EUR/USD at Critical Support

* The dollar traded mostly higher on Thursday. European currencies declined. US stocks fell. The dollar index rose to the highest level since April 2009. US initial jobless claims decreased less than expected and import prices posted the eighth increase in nine months. The S&P 500 fell 14.23 to 1,157.44. The yen rose. Japan’s trade surplus widened and merchant confidence climbed. Sterling plunged through the important 1.48 support as the UK trade deficit widened. The Australian dollar gained on strong Australian employment growth. Testing the important 1.01-area support, the USD/CAD reversed earlier losses.

* The EUR/USD fell for a third consecutive day on the problematic EMU fiscal outlook. Portugal announced new tax hikes to cut its budget deficit while Spanish unions called for a strike to protest Spanish austerity measures. Strong support is in the 1.25 area. If this is broken, the EUR/USD may fall to the 1.20 area. There is resistance from the downtrend in the 1.29 area. A break of this downtrend is required before a possible improvement in the EUR/USD technical outlook.

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Financial and Economic News and Comments

US & Canada

* US initial jobless claims in the week ending May 8 fell 4,000 to a higher-than-expected 444,000, a fourth consecutive weekly fall, from the previous week’s upwardly revised 448,000, figures from the Labor Department showed. The 4-week moving average decreased 9,000 to 450,500. Continuing claims in the week ending May 1 rose 12,000 to 4,627,000 from the preceding week’s upwardly revised 4,615,000. The 4-week moving average of those continuing claims dropped 14,750 to 4,639,500. The insured unemployment rate for the week ending May 1 was unchanged at 3.6%.

* US import prices rose a marginally less-than-expected 0.9% m/m in April, the eighth rise in nine months, after a downwardly revised 0.5% m/m increase in March and a revised 0.1% m/m decline in February, according to data from the Labor Department. April import prices climbed 11.1% y/y, following a downwardly revised 11.3% y/y March rise. Meanwhile, export prices grew 1.2% m/m in April, the fifth increase in six months, after a 0.7% m/m advance in March. April import prices rose 5.7% y/y.

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Europe

* The UK deficit on trade in goods and services widened more than expected to £3.7 billion ($5.4 billion) in March from a revised £2.2 billion shortfall in February, according to figures from the Office for National Statistics. The deficit on trade in goods widened to £7.5 billion in March from a revised £6.3 billion deficit the prior month; imports rose 5.2% m/m in March, the most in six months, to £29.0 billion and exports increased 1.0% m/m to £21.4 billion. Both were at their highest levels since September 2008. The deficit with EU countries widened to £3.4 billion in March, a 3-month high, from a revised £2.9 billion shortfall in February, and the deficit with non-EU countries widened to £4.1 billion from February’s revised £3.4 billion deficit.

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* UK house prices rose 9.7% y/y nsa in March, a fifth consecutive year-on-year rise, after a downwardly revised 7.3% y/y advance in February, data from the Department of Communities and Local Government showed. March house prices increased 0.7% m/m sa, the 10th gain in 11 months, following a 0.1% m/m February decline.

Asia-Pacific

* Japan’s current-account surplus widened 65.1% y/y to a larger-than-expected ¥2,534.2 billion ($27.3 billion) in March, an eighth consecutive yearly expansion, compared with a ¥1,470.6 billion surplus in February, according to figures released by the Ministry of Finance. The adjusted current-account surplus rose to ¥1773.1 billion from February’s downwardly revised ¥1067.5 billion. The trade balance surplus widened to ¥1074.7 billion in March from ¥778.0 billion the prior month. Exports rose 45.4% y/y in March after a 47.3% y/y gain in February and imports grew 22.0% y/y following February’s 31.6% y/y advance.

* The Japanese current conditions index increased to a higher-than-expected 49.8 in April from 47.4 in March, showing merchant confidence in Japan rose for a fifth straight month to the highest level in three years, according to the Cabinet Office’s latest economy watchers survey. The future conditions index advanced to 49.9 from March’s 47.0.

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* Japan’s machine tool orders soared 220.5% y/y in April, a fifth consecutive year-on-year gain, after a 262.2% y/y surge in March, led by foreign orders, which skyrocketed 345.4% y/y, according to preliminary April data from the Japan Machine Tool Builders’ Association. Domestic orders jumped 87.3% y/y in April.

* Australia’s seasonally adjusted employment rose for a second month in April, jumping a more-than-anticipated 33,700 to 11,025,500, after an upwardly revised 27,700 March gain, figures from the Australian Bureau of Statistics showed. The unemployment rate was unchanged at 5.4%. Full-time employment grew 37,500 to 7,735,500 in April, an eighth straight monthly gain. Part-time employment declined 3,900 to 3,290,000. The participation rate remained at 65.2%.

Source: Hans Nilsson

13.05.2010