Releases from Australia:    
      
Australia - January                      Prior     Current
New Motor Vehicle Sales  (MoM)   +1.1%    +0.6%
New Motor Vehicle Sales  (YoY)    11.6%    +7.6%

More confirmation of a robust Australian economy as new vehicle sales retain an upward trend even if January saw a small pullback in the annual gain. Clearly there is no indication that the consumers are cautious about the future while jobs remain plentiful and that is aided by continuing wage growth. It is not running out of control but the scant reaction to successive rate hikes can only encourage the RBA that another hike is required.

Releases from Japan:    

Japan – December                                   Forecast    Actual
All Industry Activity Index             (MoM)     +0.2%     - 0.2%

Japan - January
Merchandise Trade Balance Total    JPY        20.9bn   -79.3bn

Following the lead of the Tertiary Index earlier in the week the All Industry Activity Index dipped by -0.2% when a small gain had been expected in December.

Coupled with the Merchandise Trade Balance it puts a cloud over the economy in spite of the solid Q4 growth and still places a big question mark over the durability of the long recovery.

METI did attempt to play down the numbers with an explanation that the long New Year break tends to cause a dip in January. However, the trends are in place with exports down for the 5th consecutive month, hit by lower demand from both the U.S. and China while imports were hit by the surge in crude oil prices.

Also quoted on Jiji Press sources are saying that the government will lower this year’s growth forecasts. This follows from Fukui’s comments following the rate decision when he observed that weaknesses are being seen in the economic recovery and that Japan faces strong downside risks.

These will be exacerbated by the surge in oil prices which hit a new high of 1.32 per barrel today bringing the threat of stagflation along with it.

The Yen was initially little changed but has since weakened and moves in line with the technical call made since the 104.95 low that a broad pullback higher should be seen. This still has a little more to go and should reach between 109.80 and 110.94.

The following economic releases are due today:

January
Swiss Trade Balance                  CHF     0.80bn
French CPI                              (MoM)   - 0.2%
French CPI                               (YoY)    +2.8%
Swiss Producer & Import Prices   (MoM)   - 0.1%
Swiss Producer & Import Prices    (YoY)   +3.1%
U.K. Retail Sales                      (MoM)    +0.3%
U.K. Retail Sales                      (MoM)    +4.7%
U.S. Leading Indicators                         - 0.1%

February
Italian Consumer Confidence Index          102.2
U.S. Initial Jobless Claims        (16th)       345K
U.S. Continuing Claims              (9th)      2760K
Philadelphia Fed Survey                          - 10.0

The fact that we’re seeing this extremely frustrating choppy & erratic price movement holds advantages as well as disadvantages. Clearly the main disadvantage is the number of reversals, quite often just after a break has been seen. The advantage? Well, it’s rather a consolation point really but it shouldn’t be too long before it’s complete and we see a break.

I still maintain the break will be higher. The bigger issue is timing.

Obviously we need to see how this all develops but on the assumption that the Euro is in a triangle, the Pound appears to be poised to break lower, the Canadian Dollar also looks to be in a triangle, the Aussie should move above 0.9399 and Euro-Yen doesn’t seem to have much further upside, I can’t see this frustration continuing for much more than around two weeks at the most.

Just looking at the Euro it looks as if it still needs to make the 1.4835-66 area and from there we need one more dip in the range followed by a final recovery before the downside should, at last, get on its way.

The only conflict I have with that is just how the Pound will develop (as I feel the Dollar’s rally should be reflected all round.) It suggests we could see additional sideways ranging here too – so this will need to be handled with kid gloves.

For today – well, same of the usual stuff and I think it could be quite a tight range today. Thus the best way to trade this is on breaks and taking profits early. It’s just too whippy to get too tied up with a position.

Note important support and resistance areas:

         USDJPY        EURUSD       USDCHF       GBPUSD
Res:  109.13-47    1.4835-66    1.1106-20    1.9577-94
Res:  108.60-83    1.4731-55    1.1024-44    1.9473-97

Spt:   107.42-78    1.4635-70    1.0930-65    1.9361-92
Spt:   106.80-20    1.4558-81    1.0817-54    1.9329-35

See Also

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