Releases from Asia:
Australia orecast Actual
November Building Approvals (MoM) 0.0% +8.9%
November Building Approvals (YoY) 14.6%
December AiG Performance of Construction Index 59.2
Robust construction numbers from Australia have seen the AiG measurement rise for the 4th month in a row, in November by 6 points while Building approvals soared by a whopping 8.9%.
These are solid numbers following the uncertainties from the credit crisis and underline the degree of strength in the economy. This will keep the employment market tight and keep the RBA on track for another rate hike over the coming months. Another bearish U.K. number has hit the market in the form of the BRC retail sales which saw the YoY pace slow to just +0.3%. This is the weakest growth since March 2006 and the slowest December reading since 2004. The Pound hasn’t reacted at all but the release adds another nail in the coffin for the beleaguered currency which has been even weaker than the U.S. Dollar. Europe should react later and send this lower.
Other news:
Yesterday the WSJ ran an article on Japan’s growing reliance on temporary workers which they consider has held back the economic rebound in the country. The newspaper argues that Japanese businesses rely on cheaper temporary staff since they are cheaper and this has depressed wages and consequent sluggish consumer spending. They have a point but there is more to the situation. They haven’t made note of the use of companies of overtime as a method of managing higher demand. While basic wages have remained static and actually edged lower somewhat, the level of overtime has also grown. In this way, any reduction in work loads will result in lower overtime without causing businesses problems with higher fixed costs. The newspaper has also failed to note the tax hike seen last year through the removal of a rebate and a readjustment of the balance between income tax and local inhabitants taxes which has resulted in higher pension and life insurance premiums. With prices now rising the impact on consumer spending warns of further sluggish sales.
The following economic releases are due today:
November
Euro-zone Retail Sales (MoM) +0.5%
Euro-zone Retail Sales (YoY) +0.5%
German Factory Orders (MoM) - 1.8%
German Factory Orders (YoY) +7.7%
U.S. Pending Home Sales (MoM) - 0.5%
U.S. Consumer Credit US$ 8.50bn The Dollar strength yesterday didn’t surprise me too much though within the context of a larger sideways pattern we didn’t really make too much headway. I had a few moments to stare blankly at the charts hoping for inspiration and I just could get away from the fact that I really do find it hard to get too Dollar bearish. I’ll not rule it out at this point, but technically there are several signs that suggest we shouldn’t get direct follow-through lower. However, purely looking at the Euro I still see the old daily trend support which rests around, probably just above the 1.4966 high. Could it move to retest this? Well, again, I can’t rule it out. Then looking at the Pound, it still looks bearish and frankly I still feel there is room for quite a solid drop. The only way I can see this is within a scenario where the Swissie and Euro are consolidating and within this we are towards the Dollar lows of this consolidation range which implies strength – thus fitting in with the Pound’s outlook. As for Dollar-Yen, we managed to retest the old and critical 109.70-75 peaks and this still remains the key for additional gains here. Keep an eye on Euro-Yen too. This is what tends to cause me more concern with the lack of upside yesterday. A breach of the 159.73 low does seem quite bearish. It may be dragged down more by EURUSD, but there does seem some vulnerability in straight USDJPY too. This pair needs some special attention right now as there are ambiguous signs and I am still hurting from the failed cycle low here…
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 110.00-42 1.4785-23 1.1270-06 1.9849-71
Res: 109.45-74 1.4735-65 1.1190-25 1.9767-06 Spt: 108.59-85 1.4637-64 1.1106-26 1.9619-49
Spt: 107.52-89 1.4566-80 1.1050-59 1.9563-89 | 
