Releases from Japan:
Prior Current
Japan March Monetary Base (YoY) +0.1% +0.0% The BOJ appears to have stopped draining the market of excess funds in response to the credit crisis and probably more due to the downturn which has been a lot more aggressive than they had anticipated. Japanese officials appear to have been stunned into silence by yesterday’s Tankan report although they should have seen it coming. The combination of a strong Yen and slowing global demand was always going to impose significant challenges on an economy which has placed too much reliance on exports in driving growth. Going forward the outlook is bleak. Possibly more bleak than many anticipate. Government debt is already massive and it will take a big decision to return to increasing the borrowing to try and get the economy back on track. It certainly didn’t work before – the few years of growth came on the coat tails of the globalization bubble. The country also faces a huge problem in its national pension. Steps have already been taken to reduce the amount of the pension. There has even been talk of raising the retirement age. Presently the government is “encouraging” people in their 60’s to take up part time work but they may force the issue by making pensions sufficiently low to provide a basic standard of living. The public hold a growing distrust of politicians and understand the outlook for pensions is not at all rosy. This has caused more and more to organize their own investments at the cost of spending. Some have been hit by overseas investments that were linked to the subprime and this will cause another shrinkage in spending. To cut a long story short, don’t expect the Japanese economy to recover for many years to come…
The following economic releases are due today:
February
U.K. M4 Money Supply (F) (MoM) +0.3%
U.K. M4 Money Supply (F) (YoY) 12.3%
U.K. M4 Sterling Lending (F) GBP 16.4bn
U.K. Net Consumer Credit (F) GBP 0.9bn
Euro-zone PPI (MoM) +0.6%
Euro-zone PPI (YoY) +5.2%
U.S. Factory Orders (MoM) +0.6% March
U.K. Construction PMI 52.0
U.S. Challenger Job Cuts (YoY)
U.S. ADP Employment Change (MoM) - 30K Germany’s DIW Institute revise GDP forecasts
Bernanke is due to testify before a Joint Economic Committee
Dollar gains seen and to a degree that makes it look as if we’re going to see the stronger rally of the two scenarios outlined yesterday. That should eventually take the Euro back down to around the 1.5340 low. At this point I feel it will hold but we’ll watch momentum conditions as it approaches.
The target in the Euro is probably the easiest of all to identify. What are more difficult are the targets against the Swissie and Yen. The problem with these two is the rather confusing wave structure in the entire decline seen this year. This is giving some problems in identifying just what part of the decline we are retracing. The 102.15 high seen against the Dollar is quite interesting as it represents a 50% pullback of the decline from 108.60. However, while I hadn’t anticipated this degree of strength momentum conditions still look as if they could take this higher. I see two potential areas, the lower around 103.57-67 and then a higher around 104.90, both being derived from the first recovery to 101.03. The lower of the two also represents a 61.8% retracement of the decline from 108.60 so does seem to have some attraction. Now the Swissie is a different kettle of fish. At the very least the 1.0332-52 seems to attract. Let’s see how things look if and when it approaches this level. Any higher would appear to suggest 1.0475. Finally the Pound – still looks bearish and potentially stronger than the rest of Europe. If the correction from the 1.9727 low is shallow we could be talking about 1.9525 minimum. I don’t like making excessive calls so just keep this in mind as it does seem too low – but the 1.9335-61 lows are possible with an alternative target at 1.9273.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 103.57-67 1.5674-00 1.0249-68 1.9919-59
Res: 102.65-90 1.5624-50 1.0167-96 1.9838-72 Spt: 101.26-50 1.5500-25 1.0105-35 1.9693-27
Spt: 100.60-80 1.5454-65 1.0035-65 1.9624-72 | 
