Releases from Japan:
Prior Current
March Supermarket Sales (YoY) +1.9% +1.4% Japanese supermarket sales managed the second consecutive month of annualized gains following 25 months of decline. Perhaps it shouldn’t come as much of a surprise with inflation now pushing prices higher led by food prices which rose by 2.7% and represents 61.5% of total sales. Household products and clothing (accounting for 31.8% of total sales) both declined. Therefore the problem remains that real household spending remains on the decline and this will not sit happily with consumers…
There were two comments worth noting from this morning’s quiet market.
The Asian Development Bank MD Rajat Nag commented on the global crisis, “I think that a global recession is too pessimistic a scenario. We will have to assume things to be much worse in the United States, Europe and Japan for that to happen.” However, Tony Tan of Singapore’s investment agency GIC was less optimistic saying that “as the global supply of money shrinks the world faced a period of extreme uncertainty.” He said that if swift action is not taken then “We could be facing a recession which is longer, deeper and wider than any recession we have encountered in the last 30 years.” Well, if the 1970’s are an example on which to base the impact of an oil price shock, then this morning’s trading saw prices for light sweet crude remain above $117pb. At that time farmers didn’t switch to grow crops for bio-chemicals and this provides an added threat to price stability for which central bankers have no solution. There was no credit crisis then as well so the risks are high.
The following economic releases are due today:
March
Swiss Trade Balance CHF 0.70bn
March Italian Trade Bal Non-EU EUR
U.S. Existing Home Sales (MoM) - 1.6%
U.S. Existing Home Sales 4.92mn April
U.S. Richmond Fed Mfg Index 2.00
Yesterday didn’t provide any clarification of whether the 1.5982 high will prove to the high of the year and has left the picture quite open as things stand. The depth of the reversal from Friday’s low does, on the face of it, suggest follow-through higher on the back of a market that can’t give up until it sees 1.60 toppled.
However, I’m still really not that sure that we will see that final move higher. Looking at the position against the Yen, Swissie and Pound a Dollar bullish argument does seem to have greater mileage. Still, given the continued Dollar bearish sentiment (although weaker than before) it would be prudent to just be a little cautious at the outset. There are one or two small clues we can look for. The first is support in Dollar-Yen at 102.72 and while this holds there should be room for gains here again and initially back to the 104.63 high. Watch also support at 1.0063 Swissie – it may hold – with the next at 1.0020. If it gets below the latter support there would appear to be more bearish potential. As for the Euro itself, the 1.5954-76 area is critical. To confirm additional losses here we’ll need a break below 1.5873 initially and then 1.5800. If they occur along with the supports against the yen and Swissie holding we should see solid losses once again. An added point to look for is Euro-Yen. This has peaked nicely just a few points below the 164.89-96 resistance and does therefore appear to have more bearish potential. This should equate in a Dollar bullish scenario to a stronger decline in the Euro while Dollar-Yen struggles higher. Finally the Aussie – peaked nicely 3 points below the ideal target at 0.9445. Loss of 0.9378 and later at 0.9270 would add to the Dollar bullish argument.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 104.42-63 1.5982-25 1.0230-82 1.9925-66
Res: 103.50-70 1.5900-44 1.0131-52 1.9829-62 Spt: 102.39-72 1.5802-29 1.0020-63 1.9736-75
Spt: 101.54-85 1.5710-65 0.9907-39 1.9640-80 | 
