Loonie remains steady; could gain on the currency market
The Canadian dollar looks to have good prospects right now in currency trading on the FX market. As part of a forex trading strategy, the loonie could complement a currency portfolio looking for a relatively stable commodity currency. Bloomberg reports on the Canadian dollar in forex trading:
``This report is positive for the Canadian dollar,'' said Steven Butler, director of foreign exchange trading in Toronto at Scotia Capital Inc. ``Higher inflation eliminates the chance of a rate cut. We may get a note of caution from the Bank of Canada in the next meeting.''
Forex Forecast Looks Grim for U.S. Dollar
IMF forecast shows slowing U.S. economy
A slowing U.S. economy may not be able to adequately support the U.S. dollar in currency trading on the FX market. And an IMF reports shows the U.S. economy growing at a slower rate than the rest of the global economy. The National Post reports on this news that may stymie the U.S. dollar forex forecast:
"An IMF forecast that was released last week showed for the first time in 37 years you will get 5% global growth and the U.S. accounting for less than 10% of that growth -- half its normal share of global GDP," said Stefane Marion, assistant chief economist at National Bank in Montreal. "You've never seen the global economy growing at 5% with the U.S. growing ... only 2.2%."
A Look at Forex Trading Today
The currency market
The U.S. dollar is firming a bit against the other major currencies on the FX market as it attempts to recover from yesterday's beating in forex trading. However, the U.S. dollar is still down against major currencies, and the Japanese yen is making solid gains today in currency trading. Reuters reports on the FX market:
By 1010 GMT, the euro was down 0.6 percent on the day at 160.28 yen
The dollar was also down 0.6 percent at 117.84 yen
The euro was steady at $1.3601
Sterling was down 0.3 percent at $2.0026
GFT Market Recap: London Session
The JPY continued its rally at the start of the session but did suffer a small set back as China released its GDP figure which came in higher than expected at 11.1% v’s 10.4%. Other data that was released out of China showed that inflation is accelerating at a quick pace and there is speculation that the government will take measures to control the rapid expansion of the economy. The USD/JPY traded up from 117.72 to 118.14 after the China data announcements. However, after that market settled down a bit the JPY began to strengthen and USD/JPY traded to lows around 117.70 after the data. The USD gave some of the gains it made during the Asia trading session back as both the EUR and CHF traded higher on the day. The USD did stay rather firm against the GBP as the pair is hovering at the lower end of the days range.
RANGES
10:00pm-6:00am EST
Low High
EUR/USD
1.3560 1.3607
GBP/USD
1.9985 2.0061
USD/JPY
117.60 118.14
USD/CHF
1.2000 1.2045
European Mid Morning Update 19th April 2007
Most of the move looks complete today and lack of news should maintain range trading
German Producer Prices for March was fairly benign, rising by +0.4% MoM and +2.5% MoM. The annualized increase was the lowest since September 2004. Forecasts had centered on an outcome of +0.5% and +2.7% respectively. Obviously energy prices were the key driver for the MoM increase although on an annual basis they are still lower by 2.4%. This is another positive from Germany providing a general picture of prices under control.
Italian Industrial Orders undershot forecasts by a large margin, slipping by -0.3% MoM in February and down -2.5% YoY. This is a fairly erratic series but the size of the shortfall will send a few shudders through Italian businesses. It should also be noted that February last year saw a particularly strong month reporting a 3.3% MoM rise and a strong 14.1% YoY rise. This would explain the dip in the annualized figure, but the monthly decline is disappointing.
The following economic releases are due later today:
March U.S. Leading Indicators +0.1%
AprilECB Publishes its monthly report
Swiss ZEW Survey – Expectations - 20.5
U.S. Initial Jobless Claims (Apr 14) 325K
U.S. Continuing Claims (Apr 7) 2530K
U.S. Philadelphia Fed Index 2.0
It has been a fairly Asian session with both Euro and Aussie Dollar testing their respective highs but without significant penetration. The Euro is lower already while the Aussie has dipped below yesterday’s corrective low and much of the pressure has come from a shake out in carry trades.
This is backed up by the losses below 118.00 seen against the Yen. The implied consumer strength from the Tankan and Tertiary Index reports come right on the heels of stories that tomorrow’s BOJ monthly outlook will be issuing a warning about the threat of higher inflation. This sees interest rates knocking on the doors of the BOJ waiting for the next hike. Indeed, as I have been warning, the weekly cycles are bearish here for the coming 3-4 months and the decline should easy work its way below the 115.16 low and to 113.21-42 at the very least.
Elsewhere even the EURCHF cross appears to be correcting itself with strength seen by the Swissie below the 1.2024 low against the Dollar. This has potential to 1.1969 but expect a reversal there to join the general Dollar recovery.
The Pound too hit resistance announced yesterday at 2.0133-38 and this has particular long term implications. For now the upside is complete and with GBPJPY moving lower from its highs we should see the impact in both the Yen and the Pound against the Dollar.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 118.80-00 1.3666-68 1.2100-25 2.0131-38
Res: 118.00-20 1.3610-18 1.2065-75 2.0060-93
Spt: 117.50-78 1.3524-55 1.1969-97 1.9974-10
Spt: 116.95-10 1.3440-50 1.1878-98 1.9900-05
European Morning Update 19th April 2007
Dollar soft in Asian trading
There was slightly mixed news out of Japan this morning though more biased to the positive. The Reuters Tankan report was unchanged at +28 in April. Manufacturers are still downbeat on the back of higher prices and depressed output. Non manufacturers were upbeat with their sentiment rising to a new 3 year high at +26.
The non manufacturer’s sentiment was reflected in the Tertiary Index which astounded with a robust leap of +1.0% which left the forecasts of -0.4% well in its wake. This is evidence of consumers putting their hands in their pockets to back up the BOJ’s positive report of consumption on a rising trend.
From the two reports the balance is net positive and will provide more support for a move towards the next rate hike. The Yen has already begun to pick up on the back of the report and following yesterday’s evidence that some carry trades are being liquidated we can expected further Yen strength over the coming 3-4 months.
The outlook for Australian consumer inflation over the next 12 months rose briskly in April to the highest level for 5 months with a survey showing median forecasts looking for a 3.8% pace over the coming year. This is up from the prior month’s reading of 3.2%. While the survey doesn’t inquire about wage increases it may be an indication of corporations seeing price pressures and thus focus will be on the Q1 CPI report next Tuesday. Pressure is already mounting for a hike at next month’s RBA MPC.
Finally Australia’s Merchandise Imports saw a solid gain over March rising by 8.9% to A$15.36bn. This followed from February’s 3.2% decline. Machinery and transport were the big gainers, possibly evidence of attempts to increase capacity. The full March trade figures are due on May 4th.
The following economic releases are due later today:
February
Italian Industrial Orders s.a. (MoM) +1.3%
Italian Industrial Orders n.s.a. (MoM) +2.0%
Italian Industrial Sales s.a. (MoM) +1.2%
March German PPI (MoM) +0.4%
German PPI (YoY) +2.7%
U.S. Leading Indicators +0.1%
April
ECB Publishes its monthly report
Swiss ZEW Survey – Expectations - 20.5
U.S. Initial Jobless Claims (Apr 14) 325K
U.S. Continuing Claims (Apr 7) 2530K
U.S. Philadelphia Fed Index 2.0
Now yesterday was a more interesting day and certainly gave us some information that helps with the structure a lot more. Key highlights were the peak in EURUSD at 2.0016-18, the low in USDCHF at 1.2024, the peak in GBPUSD at 2.0131, the lows seen in USDCAD at 1.1263-76 and the bounce from 118.10 USDJPY. All round now we are seeing deeper and more consistent Dollar bullish divergences and thus, even if there is one more low today the overall picture does suggest the Dollar bullish cycles turning higher for the coming 3-4 weeks looks more like a winner.
All we need so is pick that Dollar low.
If I have any preference then I have to say the lows have been seen – with possibly the exception of USDJPY. If there is one more attempt to push the Dollar lower then the extended targets at 1.3666 EURUSD and 1.1969 USDCHF are the levels to look out for. However, emphasis should now be on looking for Dollar buying levels against the Europeans.
A quick note on GBPUSD which is interesting to read but for now please forget it after having read it… The 2.0138 resistance was generated by a measurement in an expanded flat from the 1.9548 high down to the 1.7046 low. If this holds it would suggest the next major target is back at 1.7046… However, as mentioned, this is a long, long term count and there needs to be more information to confirm this and as such is intended only as background information.
As for USDJPY … well it bounced perfectly from 118.10 but this morning has broken below. This tends to suggest to me that the upside is complete and thus the major direction should now be lower. I’d still like to see break of 117.50-78 but with daily & weekly cycles bearish I don’t feel like fighting them…
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 118.80-00 1.3666-68 1.2100-25 2.0131-38
Res: 118.00-20 1.3610-18 1.2065-75 2.0060-93
Spt: 117.50-78 1.3524-55 1.1969-97 1.9974-10
Spt: 116.95-10 1.3440-50 1.1878-98 1.9900-05
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