Releases from Australia:
Forecast Actual
March Trade Balance AUD -2.9bn -2.74bn
It was no surprise that the RBA left rates on hold following the end of their meeting today. The CB has always made a practice of waiting to observe any impact from rate actions. The economy has slowed considerably since the end of last year with the tighter monetary conditions along with a general slowing in the global economy causing a drop in business.
The RBA are still concerned over inflation which has been hit by a combination of a tight labor market, considerable economic growth and of course higher food and energy prices. The CB will be aware of the slackening in the domestic economy which should ease back the pressure on inflation caused from the high growth rate. However, the fact that yesterday’s inflation numbers from TS securities highlights the pressures seen elsewhere and there is little the RBA can do to reign in this pressure at the moment. It will also be noting the narrowing if the trade deficit with higher exports leading the improvement. While the economy is slowing it is still in a state of expansion but at a slower pace. Continued high commodity prices will serve to provide a benefit here while greater consumer caution is expected to lower import demand. Finally from Australia the Commonwealth bank-Australian Chamber of Commerce and Industry survey businesses are expecting a sharp downturn in activity over the rest of the year citing the global credit crunch as the reason. This brought business confidence crashing to a 14 year low at 38.8 in March. Another report from Dun & Bradstreet noted that employment growth was at its lowest since June 1992. This has forced consumers to tighten their belts which will bring about lower growth over the year.
The following economic releases are due today:
March
Euro-zone PPI (MoM) +0.7%
Euro-zone PPI (YoY) +5.6% April
Swiss CPI (MoM) +0.9%
Swiss CPI (YoY) +2.4%
Italian Services PMI NA
French Services PMI 54.0
German Services PMI 54.6
Euro-zone Services PMI 51.8
Euro-zone Composite PMI 51.9
U.K. Services PMI 51.7
Well, the Dollar has fallen back further and I feel that the argument for a larger correction is intact but the speed of the decline has not particularly inspired. Never-the-less, comparing potential bullish/bearish wave structures the downside still has a much stronger argument.
Given there is little on the release slate this week and the ECB and BOE rate decisions are very unlikely to produce any change at all the slowness of the market does seem set to continue. The approximate initial Dollar support areas at 1.5630-40 Euro and 1.0331-50 still appear to be the first targets in the decline but I suspect these will cause a move back higher. It is this pullback that will be hard to judge though given the positive vibes suddenly appearing in favor of the Dollar the chances are that the correction could be quite deep. Elsewhere I’m getting a little concerned about Dollar-Yen with key support very close now at 104.60-70. The upside still remains valid while this area holds. The issue that concerns about this is Euro-Yen. It bounced quite nicely from the 162-97-163.09 resistance area and if we see any decline below 162.00 the implications will once again be for stronger losses – at least back down to the 160.59 low and probably beyond. Now, with basic forecasts of higher Euro and Dollar-Yen we clearly have some conflict. Thus just watch out as any break below 101.60 could well generate 150 points on the downside back to 103.20 at least…. This would enable Euro-Yen to decline. However, any break in Euro-Yen above 163.09 would tend to suggest a deeper upward retracement and thus the 104.60 area should hold in Dollar-Yen.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 105.45-83 1.5648-92 1.0629-53 1.9845-73
Res: 105.00-20 1.5563-98 1.0557-83 1.9747-68 Spt: 104.45-60 1.5440-80 1.0440-71 1.9690-10
Spt: 103.75-05 1.5412-25 1.0331-59 1.9622-59 | 
