Releases from Australia:
                                                     Forecast    Actual
March Employment Change                +10.0K   +14.8K
March Employment Rate                       4.1%      4.1%
March Participation Rate                      65.2%    65.2%
April Consumer Inflation Expectation      4.3%

Australia’s employment data was pretty close to forecast although added more jobs than expected in March but with the participation rate remaining stable it still pushed the underlying employment number to +4.1%. It isn’t a bad report but maybe the first sign that the buoyant labor market may have peaked.

Inflation expectations remain high though have dipped from March’s high level of 4.6%. The Melbourne Institute stated: “April's median expected inflation figure provides some evidence that the effects of tighter monetary policy are feeding into consumer inflationary expectations, with the April figure interrupting three successive months of increases in the median expected inflation rate.”

With crude oil prices hitting a new high at 2.21 overnight there is certainly no sign of a let up in pressures here and this will also keep food prices firm also. Across the board it is bad news for central banks who had been hoping that slower growth would ease inflation. Forecasts are already circulating for oil to reach 0pb over the next few days.

Releases from Japan:

February                               Forecast    Actual
Machine Orders           (MoM)   -14.0%   -12.7%
Machine Orders            (YoY)   + 0.8%    +2.4%
Trade Balance BOP         JPY   1110bn   1030bn

March
Money Supply M2+CD   (YoY)   +2.4%    +2.2%
Broad Liquidity             (YoY)   +3.5%    +3.1%

No real news from Japan either with little to generate any movement. The large decline in machine orders was expected as the one-off steelmaker orders from the Shinkansen rolled back off but allowed the YoY pace to edge higher to +2.4%.

Elsewhere CNBC are reporting that Merrill Lynch are planning to write off over bn in subprime losses in Q1. No one disputes there are more to come with George Soros backing the IMF estimate of almost bn likely to have been wiped off global wealth.

However, the sharp downward revisions in GDP growth estimates has been met with stern statements from officials who dispute that the situation is that bad.

The following economic releases are due today:

February
French Industrial Production         (MoM)   +0.0%
French Industrial Production          (YoY)   +1.4%
French Manufacturing Production   (MoM)   +0.1%
French Manufacturing Production    (YoY)   +1.2%
Italian Industrial Production         (MoM)   - 0.5%
Italian Industrial Production          (YoY)   - 0.8%
U.K. Visible Trade Balance              GBP    -7.5bn
U.K. Total Trade Balance                GBP    -4.2bn
U.S. Trade Balance                        USD  -57.5bn

March
U.S. Continuing Claims               (29th) 

April
U.S. Initial Jobless Claims            (5th)       385K

The Bank of England is due to announce its rate decision
The European Central Bank is due to announce its rate decision

At last a break and this does look Dollar bearish. At this point, while I still look for a minimum target around 1.5980 and possibly eventually reaching 1.6065, I do have some doubts about how far this can move. I even doubt that there will be a new low against the Swissie or if there is it will be minor.

Whatever happens I am still pretty bearish for the Pound. As described yesterday, the only way it can move higher is within an expanded flat which would imply a return to 2.0047 again but then we’ll be talking much lower. While it is possible for the Pound to be de-coupled from the rest of Europe I still feel the decline will come along with the rest of Europe.

The only issue I have at present overall with the Dollar is that Euro-Yen looks quite bearish. This could be limited to the 159.40-50 area initially and the pullback can be quite deep. Thus the driver of the subsequent leg lower will obviously come from either the Euro or Dollar-Yen. If it’s the latter then we’ll have to watch supports closely. An intermediate weekly cycle low was seen and this could imply a period of recovery. However, having seen the major cycle low taken out last August/October I have less confidence in their influence right now.

In the end I would like to see the Euro driving the Euro-Yen cross lower. We’ll need to mindful of this relationship while, as I believe, the Euro pushes up to a final high.

Finally, do take care. The market has become rather skittish and it has been hard identifying the Fibonacci relationships while liquidity is so low. The wave structures have taken on more skewed appearances which make interpretation far more difficult. However, I have to say again that I am not convinced that the Dollar’s weakness will be sustainable.

Note important support and resistance areas:

         USDJPY        EURUSD       USDCHF       GBPUSD
Res:  102.50-93    1.5949-87    1.0070-10    1.9895-25
Res:  101.50-90    1.5879-01    1.0007-31    1.9790-20

Spt:   100.45-87    1.5780-00    0.9889-12    1.9700-20
Spt:   100.00-20    1.5715-45    0.9787-38    1.9605-46

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