Releases from Australia:
                                                     Forecast            Actual
Q1 Construction Work Done               +2.3%             +2.3%
March Westpac Leading Index           +3.6% (prior)    +3.3%
May DEWR Skilled Vacancies   (YoY)   - 0.8% (prior)   - 0.1%

The Australian economy isn’t collapsing but it is moderating from its peak much as the European economy started to do late last year. The symptoms are much the same having seen a period of sustained, but reasonably controlled growth and now experiencing the same withdrawal of available spending money as consumers route funds more into energy and food.

The Westpac Leading Index reflected this back in March as it declined to +3.3% in March and with recent numbers it is likely to have weakened further under the weight of higher interest rates and tighter credit.

The bank described the results as pointing to as an abrupt slowdown in economic activity but also forecast inflation to ease back below 3.0% though the word “eventually” was used and that is open ended. Indeed, it may well have to be open ended with no sign that oil has reversed its uptrend.

As conditions tighten and less of the household budget is made available for real economy product spending the softening will accelerate as the year progresses.

The following economic releases are due today:

April
German Import Price Index               (MoM)   +0.7%
German Import Price Index                (YoY)   +5.5%
U.S. Durable Goods Orders                (MoM)   - 1.1%
U.S. Durable Goods Orders ex transp  (MoM)   - 0.5%

May
French Consumer Confidence Indicator            - 37.0
Italian Retailers’ Confidence General               106.2 (prior)
Italian Services Survey                                      4.0 (prior)

On the one hand I am quite satisfied with yesterday’s moves but on the other hand there seems to be a growing number of conflicts between basic expectations for the coming week which means something, somewhere has to give way.

First of all Cable has struggled more than I’d like and any expectation of further strong gains is withering away by the day. Dollar-Yen has made a deeper than expected recovery which I could accept though the cyclic argument is strengthening for the downside to come under pressure. This should come hand in hand with a lower Euro-Yen but even this has steadfastly refused to show any overt signs of the weakness I have been looking for.

I am pretty satisfied with the Euro and Swissie moves but any higher for the Dollar against these two will begin to suggest the probability that the Dollar’s weakness is over. I would still like to feel that there is still another leg lower for the Dollar before we find a larger reversal but I wouldn’t really want to see any higher against the Swissie in particular and there’s precious little wiggle room left on the downside for the Euro either…

For the moment I’m going to stick with the view that the Dollar should come under pressure for one last attempt lower. This does seem to have more correlation with gains in Cable (but possibly limited now) and would keep Dollar-Yen potentially in a range, possibly allowing Euro-Yen also one more attempt higher.

However, the overwhelming analysis I have is that the Dollar is due to recover again and therefore be aware of the levels that would imply a stronger recovery for the Dollar…

Note important support and resistance areas:

          USDJPY        EURUSD       USDCHF        GBPUSD
Res:  105.33-68    1.5817-45    1.0393-09    1.9909-50
Res:  104.32-46    1.5735-62    1.0325-54    1.9805-49

Spt:   103.44-79    1.5648-63    1.0240-75    1.9703-32
Spt:   102.56-72    1.5534-69    1.0186-14    1.9610-51

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