Reuters published their own Tankan Report for Japan which identified a worsening in sentiment by Japanese manufacturers. The headline diffusion index tumbled by 3 points in October to a two-year low at +21 for manufacturing firms. However, non-manufacturing firms saw a rise of 5 points to +19. The sharp fall in housing starts triggered by a severe reduction in available land on which residential condominium projects can be developed has been a main contributor while rising raw material costs is squeezing corporate profits. The BOJ is still banking on these costs being passed on to the consumer in higher prices that will fuel a rise in CPI. Indeed, in the non-manufacturers sector, the index for retailers fell 10 points to +6 which indicates a sluggish personal consumption trend. With the depressed nature of consumer demand it appears that companies are not confident enough to hike prices. Of the firms surveyed 30% identified Q2 next year as the most appropriate timing for the next BOJ rate hike while 19% want the timing to be delayed further. The Swiss Trade Balance came in smack on forecasts at CHF 1.80bn in September to mark an all-time high. Exports were up by 9.3% YoY and imports by +11% YoY. Within the figures watch exports accounted for CHF 1.3bn. Certainly there doesn’t seem to be too much wrong with the Swiss economy at the moment…
The following economic releases are due today:
August
Euro-zone Trade Balance EUR 0.0 bn
Euro-zone Trade Balance s.a. EUR 0.2 bn
Euro-zone Construction Output (MoM) September
U.K. Retail Sales (MoM) +0.1%
U.K. Retail Sales (YoY) +5.5%
U.K. PSNCR GBP 12.5bn
U.K. PSNB GBP 6.1bn
U.K. M4 Money Supply (MoM) +0.9%
U.K. M4 Money Supply (YoY) 12.5%
U.K. M4 Sterling Lending GBP 18.0bn
U.S. Leading Indicators +0.3%
U.S. Philadelphia Fed Index 7.0 October
Swiss ZEW Survey: Expectations
U.S. Initial Jobless Claims (13th) 312K
U.S. Continuing Claims (6th)
Following the bad housing numbers from the States yesterday and repeated comments from the IMF that not only is the Dollar is over-valued but the decline has been orderly the market has the bit between its teeth looking to sell the Dollar off now. Indeed, this is the medium term direction with cycle bearish to the end of the year. However, whether it will be able to generate sufficient momentum to push through the 1.4281 Euro and 1.1740 Swissie levels is yet to be seen.
It is certainly making a valiant effort but until these levels break there has to be a question mark whether volumes will be large enough to trigger stops. If they break then the floor opens to stronger losses to 1.4395 and possibly as high as 1.4455 Euro and 1.1668 and possibly 1.1621 Swissie. The Pound will find a barrier at 2.0493 and only above there would have momentum for a test of 2.0593. If the closer supports hold the greater likelihood will be a return back into range. Dollar-Yen has been suspiciously quiet also. Here the cycles are bullish and there really hasn’t been any news to justify a return to buying Yen, the carry cost is just far too much to make the attempt worthwhile. It will be only a matter of time before this too continues its rally with support at 115.95 and at the most 115.25 providing a base for a rally that should pass through the 117.93 high on the next attempt. As for G7 there seems to be a growing realization that firstly there just isn’t enough support for intervention from within the ECB ranks, and when going beyond their closeted walls the enthusiasm wanes rapidly. It is then a battle of mind over fear to take the Euro through its barrier or to fall back into a range before heading higher next week.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 117.10-50 1.4369-94 1.1860-96 2.0473-93
Res: 116.30-70 1.4242-81 1.1810-30 2.0421-34 Spt: 115.96-16 1.4163-80 1.1725-40 2.0340-70
Spt: 115.25-48 1.4127-43 1.1668-07 2.0270-06 | 
