Releases from Australia:

February                                Forecast         Actual
HIA New Home Sales     (MoM)                      - 5.3%
Private Sector Credit      (MoM)    +1.1%        +0.7%
Private Sector Credit       (YoY)    16.2%         15.5%

March
TD Securities Inflation   (MoM)  +0.3% (prior)  +0.4%
TD Securities Inflation    (YoY)  +4.1% (prior)  +3.8%

Australians appear to be reacting to the RBA’s repeated rate hikes as private sector credit failed to live up to consensus forecast and home sales begin to decline. The only release that will concern them is the continuing high inflation rate but even that saw the year-on-year figure edge back lower to +3.8%.

Overall the numbers are more likely to encourage the RBA ahead of tomorrow’s rate decision and should provide them with sufficient reason to keep rates on hold.

Releases from Japan:

February                                     Forecast         Actual
Industrial Production        (MoM)     - 2.0%         - 1.2%
Industrial Production         (YoY)     +2.9%          +4.2%
Labor Cash Earnings          (YoY)     +0.6%         +1.3%
Vehicle Production             (YoY)                        +9.0%
Housing Starts                  (YoY)     - 1.0%         - 5.0% 
Annualized Housing Starts  (YoY)   1.20mn        1.15mn
Construction Orders           (YoY)   -5.7% (prior)   18.4%

March
Nomura/JMMA Manufacturing PMI     50.8 (prior)      49.5

Japan’s industrial production is edging lower though not as fast as expected. Never-the-less the Nomura/JMMA manufacturing PMI declined for the first time in 5 months by slipping below the 50 boom/bust level to hit 49.5. Notably new orders declined to 47.9 – that’s a 2nd consecutive month of losses.

What will now be concerning is the sharper than expected rise in inflation. While earnings have been pretty stable to soft the 1.3% rise in earnings will not make the BOJ’s job any easier. Vehicle production was strong but housing starts are beginning to cave in under softening house prices.

Next major impact will come from the BOJ’s Tankan Report tomorrow which is expected to show some rather distressing declines in outlook. METI may well retain their assessment of industrial production as a “flat trend” but a growing number of businesses are beginning to feel the strain, especially for exporters whose prices will be looking 20% more expensive than 7-8 months ago.

The following economic releases are due today:

February
French Producer Prices            (MoM)    +0.5%
French Producer Prices             (YoY)    +4.9%
Italian PPI                            (MoM)    +0.5%
Italian PPI                             (YoY)    +5.2%
Euro-zone M3                         (YoY)    11.5%

March
Swiss SECO 2008 Economic Forecasts
Euro-zone CPI (Est)                 (YoY)    +3.3%
Italian CPI (P)                       (MoM)    +0.3%
Italian CPI (P)                        (YoY)    +3.1%
Euro-zone Business Climate Indicator       0.70
Euro-zone Consumer Confidence            -12.0
Euro-zone Economic Confidence             100.0
Euro-zone Industrial Confidence                1.0
Euro-zone Services Confidence                10.0
U.S. Chicago PMI                                   46.5

Friday maintained the rather erratic moves which continue to provide a basically confused outlook. The two currencies that did come through well were the Pound and Aussie which both saw losses but even there the result is a little inconclusive.

Today I want to take things a little cautiously still but if I have any preference in outlook it is for a higher Dollar. Whatever happens I do feel that a pullback is likely. The only thing to look out for in the meantime is the potential for one further spike lower before that pullback.

Centering a view around the Euro the two scenarios are quite straightforward. Either we are in the middle of a Wave –v- higher which would imply an initial move to around the 1.5901 high but this would require a pullback, perhaps around 50% before it can push through more strongly above 1.5901. Alternatively we may be seeing some sort of complex correction. This could be a flat (and thus a retest of 1.5901) or a larger sideways consolidation that would imply a deeper pullback directly.

Dollar-Yen has staged a solid pullback higher after Friday’s erratic moves and the risk here is still for a move just back above 101.03 again. Good resistance is seen around 101.23-34 that needs to hold to retain a medium term dip below 95.71 again.

Note important support and resistance areas:

         USDJPY        EURUSD       USDCHF       GBPUSD
Res:  101.23-34    1.5901-07    1.0064-08    2.0028-48
Res:  100.37-64    1.5815-37    1.0005-23    1.9940-78

Spt:     99.30-50    1.5725-40    0.9930-47    1.9816-56
Spt:     98.54-81    1.5655-82    0.9846-79    1.9733-56

See Also

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