Swine Flu Increases Risk Aversion, Benefiting Yen

* The dollar and yen advanced against most other key currencies on Monday. Risk aversion rose as an outbreak of the deadly swine flu in Mexico may lead to a pandemic and further reduce economic growth. After failing to penetrate the 1.33-area resistance, the EUR/USD declined on the increased risk aversion and mixed messages by European Central Bank members. ECB Governing Council member Axel Weber said the lower limit for ECB interest-rate cut should be 1.00%, while ECB Governing Council member Nout Wellink said the ECB should discuss cutting rates below 1.00%. Sterling fell as UK home prices continued to fall. The Australian and Canadian dollars dropped as commodity prices declined. The CRB index plunged as grain prices and crude prices traded lower on swine flu concerns.

* The USD/JPY fell sharply on surging risk aversion. The Japanese government downgraded Japan’s growth outlook and Larry Summers warned that the US economy will continue to deteriorate with sharp declines in employment for quite some time. The stock market took Summers’ warning in stride and the Dow fell 51 points to 8,025. After breaking its uptrend last week, the USD/JPY is trading in a downward sloping trading channel. There are resistance at the 98-handle and support from the lower trading band at the 96-handle.

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Financial and Economic News and Comments

US & Canada

* The slump in Texas manufacturing activity eased in April, with the Dallas Fed business activity index improving more than expected to -31.6 from March’s -49.0, according to the Texas Manufacturing Outlook Survey released by the Federal Reserve Bank of Dallas. The 6-month company outlook index turned positive for the first time since June 2008, and 32% of firms expect improving conditions, the Dallas Fed said.

Europe

* Germany’s consumer confidence unexpectedly held steady for a third month in May, with the GfK German consumer climate indicator remaining unchanged at 2.5, GfK Group reported. The economic expectations indicator increased slightly to -31.2 in April from -32.8 in March and the income expectations indicator improved to -8.0 from March’s -11.4.

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* Germany’s import prices declined a more-than-expected 0.4% m/m in March after sliding 0.1% m/m in February, data from the Federal Statistical Office showed. March import prices fell 7.1% y/y, the deepest decline since April 1987, following February’s 6.4% y/y decrease.

* The UK housing slump eased slightly in April as house prices declined 0.3% m/m, less severe than a 0.6% m/m fall in March, according to the Hometrack Housing Survey. April house prices fell 10.1% y/y, slightly less severe than March’s 10.3% y/y drop.

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Asia-Pacific

* JThe Cabinet Office cut its economic growth forecast, predicting the Japanese economy will contract a record 3.3% this fiscal year, compared to a January forecast for zero growth.

FX Strategy Update

EUR/USD USD/JPY GBP/USD USD/CHF USD/CAD AUD/USD EUR/JPY
Primary Trend Negative Negative Negative Positive Positive Negative Negative
Secondary Trend Neutral Neutral Neutral Neutral Neutral Positive Positive
Outlook Neutral Neutral Positive Neutral Neutral Positive Positive
Action None Stopped Out Buy None None Buy None
Current 1.3024 96.73 1.4629 1.1559 1.2210 0.7090 125.97
Start Position N/A 97.35 1.4845 N/A N/A 0.6601 N/A
Objective N/A N/A N/A N/A N/A N/A N/A
Stop N/A 96.50 1.4450 N/A N/A 0.6950 N/A
Support 1.2900 96.00 1.4450 1.1100 1.2000 0.7000 125.00
1.2500 94.00 1.4000 1.0700 1.1800 0.6800 120.00
Resistance 1.3300 98.00 1.5000 1.1700 1.2800 0.7300 136.00
1.3700 101.00 1.5500 1.2000 1.3000 0.7600 139.00

Источник: Hans Nilsson

27.04.2009