Releases from Australia:
                                                        Forecast           Actual
April Retail Sales                     (MoM)    +0.2%           - 0.2%
May AiG Performance of Manufacturing      52.7 (prior)     51.2
May TD Securities Inflation        (MoM)   +0.5% (prior)  +0.3%
May TD Securities Inflation         (YoY)   +4.3% (prior)  +4.5%

Australian retail sales suffered in April and manufacturing in May. It seems the pullback in retail sales was driven by recreational goods while food sales were down 1.1% and adds to the evidence of a stronger slowdown in the economy.

The 1.5 point decline in the AiG Performance of Manufacturing maintained the string of disappointing numbers which the AiG described as being driven by “The slowing in activity also reflects the impact of rising input costs, particularly energy related, and a rising exchange rate.”

The figures point to a softer Q1 GDP which is due to be released on Wednesday.

Releases from Japan:

                                               Forecast             Actual
April Labor Cash Earnings  (YoY)   +1.3%             +0.6%
May Vehicle Sales             (YoY)   +6.9% (prior)   - 6.1%

Labor cash earnings maintained its series of annual rises but came in around half the pace than expected. Overtime remains the favored means of passing on higher wages though the uptick in unemployment will detract from any real positive impact on the economy. Furthermore it is very clear the economy is slowing and with corporate profits being squeezed due to higher costs one does have to question whether these increases are sustainable.

The following economic releases are due today:

Q1
Swiss GDP                         (QoQ)    +0.3%
Swiss GDP                          (YoY)    +3.3%

April
U.K. M4 Money Supply        (MoM) 
U.K. M4 Money Supply         (YoY) 
U.K. M4 Sterling Lending       GBP
U.K. Net Consumer Credit     GBP       1.0bn
U.K. Mortgage Approvals                      65K
U.S. Construction Spending (MoM)    - 0.6%

May
Swiss SVME PMI                                 55.4
French Manufacturing PMI (F)              51.3
German Manufacturing PMI (F)            53.5
Euro-zone Manufacturing PMI (F)         50.5
U.K. Manufacturing PMI                      50.5
U.S. Manufacturing ISM                      48.5

I can’t say Friday was quite as expected but wasn’t totally far from expectations. In the larger picture I still feel that the Dollar is most likely to be within a larger holding pattern and therefore I’m not really looking for excessive moves in either direction. I can break the medium term pattern down to three, most likely one of two structures and actually favor a pattern that would see the Dollar make a little more headway before pulling back into range.

Indeed, looking at the data releases this week they seem to have the strong chance of pulling the Dollar one way and then the other on an almost daily basis. However, if we see the Dollar make gains over today or tomorrow I feel the next larger risk will be back lower.

I only have one currency pair that still holds a risk of seeing a larger directional move and that is Cable. Somehow this has managed to carve out an awfully complicated correction which still seems to have another leg lower to go but the fact that it still hasn’t lost out too much does still permit quite a bullish move once the Dollar begins to weaken once again. That could be the move of the week.

If I can’t point also to the biggest uncertainty then it’s Euro-Yen. I have maintained a broadly bearish outlook but the recent tight ranging has frustrated. I would still like to see Dollar-Yen higher to 106.82 but quite how the balance of the Euro’s moves will develop versus Dollar-Yen makes the cross slightly confusing. I suspect however, if the Euro does make it down to 1.5390-1.5410 then Dollar-Yen must make it close to the 106.82 target or the downside in Euro-yen could drag it lower…

Note important support and resistance areas:

          USDJPY        EURUSD       USDCHF        GBPUSD
Res:  106.41-82    1.5670-98    1.0526-64    1.9880-09
Res:  105.72-04    1.5585-15    1.0456-75    1.9784-25

Spt:   104.91-15    1.5460-90    1.0368-93    1.9650-82
Spt:   103.92-20    1.5409-47    1.0253-88    1.9604-16

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