FOREX TRADING

The euro rallied against the dollar and other key currencies after a €45 billion aid plan for Greece calmed investor fear of a Greek default. The S&P 500 was up 2.11 to 1,196.48. The Dow Jones Industrial Average rose 8.62 to 11,005.97, its first close above 11,000 since September 2008. The yen fell versus the dollar. Bank of Japan policy makers Tadao Noda and Miyako Suda opposed bolstering a lending program last month because it could not be justified given Japan’s improving economic conditions, minutes of the March 16-17 BOJ policy meeting released today showed. Yuan appreciation speculation eased following a government report that China posted its first monthly trade deficit since 2004. Sterling pared gains on renewed worries of a hung UK parliament. Unable to penetrate the important 0.94-area resistance, the Australian dollar reversed earlier gains on a deeper-than-expected decrease in Australian home-loan approvals. Hovering around parity for a sixth straight day, the Canadian dollar slipped as Canada’s housing starts unexpectedly declined.

The EUR/USD jumped to the highest level in three weeks. The cost to protect against sovereign and corporate defaults decreased around the world as the Greek rescue plan eased concern of a wider debt crisis. Under the plan, Greece would receive loans at approximately 5% interest rate, significantly lower than Greece’s 7.5% borrowing rate last week. The EUR/USD gapped higher and broke its well established trading channel and 50-day moving average; thus, improving its technical outlook. There are support in the 1.35 area and resistance in the 1.38. We have been short the pair since it traded at 1.4628. We could take profits here but prefer keeping the short position for now.

Financial and Economic News and Comments

US & Canada

• The US budget deficit narrowed more than expected to $65.4 billion in March, an 18th straight monthly shortfall, from a $220.9 billion deficit in February, compared with a $191.6 billion shortfall in March 2009, data from the Treasury Department showed, reflecting a decline in outlays for the Troubled Asset Relief Program to support financial firms.
• Canada’s seasonally adjusted housing starts unexpectedly slid 1.5% m/m to a 197,300 annualized rate in March, the first decline in three months, after upwardly revised gains of 6.0% m/m to 200,400 in February and 7.5% m/m to 189,000 in January, according to figures from Canada Mortgage and Housing Corporation. March housing starts rose 35.4% y/y.

• While Canadian firms reported slowing sales growth over the prior 12 months, they expect sales growth to pick up over the next 12 months, according to the Bank of Canada’s Business Outlook Survey. Meanwhile, the Senior Loan Officer Survey showed credit conditions were easier for a second consecutive quarter in Q1 2010.

Europe

• The Conference Board UK leading economic index, a measure of future economic activity, rose 0.6% m/m to 100.6 in February, an 11th straight rise, led by gains in six of the seven LEI components, after a 0.8% m/m advance in January, a report released by the Conference Board showed, suggesting that “the British economy should continue to expand in the short term, but as factors driving consumption are likely to remain weak, the recovery is unlikely to gather speed.” The coincident economic index, measuring current economic activity, increased 0.2% m/m to 102.2 in February after a 0.3% m/m decline the prior month.

Asia-Pacific

• Australia’s home-loan approvals fell a more-than-expected 1.8% m/m to 50,287 in February, a fifth consecutive month-on-month fall, after a revised 7.3% m/m drop in January, according to figures from the Australian Bureau of Statistics. The total value of loans declined 3.4% m/m to A$20.49 billion ($19.01 billion) in February. The value of lending for owner occupied housing fell 4.4% m/m to A$14.09 billion in February. The value of lending for investment housing slipped 1.1% m/m to $A6.40 billion.
• China posted a $7.24 billion trade deficit in March, the first shortfall since 2004, compared with a $7.61 billion surplus in February, the Customs Bureau said on April 10. Imports surged 66.0% y/y to $119.3 billion in March after a 44.7% y/y rise in February. Exports rose 24.3% y/y to $112.1 billion following February’s 45.7% y/y gain.

FX Strategy Update

Capital Market Services, L.L.C.
www.cmsfx.com

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