight the risks of overheating in the economy and the need to act quickly to curb inflation threats. Given this expectation, firm risk appetite, and more follow through from Singapore’s FX move, the outlook for other Asian currencies remains positive.

Published on Thu, Apr 15 2010, 08:21 GMT

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EUR/USD was down 0.45% by the close while the dollar surged over 2.5% against the Yen and has pushed to its best in almost 12-weeks overnight touching 93.59 and is currently trading up 0.4%. The Australian Dollar has lost ground this morning after Retail Sales missed their target, declining 1.4%.

Equities closed little changed yesterday and have come under pressure overnight with the MSCI Asia Pacific Index currently down 0.25% and the Nikkei off around 0.1%. Other data today will show EU Flash CPI Estimate & Unemployment Rate , US Chicago PMI & Factory Orders. Close attention will also be paid to today’s ADP Employment Change ahead of Friday’s NF Payrolls. Treasury Secretary Geithner and FOMC member Duke are also due to speak.

Gold continued to take direction from the EUR/USD cross yesterday, closing down 0.45% after posting a high of $1113.50 in Europe before sliding to a low of $1101.70 during US trade. Silver closed 2-cents lower after spending the day in a narrow range between $17.22-47.
Month and quarter-end today and the shortened trading week due to Easter celebration are likely to mute investor risk appetite. Gold for the moment continues to consolidate with good volumes of physical and investment demand providing support, however the metal remains capped by overhead mid-term downtrend resistance and the 100-Day MA ($1120) with another stalled rally potentially triggering a re-test of the $1085 level. Similarly silver is struggling to conquer overhead resistance between $17.43-66. A break could open the way to challenge $18 while a failure would likely re-test the $16.55 area.

Platinum tracked lower on the back of gold and silver but closed off the day’s low after Lonmin announced the closure of its number-one furnace at the company’s Marikana facility. Palladium closed $2 lower after holding in a tight range.
Both metals have seen a solid start with platinum up over 1% in reaction to the Lonmin news and the possible implications of lower metal supplies; palladium has traded to its best in over a week at $478. Both face further resistance ahead this year’s highs of $1655/$482 however tightening fundamentals as industrial and investment demand increase look set to push the complex to fresh highs in the coming sessions.

Published on Wed, Mar 31 2010, 10:44 GMT

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EUR – The euro recovered from its lows last week after European leaders came to broad agreement over a potential Greek rescue package. The single currency rose to a high of $1.3420 overnight, rebounding from 10-month lows, after European leaders agreed upon a potential rescue package for Greece involving both the ECB and IMF at the conclusion of a leadership summit last week. Euro also received a boost from an improved Economic Sentiment report (97.7 in Mar.). Although pressure on the euro has eased with accord on a Greek rescue plan, the Eurozone will have to show concrete steps in shoring up its budgetary issues to stabilize the single currency longer term.

GBP – The British pound rose amid an easing of risk aversion. The pound rose above $1.50 but found further gains capped amid political uncertainty ahead of upcoming elections in May. Standard and Poor’s also affirmed the country’s AAA rating but kept its negative outlook citing concerns over the country’s public finances. Due to this, the pound is likely to remain under pressure until further clues over the outcome of elections and resolution of country’s messy debt situation is known.

JPY – The yen fell last week as US economic data improved, while Japan remains in deflation mode. Last week, BoJ policy board member Hidetoshi Kamezaki left the door open to more monetary easing. He warned that deflation was likely to persist for some time and it is starting to affect public perception about future price movements. Pressure for the BoJ to take action in credit-easing weighed on the yen. The yen fell further today as Greece went ahead with plans for a debt offering, boosting appetite for higher-yielding, riskier currencies. This week, markets will eye the February Retail Trade and Jobless Rate for direction.

CAD – The loonie was recently hurt by worries over Greece’s woes and tighter monetary policy in China. However, higher commodity prices and talk of a possible Canadian interest rate hike as soon as June limited losses. The outlook for the CAD remains positive and has gained 3.1% since the beginning of the year. The currency will be influenced by external factors for now. Today, the market will focus on a speech by Paul Jenkins, senior deputy governor of the central bank, for clues on interest-rate moves. Last week, Bank of Canada Governor Mark Carney said he thinks rising consumer prices have been due to recent economic strength. Thus, Carney’s comments led market players to believe he was more hawkish on raising interest rates. This Wednesday, the market will eye Canada’s growth data, where the economy is expected to expand at a rate of 0.5 percent in January.

MXN – The peso strengthened against the USD to its highest level since November 2008 as positive economic data suggests exceptional signs of recovery in the Latin American region.
Rising crude oil prices ($82.48/bbl) continues to benefit the peso as the commodity generates 1/3 of Mexico’s annual revenue. Furthermore, a rise in risk appetite further supported the high-yielding currency to appreciate close to 0.80% against the greenback this week. On the data front, Mexico’s Trade Balance for February posted better-than-expected numbers (244M vs -333M prior and -5M exp.). Unemployment numbers in February dropped significantly (5.43% vs 5.87% prior and 5.70% exp.). Bi-Weekly Core CPI rose slightly (0.18% vs. 0.17% prior and 0.22% exp.).

AUD – The Australian dollar remains firm vs. the US dollar amid speculation of further interest rate increases. Aussie rose to highs at 0.9166 after Reserve Bank of Australia Governor Stevens said that interest rates had been too low and could not remain at previous levels. Markets are forecasting a 61% probability of a 0.25% rate hike at the Central Bank’s meeting next week.

Last Week’s Currency Highs and Lows and Forecast

U.S. Economic Indicators

Date	Indicators	Previous	Expected
3/29	Personal Income / Consumption (February)	+0.1% / +0.5%	+0.1% / +0.3%
3/29	- Core PCE	+0.0% (+1.4%)	15
3/30	Consumer Confidence (March)	46	50
3/31	ADP Employment (March)	-20,000	34,000
4/1	Initial Jobless Claims (w/e 27th March)	442,000	435,000
4/1	Construction Spending (February)	-0.60%	-1.30%
4/2	- Unemployment / Average Earnings	9.7% / +0.1%	9.7% / +0.2%

Published on Tue, Mar 30 2010, 08:14 GMT

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