Latest news on European Morning Update 9th April 2008
| Dollar remains range bound in Asian trading Releases from Australia: The ride is most certainly turning for the Australian economy as the global trend of consumers being spooked by the credit crunch spreads to Australia which had seen it economy hitherto retain a strong undertone. Westpac saw its measurement of consumer confidence decline a further -1.3% in April following March’s rather alarming -9.1% decline. AS elsewhere in the world the specter of rising fuel prices and mortgage rates has taken its toll on the previously buoyant consumer mood. April’s decline to 87.5 brings it to a loss of 24.2% over the past 12 months and to the lowest level in 15 years. The largest loser was the large decline in sentiment in buying a major household item at -12.7% and this confirms the general view that consumers are beginning to protest their wealth rather than spend in an uncertain global environment that spells more risks for the credit crunch to bit deeper.
Japan managed to avoid complete embarrassment by finally appointing Masaaki Shirakawa as successor to Fukui as governor of the Bank of Japan and meant that the first monetary policy meeting did have a leader at the helm. However, it didn’t take much guessing that the board would retain an unchanged rate for the 16th consecutive meeting. The BOJ are expected to downgrade their assessment of the economy following a deepening of the credit crisis and last week’s Tankan Report which showed a dramatic worsening in corporate CAPEX and outlook. Only yesterday Shirakawa stated that the Japanese economy faces many risks at home and abroad. This is causing many in the market to look for a rate cut over the coming months. However, this is by no means certain given that the zero rate policy never provided the boost required and instead complicated the process of normalization of rates. The following economic releases are due today: Q4 February March
One thing that happened yesterday was the sharp fall in the Pound. It has been on the cards for some while and although I felt a pullback was possible yesterday it did obviously fall through the floor… If I look at balance of the bearish structure it does seem to point to quite a strong decline to 1.9360 initially and 1.9270 thereafter and possibly a little lower. There is however, one support area we should look at – this being at 1.9605. If this holds and we see a strong recovery it could actually get all the way back to 2.0047. However, it wouldn’t be a pattern I’d be comfortable with… The Aussie too is reaching key resistance around 0.9330. If this also caps and we start seeing losses we should therefore accept the probability that the Dollar could see some strength. It would appear to be the preference against the Yen which, while a small, early consolidation is possible, while it holds above 102.35, the move does seem set for 103.86-00. Now what this means for the Euro and Swissie is less clear. I could accept a move to the 1.0338 area in the Swissie but I’m not sure beyond that. Against the Euro the picture is probably the least clear. I have wanted this to be bullish but the structure does seem to be breaking down and any loss of 1.5610-44 would tend to suggest a move all the way back to the 1.5340 area eventually. Even then I’m not particularly happy about the structure as the internal structure doesn’t seem to fit. So, until I get a clearer picture overall I have to come down to watching key supports & resistances. Certainly the background sentiment appears very confused also. While we do have rate decisions from Japan today and also the ECB and BOE tomorrow there seems to be something else behind this sentiment and perhaps we need a little longer for this to work its way into the market…
USDJPY EURUSD USDCHF GBPUSD Spt: 102.15-20 1.5644-72 1.0065-90 1.9605-50 See Also
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