Releases from Japan:
Forecast Actual
March Trade Balance BOP Basis JPY 1233bn 1251bn
April Domestic CGPI (MoM) +0.5% +0.6%
April Domestic CGPI (YoY) +3.6% +3.7% April’s domestic CGPI saw a higher than anticipated monthly rise, which is no real surprise given the rising instances of businesses applying price hikes, often in the 5%-10% range. The YoY figure fell back from March’s high (in 27 years) to 3.7%. However, this was due to the removal of the gasoline surcharges. With out a doubt this is the strongest pace of inflation I have seen since I first arrived on these shores 15 years ago. Around the mid to late 90’s subway fares were increased and they have remained the same ever since. However, after first resisting the need to pass on price increases this year has seen a rash of price hikes in each of the past three months and this is clearly having an impact, as elsewhere in the world, on the ability for consumers to maintain the same level of spending on non-oil or food related goods. To make things worse the current comparative strength of the Yen is hitting both exports and corporate profit levels, a problem highlighted by the BOJ’s Shirakawa who clearly picked the short straw to get appointed as governor to follow from Fukui. He now faces the same problems as other central banks in seeing dwindling growth, higher inflation and falling property prices.
The following economic releases are due today:
April
French CPI (MoM) +0.4%
French CPI (YoY) +3.0%
French Survey of Industrial Investment
Italian CPI (MoM) +0.1%
Italian CPI (YoY) +3.3%
U.K. Jobless Claims Change 0.0K
U.K. Claimant Count Rate 2.5%
U.K. BOE Quarterly Inflation Report
U.S. CPI (MoM) +0.3%
U.S. CPI (YoY) +3.9%
U.S. CPI ex food & energy (MoM) +0.2%
U.S. CPI ex food & energy (YoY) +2.4% May
Bloomberg Global Confidence
Once again yesterday was provided a mixed bag of tricks. The Dollar did firm up in line with my preferred bias but I can’t say that it looks particularly convincing except perhaps against the Pound and Yen. Looking around a little further there does seem to be more room for additional price wiggles.
For example, the Aussie appears to still be in a tight sideways range and that doesn’t look like ending today, and probably not tomorrow either. Dollar-Canada failed to make its preferred target but in not doing so still looks like it has a few more kinks to iron out on the downside before it can rally. And finally Euro-Yen actually pushed above the 161.63 area and although it wasn’t expected, the larger picture here is still quite bearish so the upside still remains limited at best. So what can we make out of the majors? Well, the two pointers I have been following - Dollar-Yen and Cable - appear to be going in the right directions. Even so there still risk of some earlier corrective patterns emerging but I retain the 1.9300-30 area in Cable as the likely base while Dollar-Yen still has potential through to 106.82. If this generates the same directional moves in the Euro and Swissie then we could still be talking about new Dollar highs. I still can’t say I like the wave structure that much, but in the absence of any obvious Dollar losses I’ll maintain my main Dollar bullish stance but under the awareness that we should begin to see losses fairly soon. For this I’ll be looking at Cable for the first signal of a top and probably then Dollar-Yen.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 106.34-82 1.5593-14 1.0679-25 1.9550-85
Res: 105.27-61 1.5485-90 1.0575-23 1.9480-00 Spt: 104.00-40 1.5392-28 1.0476-00 1.9382-18
Spt: 103.30-60 1.5289-29 1.0389-04 1.9300-35 | 
