FOREX TRADING

The dollar traded lower across the board as increased risk-appetite helped the Loonie extend gains to the 0.9956 mark and the euro climb to 1.3677. The Nasdaq led today’s gains, trading higher by nearly 1.3% while the Dow Jones and S&P 500 edged up by around 0.8%. Crude oil bounced by around 2.4% to trade above the $86-mark on Wednesday as EIA inventory data released earlier today posted an unexpected draw on the week with crude supplies decreasing by 2.2 million barrels.

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FX Highlights

• The USD is trading mixed with GBP supported by report of a narrowing of the UK trade deficit as exports rise 9.5%, the EUR is trading flat supported by good demand for today’s Greek T-bill auction, EUR gains were limited by ongoing concern about the Greek rescue package and profit taking after the Greek auction, AUD trades higher supported by report that NAB business conditions rose to their highest level since January 2008, JPY edged higher supported by report of a modest rise in Japan’s corporate good prices and speculation the BOJ will revise up its CPI forecast
• Focus turns to today’s release of US import prices and trade balance and Canada’s trade balance
• UK exports rose 9.5% in February, the February trade balance narrows to -6.17bln from -8.06bln last month, March BRC retail sales rose by 4.4% and RICS house price balance declined to its lowest level since July of 2009,GBP higher
• Japan’s March domestic corporate prices rose by 0.2%, Nikkei reports that the BOJ may raise its CPI forecast for next fiscal year in its April 30th economic outlook report, a panel for Japan’s ruling party said Japan should try to keep USD/JPY around 120, JPY higher as stocks slide
• Australia’s March NAB business conditions index +5 points +13,AUD higher
• Today’s Greek T-bill auction was oversubscribed, the reception for the Greek auction is seen as an endorsement of yesterday’s announcement an IMF/EU rescue package for Greece, EUR steady
• US posted a 65.4bln deficit for March, much lower than 191.1bln deficit last March, the smaller deficit reflects an increase in tax receipts and lower costs for the TARP bailout plan
• NBER says it premature to declare the end date of the US recession
• NFIB small business confidence index falls 1.2 points to 86.8
• US equity markets set to open lower, European equities 0.25% lower, Nikkei closed 90 points lower

Upcoming Events

• US- Tuesday, March import prices will be released expected at 0.1% compared to 0.9% along with February trade balance expected at -38.5bln compared to -37.3bln last month
• CAN-Tuesday, February trade balance will be released expected at 0.6bln compared to 0.799bln last month

By Michael J. Malpede

Easy Forex

Michael J. Malpede is Chief Market Analyst with Easy-Forex® and has previously been featured on Bloomberg TV, Bloomberg radio, Reuters, MarketWatch, Wall Street Journal, Chicago Tribune, Chicago Sun Times, Toronto Star and Nikkei press. In analyzing the markets, he draws from 29 years of Foreign Exchange Research as a Foreign Exchange Analyst.

Please note that Forex trading (OTC Trading) involves substantial risk of loss, and may not be suitable for everyone. This report is provided by Easy- Forex® for informative purposes only. In no way it is a recommendation by Easy-Forex® for you to engage in any trade. It is your sole responsibility and you will have no claims with regards to this report against Easy-Forex®. If you do not agree to this, you are strongly advised not to use this report. Hence, Easy-Forex® shall not be held responsible for any outcome of trading decisions, in regards with this report or similar reports.

The AUDUSD headed for a second week of gains trading near a 12 week high at 0.9283 in early morning trade, having gained 1% this week after the nation’s interest-rate advantage over the US widened to near the most since 2008 with extra yield offered by two-year Australian debt over similar maturity Treasuries rose to 398 basis points on April 7, the most since July 2008. NZDUSD was also poised for a second weekly advance trading at 0.7077 as easing concern Greece will default on its debt boosted demand for higher-yielding assets. The two currencies were boosted after ECB President Trichet said he doesn’t expect Greece to default on its debt and it probably won’t need aid from the EU. The EURJPY rose for a second day to 124.94 while the USDJPY rose to 93.51 as signs the global economy is improving and speculation Greece will avoid a default damped demand for the safety of JPY. The JPY weakened against all 16 of its major counterparts before reports today that economists said will show German exports rose 4 percent (prev. -6.4%) in February and U.K. producer prices rose an annual 4.4 percent (prev. 4.1%) in March the most since December 2008.

USDCAD also headed for a second weekly decline trading at 1.0015 after trading at parity for the first time since July 2008 amid signs Canada’s economic recovery is gaining traction. Employment in Canada is expected to rise by 26,000 in March, a third month of gains, and the jobless rate falling to 8.1% in March, the least since April 2009.

ACM FOREX

Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

US Data Mixed, Dollar Slips

The dollar traded softer against the majors amid increased risk-appetite ahead of key reports on the US labor market starting on Wednesday. The greenback relinquished the 1.51-handle versus the British pound and the 1.35-mark against the euro earlier in the session before recovering slightly in the New York afternoon. The US equity markets were marginally higher after a mixed bag of economic reports.

Home prices continued to struggle with the Case-Shiller index, declining by 0.7% on an annualized basis versus a slide of 3.1% in the previous year and down by 0.4% on a monthly basis from a decline of 0.2% in the prior month. The Conference Board’s consumer confidence survey beat consensus estimates in March, rising to 52.5 from an upwardly revised February reading of 46.4.

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Greek Bond Sale Successful

Despite ripping higher on the Asian open, EURUSD has spent the rest of the day consolidating between 1.3409 and 1.3508, with the DXY in slightly negative territory overall (DXY -0.35%). German regional and composite CPI data released in the morning was higher than expected with the EU harmonized HICP +0.6% MoM, +1.3% YoY (+0.3% MoM, +0.9% YoY expected). The effect on the currency space has been limited, with the key inflation measure for the Eurozone as a whole due on Wednesday. The only other significant release of the morning was Swedish Retail Sales which was extremely disappointing at -1.0% MoM, +2.3% YoY compared to median forecasts looking for +0.3% MoM, 4.2% YoY. The unexpected plunge in retail activity has understandably caused EURSEK to rally from 9.7400 levels prior to the release all the way up to 9.8000 levels shortly after.

The afternoon has been somewhat subdued with US PCE and Personal Income data coming out broadly in line with forecasts, and US equity markets modestly higher. The Greek sale of 7 year debt has proceeded without incident, with the head of the Public Debt Management Agency quoted as saying that they have now successfully “pre-funded the whole of April”.

Tomorrow’s main releases will be Norway’s Retail Sales, the final estimate of UK Q4 GDP, and US Consumer Confidence.

AC Markets
http://www.ac-markets.com

Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

Long Dollars Are All The Rage

The Asian trading hours were flat in the currency market, but the major currencies were again showing a bearish bias at the European open, extending the selling seen throughout the prior few sessions.

The Eur/Usd plunged to new lows overnight, breaking beneath the 1.3300 area. As of December, when the current downtrend started, the Euro has lost 1800 pips, or approximately 14% of its value. Over the same time, the S/P index has gained 70 points, or just about 0.6%, even though the two have held a very high correlation over the last 12 months, something that is now getting tested.

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Deflation Continues In Japan

Japan’s core CPI rate has declined for 11 straight months. The core CPI declined by 1.3% in January. The decline in January CPI confirms that deflationary pressures continue in Japan. The Bank of Japan (BOJ) has been under intense pressure from the Japanese government to take action to combat deflation and boost growth. At an emergency meeting in December the BOJ elected to ease monetary policy. The BOJ increased its lending operation to ¥10trln offering fixed rate loans to commercial banks at 0.1%. Last week the BOJ elected to ease monetary policy again and double its short-term lending operation to ¥20trln. The increase in the lending operation is unlikely to have any major impact on deflationary pressures in Japan. The Japanese government has called on the BOJ to do more to combat deflation and would like to see the BOJ buy Japanese bonds. BOJ purchase of Japanese bonds would effectively be printing of money and could boost the money supply and slow deflationary pressures. BOJ officials have rejected the government’s call for the purchase of more bonds. The BOJ policy board was split at last week’s meeting and the split decision to expand lending operations reflects concern by some of the BOJ board members that it’s more difficult to justify easing monetary policy as Japan’s economy shows signs of improvement. Recent Japanese economic data shows that exports posted the third biggest monthly gain on record last month and imports rose for the first time in 15 months. Japan’s manufacturing and business confidence has been rising and unemployment posted a modest decline. Q4 GDP however rose at a slower pace reported at 3.8% compared to 4.6% in the preliminary report. Japans quarterly tankan business sentiment will be released on April 1st. The tankan report is expected to confirm improvement in Japan’s business sentiment for the fourth straight quarter.

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All Hail the Mighty Greenback

Today’s European session was a watershed moment for the greenback. Already moving to the stronger side in Asian trading, the USD really hit its stride across the board when Fitch came out with a downgrade of Portuguese debt (from AA to AA-, a move that was presaged by a recent surge in bond yield spreads and CDS prices) that knocked equity markets and general risk sentiment for quick losses. Ahead of the NY open, EURUSD swooping to new lows no t seen since last May, and the USD index also headed to new highs since that period as almost all currencies fell against the resurgent greenback today.

The very strong IFO release today (highest number since mid-2008) couldn’t do anything to reverse the Euro’s slide today, as Euro weakness may actually be a driver for improved German sentiment.

Chart: USDJPY

USDJPY finally broke out of its torpor and pulled above the line of resistance created by day after day of range trading. Curiously, the bond market has come completely derailed today despite rising risk aversion in other markets today, and this is adding to the potential for this break higher in USDJPY to hold. The move has even taken the pair above the 200-day SMA which had previously held on the last two attempts at that MA in January and February. This is an important development for USDJPY as we move into the final few trading days of the Japanese financial year.

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FOMC: Less Dovish, but Hikes Remain Distant

• No change to policy measures. Hoenig repeats his lone dissent.
• Growth language slightly more optimistic but no change to inflation outlook
• ‘Extended period’ retained indicating continued commitment to low rates
• Further asset purchases highly unlikely
• No change to our outlook expecting unchanged rates until late this year

Details

The assessment of activity was slightly more upbeat than in the previous statement. As expected the FOMC turned more optimistic on the labour market while on the other hand noting recent very weak housing data. Generally, the committee still expects a moderate recovery including a gradual return to higher resource utilisation. As a result, the outlook remains 3-3.5% growth, a relatively moderate rate historically.

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Markets Brace For FOMC Decision – USD Firmer

Asian equity markets were mixed after a late session rally leveled off a lackluster day in the US with the Dow up 17.46 points, closing at 10642.15. Financials rallied late in the day after Senator Dodd’s proposed financial regulatory overhaul gained some momentum. Traders are cautious ahead of the FOMC rate decision at 2:15pm in New York today. Although no change is expected, analysts will be once again paying close attention to the language used in the Fed’s statement as well as the number of dissenters. Investors are looking for assurances that rates will remain ‘exceptionally low’ for an ‘extended period.’ We do not see this language changing so long as the labor market continues to deteriorate.

Euro Loses Steam

European finance ministers agreed on a rescue mechanism for Greece in Brussels yesterday, but offered little information on details of what the bailout package may look like. The lack of clarity will continue to weigh heavily on the euro which has softened in the last 2 sessions. Indeed EU officials are being careful not to make a precedent of the Greek situation as other Eurozone countries in financial distress will be keeping a close eye with regards to the structure that is chosen for the rescue package.

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USD Mixed as Stocks Weaken

• USD: Mixed, better than expected nfp, consumer credit rises, specs on the IMM halve USD long positions
• JPY: Lower, Nikkei rallies 2.9%, BOJ ease speculation
• EUR: Lower, Sarkozy says EU will help Greece, investor sentiment improves
• GBP: Mixed, BOE policy and UK election uncertainty
• CHF: Higher, Swiss unemployment rate improves, retail sales strong
• CAD and AUD: AUD & CAD higher, tracking improving risk sentiment, Canadian housing starts rise 6.1%

Overview

USD starts the week mixed to lower pressured by a modest improvement in risk sentiment. The improvement in risk sentiment is attributed to Friday’s release of better than expected US unemployment and stronger consumer credit, a statement from French President Sarkozy that the EU is ready to help Greece and in reaction to a Financial Times report which suggests that China is ready to shift its currency policy and break its USD peg. US January consumer credit rose for the first time in over a year and posted its largest increase since July 2008. The Nikkei surged 2.9% adding to the improvement in risk sentiment but European equities and US equities struggled which limited the downside for the USD. European economic data was generally positive with EU investor sentiment improving and Swiss unemployment and retail sales coming in better than expected. There was no major UK economic released today and GBP consolidated recent gains. Commodity currencies traded higher supported by the improvement in risk sentiment with the AUD trading at a six-month high. AUD was also supported by M&A news that Royal Dutch Shell and Petro China are bidding for Australia’s Arrow Energy. CAD traded higher in reaction strong Canadian housing starts report and BOC rate hike speculation .There was limited reaction to an NABE report which says that business economists see a Fed rate hike within the next six months. CFTC commitment of traders for the IMM shows that speculators cut USD speculative long positions in halve last week. The CFTC report suggests that speculative sentiment towards the USD is turning less positive. There were no major US economic reports released in today’s trade. Focus turns to this week’s release of US jobless claims retail sales and consumer sentiment.

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According to a Treasury Department report released Tuesday China sold a record amount of US debt in December. The Treasury said that China sold $34bln of US Treasuries in December. China owns $755.5bln of US government debt. After the December sale of US Treasuries China slipped to number two behind Japan as the largest holder of US treasuries. Japan’s holdings of US debt rose 1.5% in December to $768.8bln. Japan is now the largest US creditor. China’s sale of US debt reflects concern about the USD. The US announced a record 1trln budget deficit for 2010 and deficits in the US are expected to remain in excess of $1trln for a number of years to come Chinese officials are becoming wary of holding US long-term debt as a weaker USD would reduce the value of Chinas US debt. China’s PBOC Deputy Governor Min said that USD will decline because of concern about rising US debt. China’s December sales of US Treasuries may also reflect the fact that China and US are in disputes over the value of the Yuan, trade imbalances and human rights violations in China.

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Waiting For The ECs Assessment Of Greeces Deficit Cutting Plan

News and Events:

Just a day after the RBA mentioned China shift in policy as a rational for holding rates, Fitch Rating warned that banks in China faced the greatest ‘bubble risk’ of any Asian country. This temporarily took the wind out of the risk-on tone, pushing the EURUSD down to 1.3946. However, markets were able to rally as Europe opened and traders prepared for an event and data filled day. Gold then broke its trend line resistance at $1122, pulling EUR along for the ride. Just a day after the RBA stunned the market by keeping rates unchanged, Australian trade deficit widened to A$2.25bn vs. -A$2.5bn exp in December from A$1.7bn in November, illustrating a strong recovery in both imports and exports. We still believe the RBA will hike in March and AUD should be well supported near term (AUDUSD powered to 0.8920, as commodities and risk also rallied). In Europe, the highlight will be the release of the EC assessment of Greece’s deficit-cutting plan. Part of today’s rebound in risk correlated trades might be from the easing concerns over Greece and just the fact that something is being done. As a testament, Greek sovereign 5y CDS spreads have tightened slightly. The press conference is expected to mention two items: 1. the analysis and endorsement of the Greek public finance cutting strategy and 2. explanation of the EC monitoring plan. In the long run, we believe the EC will eventually need to step in with some kind of funding program, but most probably it will not mention it in this report. For today, the risk is that the report and comments will not go far enough to ease the markets concern, causing the EUR to suffer. We prefer to play the short side of the EURUSD. The Norges Bank is expected to keep rates on hold at 1.75% at this meeting, after raising rates at the previous two consecutive meetings (the last on 16 Dec). After the surprise hike of 25bps the last time around that caught many analysts wrong-footed, there is certainly a possibility that the consensus may have underestimated the Norwegian economy once more. Recent retail sales figures have been strong at 1.1% MoM, and PMI data for January at 50.1 was also indicative of further improvement in the economy. Nevertheless, we would align ourselves with the majority in believing rates will be kept on hold this month; consistent with the prediction offered by the Norges Bank Deputy Governor in December that he expected rates to be at 1.75% in March, and also compatible with the rationale that the Executive Board will want to see the contents of the next Monetary Policy Report published on 24 March, before deciding on further tightening. In the US, ADP reports will help solidify expectations for Friday critical NFP. We have seen an adjustment lower in recent days, with the current consensus standing now at -30k. Should ADP fall in line and not repeat one of its spectacular deviations, this will put NFP around 25k which should be very USD positive (more…)

USD Pares Losses, Existing Home Sales Fall by 16.7%

• USD: Mixed, Bernanke expected to be confirmed for second term, US existing home sales fall sharply
• JPY: Lower, BOJ may be prepared to increase purchases of government debt and ease monetary policy
• EUR: Higher, Nowotny says ECB will use steady hand approach to withdraw liquidity
• CHF: Higher, Hildebrand says SNB to prevent excessive CHF appreciation
• GBP: Higher, BOE to keep its emergency asset purchase plan under review
• CAD and AUD: AUD & CAD higher, China pledge’s to maintain loose monetary policy

Overview

USD traded lower Monday pressured by speculation that Bernanke will be confirmed for a second term as Fed chairman and in reaction to weak US housing data. The Bernanke news helped to boost risk appetite and reduce safe haven demand for the USD and JPY. JPY was also pressured by BOJ ease speculation as Bloomberg reports that the BOJ may be willing to increase its purchase of bonds in an effort to boost the Japanese economy and contain JPY strength. EUR rallied supported by a statement from the ECB’s Nowotny that the ECB will implement a steady hand approach to withdraw liquidity and in reaction to report of good demand for today’s Greek bond auction. GBP edged higher supported by improving risk sentiment and short covering ahead of Tuesday’s release of UK advanced Q4 GDP. A statement from Chinese officials that monetary policy will remain loose generated demand for commodity currencies. Today’s US economic data was mixed with US existing home sales declining sharply and Dallas Fed manufacturing index posting improvement. The drop in US existing home sales partly reflects uncertainty about the US tax credit for first-time homebuyers. NABE survey says that businesses are expected to boost hiring and capital spending in the first half of the year as the economy posts slow recovery. The USD is expected to consolidate recent gains due to concern about the strength of the US recovery and the impact of new banking regulations proposed by President Barack Obama last week. Focus turns to this week’s BOJ and FOMC policy meetings, the president’s State of the Union address Wednesday and advanced Q4 GDP reports in the UK and US. (more…)

Risk aversion from both Asian and European factors aiding USD and weighing upon equity sentiment

ECONOMIC DATA

(JP) Japan Cabinet Monthly Economic Report: Leaves economic assessment unchanged (6th straight month)

(GE) Germany Dec Producer Prices M/M: -0.1% v 0.2%e; Y/Y: -5.2% v -5.1%e

(JP) Japan Dec Convenience Store Sale Sales Y/Y: -5.5% v -6.3% prior

(TT) Taiwan Dec Export Orders: 52.6% v 49.6%e

(MA) Malaysia Dec CPI Y/Y: 1.1% v 1.0%e

(IT) Italy Nov Industrial Orders M/M: 2.6% v 0.4%e; Y/Y: 0.0% v -8.7%e
(IT) Italy Nov Industrial Sales M/M: 1.5% v -1.6% prior; Y/Y: -8.9% v -18.4% prior

(UK) BOE Minutes: Voted 9-0 to maintain interest rates and Quantitative easing measures at current levels
(UK) Dec Claimant Count: 5.0%% v 5.0%e; Jobless Claims Change: -15.2KK v -4.6Ke
(UK) Nov Avg Earning (incl bonus) 3M/Y: 1.6% v 1.6%e; Ex bonus 3M/Y: 1.6% v 1.7%e
(UK) Nov ILO Unemployment rate: 7.8% v 8.0%e

(SA) South Africa Nov retail Sales Y/Y: -6.6% v -5.0%e

(IT) Italy Nov Current Account: -€4.6B v -€3.3B prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities: Equity markets in Europe opened on a heavy theme following equity rotations in Asia. Asian markets, specifically China traded down sharply on further speculation regarding monetary tightening. This sentiment weighed on European banking shares throughout the morning session. Expectations ahead of a plethora of financial earnings from Bank of America [BAC], Morgan Stanley [MS], US Bancorp [USB] and State Street [STT] amongst others added to this sentiment. Despite blockbuster production figures from BHP Billiton [BHP.AU], specifically for iron ore, concerns out of China and USD strength sent the resource sector broadly lower. Fertilizer names, specifically potash names (K+S [SDF.GE]) moved significantly lower following a profit warning from Honk Kong listed Sinofert [297.HK]. Names that moved against the broader trend and traded higher have been highlighted by Merck Kga [MRK.GE] following reports that the firms Q4 figures may beat expectations. The broader tech sector has taken a lift from earnings from giant IBM [IBM] and European name ASML [ASML.NV]. Trading ranges have remained choppy through the session with a downside bias. Volumes have been in-line to light as markets prepare themselves for US corporate earnings.

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