Releases from Australia:
                                               Forecast    Actual
Q1 PPI                           (QoQ)   +1.0%    +1.9%
Q1 PPI                            (YoY)   +3.9%    +4.8%
March New Vehicle Sales   (MoM)    -2.3%    +1.0%
March New Vehicle Sales    (YoY)   +3.1%    +3.7%

The cost of raw materials in building construction and energy has taken its toll over Q1 and while the RBA had hopes of inflation beginning to tack its way lower the global pattern of rising producer prices looks as if it is going to make its impact felt in the antipodes as well.

While the market was beginning to talk about the possibility of rate cuts later in the year the prospect seems quite bleak and should cause the CB to retain a stable policy for quite some months to come…

Releases from Japan:
                                                           Forecast    Actual 
February Tertiary Index             (MoM)     - 0.5%    - 1.7%
February Tertiary Index              (YoY)     - 0.5%    +1.6%
February Leading Economic Index (F)        54.5%     54.5%
February Coincident Index (F)                  70.0%     70.0%

More evidence of slowing service industry conditions in Japan as the Tertiary Index declined by a much larger margin than expected in February. It does tend to slot in with the last Tankan Report and with over 50% of the Japanese workforce employed in this broad sector the news hammers another nail in the coffin of the already fragile domestic economy.

Spending in the financial and insurance services sector fell 3.6 percent, while spending in the wholesale/retail sector slipped 1.0 percent. The real estate sector declined by -4.8% which is the largest fall under the current statistical method.

Releases from U.K.:
                                                           Prior    Current
April Rightmove Houses Prices   (MoM)   +0.8%   - 0.1%
April Rightmove Houses Prices    (YoY)   +5.0%   +1.3%

Still no reprieve for U.K.’s house prices as April saw yet another decline that has brought the annual change in house prices to just 1.3% and will begin to raise the risk of negative house prices over the next few months. This is the weakest annual gain since July 2005.

Rightmove were even moved to add in their statement that “This reasonable correction in the housing market is in danger of being taken to unreasonable extremes if the freezing of mortgage liquidity continues.”

The U.K. Treasury and BOE are working closely to provide a solution to improve liquidity in the mortgage market after the lenders reduced the range of housing loans on offer and toughened conditions for borrowers due to the global credit crisis.

With a rising number of houses left unsold and the average period of being on the market rising to 85 days the impact is a wilting confidence by U.K. consumers who are also finding their monthly budget squeezed by higher food and oil prices.

It’s not a crisis yet, but their remains worried frowns and scratching of heads.

The following economic releases are due today:

March
Japanese Convenience Store Sales   (YoY)   
Swiss Producer & Import Prices        (MoM)   +0.3%
Swiss Producer & Import Prices         (YoY)   +3.5%

Well, Friday was a turn up for the books… The Dollar’s strength was clearly something that I have been looking for but it may well be that we have already seen the Dollar lows for the year against all Europeans now. Well, we already knew that the Swissie and Pound had probably seen Dollar lows already and the only one in question was the Euro.

If I am to give any percentage chance that we have seen the Dollar’s low against the Euro then I’d place it around 60%-70%. In fact I can only see one possible pattern that will still imply a final Euro high later. That would rely on the 1.5982 high being part of an expanded flat correction. This pattern would call for a move down to 1.5510 again and then rally to new highs.

The reason I give this less chance is because we have already seen the long term 1.5954-86 targets (see Friday’s LT report.) If this recent pattern was an expanded flat (the 23.6% expansion lay at 1.5986) then it would more likely imply a stronger rally above the minimum 1.6065 target and all the way above 1.6200. This would be too high for my comfort considering the 1.5954-87 targets.

Thus don’t expect too much of a retracement today with the most likely result being a strong Dollar again by the end of today. Overall this should reach the area around the 1.5510 low but I’d expect some sort of deeper correction from there.

Just to recap on Dollar-Yen, I still see this within a larger correction towards 106.82 and most likely in a choppy manner. Here I see a difference to Dollar-Europe in that a new low around 90.80 is implied by July.

Note important support and resistance areas:

         USDJPY        EURUSD       USDCHF       GBPUSD
Res:  105.05-32    1.5954-82    1.0282-12    2.0092-17
Res:  104.30-63    1.5846-78    1.0204-25    2.0024-51

Spt:   103.44-67    1.5765-94    1.0143-52    1.9880-25
Spt:   102.72-04    1.5648-68    1.0040-70    1.9790-10

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