Releases from Australia:
                                                       Forecast           Actual 
Q1 House Price Index             (QoQ)    +0.0%           +1.1%
Q1 House Price Index              (YoY)    11.0%            13.8%
April AiG Performance of mfg Index         54.9 (prior)     47.3
April TD Securities Inflation      (MoM)   +0.4% (prior)  +0.5%
April TD Securities Inflation       (YoY)   +4.0% (prior)  +4.3%
April ANZ Job Advertisements   (MoM)   - 0.7% (prior)  +3.1%

The RBA will be unhappy with the numbers out from Australia this morning as house prices and inflation rise while the performance of manufacturing saw a whooping drop of 7.6 points to slip roundly below the 50 level to indicate a contracting manufacturing sector.

Activity fell sharply in the retail trade, finance & insurance and transport & storage sectors, with CB stating that the combination of rising interest rates, high petrol prices, volatile financial markets and the accompanying dent in consumer and business confidence was starting to bite.

With the TD Securities measurement of inflation rising uncomfortably above 4% any thoughts of a cut in rates can be shelved for some time to come, but without demand being the catalyst it is also unlikely that there will be any move to hike rates either.

The following economic releases are due today:

May Euro-zone Sentix Investor Confidence    +4.40
April U.S. ISM Non-Manufacturing Composite   49.5

Dollar losses stalled just above the 1.5340-56 target zone and just above the 1.0601 resistance in the Swissie. It’s nice to see those levels remain intact and that Dollar bearish divergences developed.

Will we now see the Dollar back-off from its rally? Well, it’s my preference but I can’t say that we’ve seen any confirmation of reversal yet. Add to that the 4-hour bearish divergence in the Swissie is breaking down and it does suggest we need to be a little cautious about a call for a reversal.

I do find any continued Dollar bullishness rather difficult to fit into the structure that we have seen so far, but the manner of the decline in the Euro, for example, wasn’t text book in terms of the fact that we didn’t really see much of a correction all the way through.

Thus for today, while my preference is to see a Dollar reversal back lower, I still feel some care needs to be exercised before committing to that reversal.

This sentiment is amplified by the fact that the U.S. employment data and factory orders were more on the positive side than negative. Even then I do have to say that the jobs data in general was only good in terms of reference to the forecasts but otherwise there was no real reversal in the negative trend that has been developing.

On a final comment Dollar-Yen still has potential to the 106.82 target still – and it’s more a case of the whether 106.18 will hold first or whether we approach the target directly. Even Euro-Yen has not really performed quite as I expected so there is still a fair degree of uncertainty existing at the moment.

Note important support and resistance areas:

           USDJPY        EURUSD       USDCHF       GBPUSD
Res:  106.18-47    1.5528-51    1.0653-72    1.9851-96
Res:  105.68-83    1.5475-98    1.0580-06    1.9774-13

Spt:   104.70-00    1.5378-00    1.0480-00    1.9655-91
Spt:   104.15-44    1.5340-56    1.0432-42    1.9600-22

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