News from Japan:

The market opened its eyes only briefly during sleepy Asian trading to glance at the BOJ monetary policy minutes of the 8th-9th April and promptly returned into a state of slumber.

Well, to be honest there were a couple of interesting snippets from the report which unsurprisingly highlighted heightened concern over the downside risks to the Japanese economy and the rising pace of inflation which they felt “warranted attention.”

On shift from the previous meeting was the removal of the reference to the need for normalizing interest rates to reflect economic fundamentals and prices. Risk factors, they claimed, “had been increasing both at home and abroad.”

They also noted that Japanese businesses are seeing earnings under pressure from higher raw material prices and a strengthening Yen.

Dollar-Yen remained locked in a tight trading range over the day.

The following economic releases are due today:

Q1
U.K. GDP                           (QoQ)    +0.4%
U.K. GDP                            (YoY)    +2.5%
Italian GDP (P)                   (QoQ)    +0.2%
Italian GDP (P)                    (YoY)    +0.4%

April
Swiss Trade Balance              CHF 
French Consumer Spending  (MoM)    +0.5%
French Consumer Spending   (YoY)    +2.0%
Italian Trade Balance Non-EU  EUR    -1810K
U.S. Existing Home Sales     (MoM)    - 1.6%
U.S. Existing Home Sales                 4.85mn

May
French Manufacturing PMI                    51.0
French Services PMI                            52.9
German Manufacturing PMI                  53.2
German Services PMI                          54.0
Euro-zone Manufacturing PMI               50.5
Euro-zone Services PMI                        51.7
Euro-zone Composite PMI                    51.5

Yesterday saw the Dollar decline slow down a bit, held back by the bullish divergences. The exception was of course Cable which pushed directly through the 1.9757 resistance and moved all the way to 1.9847. I have mentioned before that Cable could be a decent indicator for the end of the entire Dollar downturn and yesterday’s continued gains has brought it closer to the next target at 1.9909.

Indeed, the pullback from 1.9847 is very nearly complete and should make the next leg higher to 1.9909 over the course of today but from there we should see a further correction that should last over the long U.S. weekend. This will leave Tuesday-Friday for it to reach the 2.0192 target again.

Thus as a broad indicator for the European currencies we can expect something similar. The only uncertainty is whether the current correction lasts through Monday or whether we’ll see an earlier resumption of the Dollar’s decline. I suspect the former which really does make for a potentially dull day today.

It would be well to point out the Aussie here too as this appears to be turning into a rather major topping pattern. Bearish divergences exists across the board and while 0.9500-10 supports there is suggestion of one more rally rather similar to the European currencies.

Where I do have some doubts in my mind is over Dollar-Yen. I have maintained an ideal daily retracement to 106.82. If this does continue then we could come to the point where Dollar-Europe will be bullish while the implication of my Yen call would be Dollar bearish. Well, there are no rules to say they two areas should be correlated but at this point I can’t see any reason why they should be 100% uncorrelated… This will be something I shall be observing over the coming week.

Note important support and resistance areas:

          USDJPY        EURUSD       USDCHF       GBPUSD
Res:  105.43-68    1.5894-10    1.0428-74    1.9909-40
Res:  104.77-05    1.5752-84    1.0372-02    1.9847-74

Spt:   103.75-90    1.5692-20    1.0261-94    1.9750-64
Spt:   103.10-15    1.5586-30    1.0203-32    1.9650-96

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