USD/JPY Testing Support

* The dollar and yen rose after government reports showed US retail sales and producer prices unexpectedly fell in March. The weak data increased risk aversion and concerns over a US economic recovery. The Dow fell 138 points to 7920. The euro was pressured by European Central Bank council member Athanasios Orphanides’ comment that deflation risks in the EMU may require further ECB policy easing beyond next month. Sterling rose on optimism the UK housing slump will end and falling LIBOR rates indicate UK and other global banks are on a recovery. The Australian dollar consolidated earlier gains as copper prices plunged. The Canadian dollar rose to the highest level in over 10 weeks.

* The USD/JPY fell sharply today, pressured by decreasing risk appetite as equity and commodity prices declined. The pair is testing support in the 98.50 area. If the support is broken, the pair may fall to the 97 area. Still, the trend is up. We believe the USD/JPY will rise as the Japanese economy deteriorates further and Japanese investors look for higher returns abroad.

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Financial and Economic News and Comments

US & Canada

* US retail sales unexpectedly decreased 1.1% m/m in March, softening optimism about a US economic recovery, following increases in January and February, data from the Commerce Department showed. Excluding automobiles, retail sales unexpectedly declined 0.9% m/m after February’s upwardly revised 1.0% m/m increase. Retail sales fell 10.6% y/y and fell 7.3% y/y excluding autos.

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* US producer prices unexpectedly declined 1.2% m/m on a seasonally adjusted basis in March after increasing 0.1% m/m in February, the Labor Department said. The PPI fell 3.5% y/y. The March PPI decline was led by energy, which fell 5.5% m/m. Food prices also declined 0.7% m/m. The core PPI, which excludes food and energy, were unchanged m/m in March, after a 0.2% m/m advance in February. The core PPI rate decelerated to 3.8% y/y from February’s 4.0% y/y. Today’s PPI figures indicate deflation risks remain.

* US business inventories fell a slightly more-than-expected 1.3% m/m to a seasonally adjusted $1.421 trillion in February, a sixth consecutive fall and matching January’s decline, data from the Commerce Department showed. Business sales increased 0.2% m/m to $994.9 billion, the first gain since July. The inventory-to-sales ratio slid to 1.43 from January’s 1.45.

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* The Globicus/qEcon US leading economic index shows clear signs of a US economic recovery, possibly as early as Q3 2009. The long leading index, which has a long lead, grew at a 4.2% smoothed growth rate in February. The strong growth is a result of the Federal Reserve’s easy monetary policy. The short leading index’s growth bottomed at -16.7% in December but improved to -11.7% in March. The coincident index, which measures the overall economy’s growth rate, fell at -7.8 in February, indicating weak Q1 2009 GDP data. Overall, the LEI indicates a US economic recovery in Q3 2009. 

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* Fed Chairman Ben Bernanke said he has seen “tentative signs” that the sharp decline in economic activity is easing, citing “progress” in stabilizing financial markets and hopeful data on home sales, homebuilding and consumer spending.

Europe

* European Central Bank council member Athanasios Orphanides signaled the European Central Bank may have to continue easing monetary policy beyond next month to counter eurozone deflation risks. “If inflation threatens to remain significantly below 2 percent for a considerable period of time, then additional policy easing could be warranted to counter that eventuality,” Orphanides said. “The risk of deflation has increased somewhat in the past few months.”

* The London interbank offered rate for three-month dollar loans is falling at the fastest rate since January as bankers believe the worst of the financial crisis is over.

Asia-Pacific

* Australia’s business confidence rose for a second month in March, with the NAB Australian sentiment index improving to -13 from February’s -22, still showing pessimists outnumbered optimists for a 14th month, National Australia Bank Ltd. reported. The business conditions index increased to -17 from -20, remaining near the lowest since June 1992.

* Bank of Japan Governor Masaaki Shirakawa said the BOJ is “cautious” about Japan’s economic outlook despite signs of a global economic recovery. “While drops in exports and output are easing, we expect business investment and consumer spending to keep weakening and become major factors that will drag down growth,” Shirakawa said at a parliamentary committee.

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 Positive Positive Neutral Neutral Neutral Positive Positive
Outlook Neutral Positive Neutral Neutral Neutral Positive Positive
Action None Buy Buy None None Buy None
Current 1.3257 98.95 1.4893 1.1383 1.2147 0.7226 131.16
Start Position N/A 97.35 N/A 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 94.00 1.4450 N/A N/A 0.6775 N/A
Support 1.3000 98.50 1.4500 1.1100 1.2200 0.7000 127.00
1.2800 97.00 1.4000 1.0700 1.1800 0.6800 124.00
Resistance 1.3750 102.00 1.5000 1.1600 1.2800 0.7500 136.00
1.4000 103.00 1.5500 1.2000 1.3000 0.7700 139.00

Источник: Hans Nilsson

14.04.2009