USD/CAD Develops Inverted H&S?

* The dollar was up modestly against its rivals on Wednesday. US economic figures were mixed with weakerthan- expected housing, stronger-than-anticipated industrial production and tame producer-price inflation. The S&P 500 declined 0.62 to 1,114.61. The euro pared overnight losses and hovered around the 1.23 handle. The European Central Bank said the European Bank stress will be published starting with Spain. The yen was down slightly. Japan’s tertiary industry activity index rose less than expected. Unable to penetrate the 1.48 resistance, the pound fell. Bank of England Governor Mervyn King said the Monetary Policy Committee “will not hesitate to begin to withdraw the current degree of stimulus when we judge that is necessary,” adding that “that is most likely to be through a rise in bank rate with asset sales being conducted later in an orderly program over a period of time, leaving bank rate as the active instrument.” The Australian dollar consolidated recent strong gains.

* The USD/CAD declined modestly today. The pair fell six out of the last eight days, pressured by better global risk appetite, stronger Canadian economic growth and speculation that the inflation-targeting Bank of Canada will continue to hike interest rates while the Fed will maintain its target rate at record low for the foreseeable future. The USD/CAD made a cycle low below par in late-April and rallied for a month to a high of 1.08 before falling to its recent low in the 1.02 area. Technically, it looks like a possible head-and-shoulder bottom. If the 1.02-area support holds and the pair rallies, it will create the right shoulder in the formation. That would imply higher prices and a possible long-term bottom. We buy the USD/CAD with stop at 1.0075.

www.cmsfx.com

Financial and Economic News and Comments

US & Canada

* US industrial production rose a more-than-expected 1.2% m/m in May, the 10th rise in 11 months, after a downwardly revised 0.7% m/m rise in April and an upwardly revised 0.3% m/m increase in March, according to data released by the Federal Reserve. Industrial production grew 7.6% y/y in May, a fifth consecutive year-onyear gain. Overall capacity utilization advanced to 74.7%, the highest since October 2008, from April’s 73.7%. Manufacturing production rose 0.9% m/m in May, a third consecutive monthly advance, after rising at the same rate in April. May manufacturing production climbed 7.9% y/y. Manufacturing capacity utilization increased to 71.5% from April’s 70.8%.

www.cmsfx.com

* US housing starts fell a more-than-expected 10.0% m/m in May, the largest fall since March 2009, to a seasonally adjusted 593,000 annual rate, the lowest level this year, from a downwardly revised 659,000 pace in April, figures from the Commerce Department showed. May housing starts rose 7.8% y/y. Single-family housing starts decreased 17.2% m/m to a 468,000 rate in May, the largest drop since 1991; however, they climbed 15.3% y/y. Meanwhile, building permits unexpectedly declined 5.9% m/m in May to a seasonally adjusted 574,000 annual rate, a one-year low, from an upwardly revised 610,000 pace the prior month. May building permits increased 4.4% y/y.

* US producer prices fell a slightly less-than-expected 0.3% m/m in May, the third fall in four months, after a 0.1% m/m decline in April, according to PPI data from the Labor Department. The producer-price inflation rate slowed to 5.3% y/y from April’s 5.5% y/y. The May PPI month-on-month fall was mostly due to energy prices, which fell 1.5% m/m. Food costs slid 0.6% m/m, the largest decline since July. The core PPI, which excludes food and energy, was up 0.2% m/m for a second month in May. The core CPI rate increased to 1.3% y/y from April’s 1.0% y/y.

Europe

* Eurozone consumer prices were up as forecast 0.1% m/m in May, a fourth successive month-on-month increase, after a 0.5% m/m advance in April, CPI data from Eurostat showed. The consumer-price inflation rate rose to 1.6% y/y in May, the fastest since December 2008 and matching the estimate published on May 31, from 1.5% y/y in April, compared with 0.0% y/y in May 2009. The core CPI rate, which excludes food and energy, held at 0.8% y/y in May, as expected.

www.cmsfx.com

* Eurozone labor-cost growth accelerated to 2.1% y/y in Q1 2010 from 1.7% y/y in Q4 2009, according to a separate report from Eurostat.

* UK jobless claims fell a more-than-expected 30,900 in May, a fourth consecutive monthly fall, to 1.48 million, below 1.5 million for the first time since March 2009, after a revised 32,000 drop in April, data from the Office for National Statistics showed. The claimant count rate declined to 4.6% in May from 4.7% the previous month. Unemployment based on International Labour Organization methods declined to 2.472 million in the three months to April from 2.51 million in the three months to March, and the ILO UK unemployment rate slipped to 7.9% from 8.0%. Average weekly earnings including bonuses increased 4.2% y/y in the three months to April after an upwardly revised 4.3% y/y gain in the quarter to March. Average weekly pay excluding bonuses increased 1.9% y/y in the three months to April after an upwardly revised 2.0% y/y advance in the quarter to March.

Asia-Pacific

* The tertiary industry activity index was up a less-than-expected 2.1% m/m sa to 97.6 in April after a revised 2.7% m/m decline in March, indicating Japan’s demand for services grew for the first time in three months, according to data from the Ministry of Economy, Trade and Industry. The index rose 1.3% y/y sa, a fourth consecutive year-on-year gain, following March’s upwardly revised 1.3% y/y rise.

www.cmsfx.com

* The Westpac-Melbourne Institute Australian leading economic indicators index, a measure of future economic activity, was unchanged at 264.4 in April, Westpac Banking Corp. and the Melbourne Institute reported. The LEI annualized growth rate slowed to 7.6%, the weakest pace in three months, from March’s 8.8%. The coincident index, measuring current economic activity, increased to 252.5 in April from 251.7 the prior month, and grew at a 3.9% annualized pace.

Источник: Hans Nilsson

16.06.2010