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195421 Resource 128466 128654 128654 1201153653518 1201153653518 Controlled European Morning Update 24th January 2008

Market takes a breather

Releases from Japan:                                Forecast   Actual   November All Industry Activity Index  (MoM)   - 0.4%   - 0.5%Japan’s All Industry Activity Index was released slightly below forecasts and does reflect their sagging export industry. Over December exports slowed once again reducing the annual gains by 2.8% to 6.9% YoY. No prized for guessing the source of the slump, the waning demand for cars and electronics from America which will keep the All Industry Activity Index under pressure for a little while to come. No wonder Fukuda is worried as he watches the stock markets in chaotic panic. A falling export industry will threaten a downward spiral in GDP, not just on the back of lower exports but also the impact that it will have in the already anemic domestic economy.With zero wage growth, a reliance on part time workers and control over fixed costs by paying existing workers for overtime, any reduction in business will trigger lower overtime payments and in turn drive domestic demand even lower.This would drive Japan back into recession.Hitting the news today are reports that the LDP lawmakers are drawing up proposals to introduce tax exemptions on dividend income and capital gains to boost the stock market and muting the idea of a sovereign wealth fund. These are hardly going to produce much comfort for the average salary man though.It is also reported that they want to convince the Bank of Japan to reintroduce the zero interest rate policy. Frankly it didn’t really boost the economy before and the BOJ has strongly defended its independence on monetary policy already over the past year. That one is a non-starter. The following economic releases are due today:December U.S. Existing Home Sales                   4.95mn U.S. Existing Home Sales         (MoM)   - 1.0%January Italian Consumer Confidence Index       106.5 German IFO: Business Climate              102.3 German IFO: Current Assessment          107.4 German IFO: Expectations                      94.5 U.S. Initial Jobless Claims        (19th)     320K U.S. Continuing Claims            (12th)   I do get the sense the market is none too happy with any sort of Dollar position right now. By that I mean the short to medium term gang. The long term guys are still likely short and until they reverse we’ll not see much strength.The Dollar movement across currencies is pretty uncorrelated right now and that appears to be showing through in rather erratic trading. I therefore feel we should be on our guard and not look for any trending move right now. This tends to suit the triangle picture I have been considering in the Euro while the Swissie still has a little uncertainty over whether yesterday formed an intermediate low or whether there is room for one final drop before a correction. The Pound is still in its own correction phase and that has some decent upside potential from current levels. I would add that once this correction completes it should be heading for the 1.86-1.90 medium term target.My assumption is that when the Pound does resume its move lower is when we’ll see more correlation across the Europeans with Dollar gains then expected. The only uncertainty will be Dollar-Yen which does appear to be in a world of its own. However, the low at the 104.95 target was encouraging and does suggest we could now see a correction develop. I am not so certain here though that it will be sustainable. Note important support and resistance areas:         USDJPY        EURUSD       USDCHF       GBPUSD Res:  107.90-40    1.4742-72    1.0995-25    1.9771-90 Res:  107.08-40    1.4644-83    1.0944-49    1.9590-35Spt:   106.07-20    1.4549-93    1.0830-50    1.9453-90 Spt:   105.42-75    1.4439-86    1.0749-89    1.9383-08 9 application/xml false All industry activity BOJ currencies Dollar equity markets Forex Fukuda FX Japan LDP US zero rate policy Want to know more about currency trading? Read about the largest global market http://www.gftforex.com/land/index.asp?aid=446 Mozilla/4.0 (compatible; MSIE 7.0; Windows NT 5.1; hc; .NET CLR 1.1.4322; .NET CLR 2.0.50727; MS-RTC LM 8) 127.0.0.1 127.0.0.1 ICopsey 202.216.243.97 false true false false true 128466 blog blogsite/GFTForex/web