Saxobank: USD/JPY faellt weiter - KZ 111 dann 108

MARKET RECAP:    Europe    -  May 26

-      Asian stocks rose after U.S. consumer and home sales reports bolstered confidence that the world's largest economy will keep growing even as oil prices rise.   The Morgan Stanley Capital International Asia-Pacific Index, which tracks more than 850 stocks in the region, gained 1.4 percent to 87.36 at 11:30 a.m. in Tokyo. Japan's Nikkei 225 Stock Average added 2.3 percent and the Topix index rose 1.5 percent. Stocks on the New York Stock Exchange yesterday had their broadest rally in a decade.    All stock benchmarks open in Asia advanced, except those in China. Markets in South Korea and Hong Kong are closed today for holidays.


-    Australia's dollar rose to its highest in almost three weeks on optimism a surge in U.S. stocks signals the world's biggest economy will shrug off high oil prices, boosting demand for Australian exports.   U.S. stock markets notched up their broadest rally in a decade led by producers of raw materials. The U.S. is Australia's second-largest export market and last week the two countries signed an agreement that will boost exports, of which 60 percent are raw materials.    Australia's dollar rose to 70.86 U.S. cents as of 8:10 a.m. in Sydney, from 70.27 cents in late Asian trading yesterday. The currency gained as far as 71.02, the highest since May. 7.


-     The yen traded at its strongest in more than two weeks against the dollar in Asia after a trade report showed Japan's economic recovery is boosting domestic demand, spurring global investors to buy stocks.    Japan's trade surplus narrowed less than expected as demand for consumer goods boosted imports to a record. The Nikkei 225 Stock Average gained as much as 2.3 percent. The yen yesterday had its biggest rise in almost two months as oil prices fell from a record high.    The yen traded as high as 111.60, the strongest since May 7 and was at 111.90 per dollar at 11:27 a.m. in Tokyo, from 111.70 yesterday in New York. It was at 135.49 per euro from 135.26.


-     Japan's trade surplus narrowed for the second month in April as demand for factory and consumer goods boosted imports to a record.   The trade surplus shrank to 985.5 billion yen ($8.81 billion), seasonally adjusted, from a revised 1 trillion yen in March, the Ministry of Finance said in Tokyo. The surplus had been expected to shrink to 892 billion yen, according to the median of 13 forecasts in a survey.


-     Crude oil futures in New York rose for the second day in three on speculation that production increases pledged by Saudi Arabia won't be sufficient to restore low gasoline supplies before peak summer driving demand in the U.S.   U.S. gasoline demand is 3.5 percent higher than the same time last year, while supplies in the week ended May 14 were 2.3 percent lower than a year earlier, according to the U.S. Energy Department. Crude oil reached a record $41.83 a barrel yesterday even after Saudi Arabia, OPEC's biggest producer, said it would boost output to 9 million barrels a day next month to help lower prices.




FX Market Summary   -     

The greenback traded down 0.9% against the Japanese yen and slid 0.7% vs. the euro. The dollar did rise 0.2%, though, against the Canadian dollar.

The dollar tumbled on Tuesday, hounded by concerns that steep oil prices will slow the U.S. economy and discourage the Federal Reserve from aggressively raising interest rates in coming months.    But crude prices did ease from the record highs hit earlier this week, allowing the Japanese yen to gain against the dollar. Japan's economy is also vulnerable to energy's effects and even near-term crude price relief allowed the yen to trounce its U.S. rival during U.S. trading on Tuesday.   Rising oil prices could offer Japan its own economic duress. It, like the United States, is a net oil importer. Japan, as a major exporter of electronics, cars and other goods, could also be dealt a growth setback if higher energy bills cut into consumer spending.

The large stock market gains did not translate into a dollar recovery, however. Despite Tuesday's pullback, expectations that summer driving demand will keep upward pressure on energy prices continued to hang over the currency market.

Encouraging news from the May German Ifo survey of business sentiment and April French consumer spending provided some support to the euro.   The data are seen cutting the chance for a eurozone interest-rate cut.

The greenback tumbled 1.2 percent against the British pound. The pound crossed above 1.8100 on Tuesday for the first time in more than a month.   Sterling rallied, as it benefited from a hawkish domestic interest-rate outlook and Britain's position as a net exporter of oil.

Currency traders showed little reaction to U.S. economic data, which offered little fresh evidence in support of a June interest-rate hike. The bond market remains priced for fairly strong odds the U.S. central bank pulls the trigger next month and sees even greater odds for a rate hike in August.


Forex Technicals:


-     EUR/USD  -    the uptrend is back on track, but first the currency has to suffer a little consolidation period in early European trading.  The current correction may find support at 1.2080 area however, and the uptrend should resume later in the day. The ongoing rally may yet carry the currency pair to the 1.2180 area.  And if 1.2200 is further taken out, then we start focusing at 1.2450 as the initial destination of the uptrend which may eventually carry the common currency all the way to 1.2900 and beyond. There is a good chance that we have seen a significant trough at 1.1780 last week; if our analysis is correct, we may not see those levels again until very late in the year.


-     GBP/USD  -  the currency has been to 1.8146 and corrects back to 1.8080 area. The rally should resume thereafter and may hew to the specifications of a third wave type appreciation.  As such, the rally may be focused at 1.8300.  The entire wave sequence may end at 1.8650 area within the next two weeks.


-     USD/JPY -    the bearish short-term  scenario did kicked in at the 113.30 top and has taken out the 111.80 support. The downtrend should accelerate further later in the trading day.  We now focus at the 111.00  immediate target, then at 108.00 chart support much further out.


-    USD/CHF  -    the currency has been to 1.2668 and managed a small recovery which may find resistance at 1.2750. The downtrend should continue thereafter and the currency should fall through the 1.2669 support,  which would bring on 1.2500 as the next downside objective. But eventually we have to revive the 1.2200 base as primary target.


-     USD/CAD  --  support at 1.3650 firmed up, generating a rally back to 1.3780. But the downtrend may have resumed from there, and the sell-off should resume soon.  The next downside target may be the area of 1.3550, then to 1.3415 further out.  But 1.3000 is shaping up to be the primary focus farther out.


 -     AUD/USD  -     the currency did accelerate and has been to .7100 and has since then corrected to .7060/50.  A new run up should set up further bull run to .7350 initial objectives. Further out, we start focusing at .7550.


 -     NZD/USD  -   the currency has been to .6200 and support is inherent at .6165. The rally should resume shortly, and may be  followed by further moves to the .6280 - .6300 area short term objectives. Further out, we now focus at .6600.


-     EUR/JPY  -   the cross did decline from 136.35 top and has gone lower than expected. However, it may find support at 134.80/75. The upmove should continue thereafter and may yet  continue from there and have a go at 137.00 area.


-     EUR/CHF  -   the upwards bias may extend further today and may have a go at crucial 1.5425 resistance.  Nonetheless, the caveat still remain --  the risk here is that we see the stock markets falling further for a few days which suggests that resistance at 1.5420 may keep the cross suppressed. This keeps the scenario of 1.5300 alive.   Further out, we need a rally through 1.5460 to dispel further1.5300 declines.


-    EUR/GBP  -    the cross should fall further -- the sell-off may yet proceed further to  .6640 from there.

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MARKET RECAP:    New York    -  May 25

-    Business confidence in Germany, Europe's biggest economy, dropped for the third month in four in May as stagnating consumer spending and higher oil prices threatened to restrain an economic recovery.   The Munich-based Ifo institute said its confidence index, based on a survey of 7,000 executives, declined to 96.1 from 96.3 in April. Economists predicted a reading of 96. The benchmark DAX 30 stock index dropped as much as 1.5 percent.  The biggest increase in exports since the end of 2000 kept Germany's economy growing in the first three months as consumer spending failed to increase for the fourth straight quarter.  Higher oil prices and health-care costs boosted the inflation rate to the highest in more than two years this month, adding another deterrent to household demand.


-      German inflation accelerated to the fastest pace in more than two years in May after the price of oil surged to a record this month.   The annual inflation rate rose to 2.1 percent, the highest since January 2002, from 1.6 percent in April, the Federal Statistics Office in Wiesbaden said. Economists had expected an rate of 2 percent, the median of forecasts in a survey showed. From a month ago, prices gained 0.3 percent.   Higher oil prices are making fuel-related products more expensive and may push inflation across the dozen-nation euro region above the ECB's 2 percent ceiling ``over the short term,'' the bank said earlier this month.


-   Precious metals advanced across the board in Europe on Tuesday morning with gold benefiting as oil price concerns sent the dollar lower, while silver donned its base metals hat for a rally, but dealers said more gains would be needed to confirm an uptrend.  Oil price worries dented the dollar across the board as investors fretted the high cost of crude could apply the brakes to the U.S. economy and keep interest rates lower for longer -- highlighting gold's appeal as a hedge against economic uncertainty.

U.S. Data Preview:


1)  Conference Board consumer confidence for May (Tuesday, 10:00 am )   -     The consensus calls for the Conference Board consumer confidence index to rise to 94.1 from April’s 92.9.

Several factors are impacting on consumer moods : Gasoline prices, which have just breached the psychologically important $2/gallon price, would presumably be a key negative influence.  Rising interest rates and an uptick in consumer price inflation, may also add to the overall drag on consumer moods.   Polls also indicate that the situation in Iraq is also an important concern.

2. Existing home sales for April (Tuesday, 10:00 am )  -      The consensus calls for existing home sales to slip to 6.4 million annualized units from March’s extremely high 6.48 million units.

Existing home sales tend to lag new home sales and mortgage applications by a month or two and, thus, the relevant guidance would come from March data. Mortgage rates hit a new low for the year in March and applications jumped 6.7%; moreover, new home sales soared by 8.9% in March. Unfavorable weather conditions in January and early February likely pushed some of the sales associated with these January and February applications to March. The fading of this temporary lift suggests a modest decline in April turnover.

Indications in the FX Market :     

  The euro traded near a two-week high against the dollar after Bundesbank President Axel Weber said Germany's economy will sustain a recovery even after a drop in business confidence.  The Ifo institute's index of German business sentiment fell in May to 96.1 from 96.3. The median forecast of analysts was for a drop to 96. Government reports also showed gains in French spending and German exports.   Reports are pointing towards a modest recovery; the Ifo report was supportive of the euro because it didn't shock on the downside.   The euro rose to 1.2109 at 8:50 a.m. in New York from 1.2005 late yesterday.

The surge in oil prices weighed on the value of the greenback which drifted lower throughout the session. All told, the dollar lost about half a percent of its value against both the yen and the euro. The dollar seems to be tracking the price of oil quite closely at present.

The yen fell after the Nikkei slumped on concerns that higher oil prices will stifle the Japanese recovery.   The yen fell as markets became more concerned about the impact of sustained high oil prices for Japan . Japan is highly dependent on oil imports, and at this early stage of its recovery, a sustained rise in oil prices could cause severe damage. Moreover, a report in the FT cast a cloud over the accuracy of the robust Q1 GDP figures as difficulties calculating deflation may have led to problems in the headline data. The yen was trading at 112.50 per dollar.

Sterling was firm against the dollar, rising to 1.8097 as the market continues to expect a rate hike by the BoE as early as the June 10 meeting. Also helping the pound was the broad scale pull back in the dollar.

Canadian markets are back from the Victoria Day holiday and the market got some good news with the better than consensus release of March retail sales. In March, retail sales were up 1.2%, which was the third consecutive monthly gain. Gains were recorded in six of the seven categories, so the strong number was not driven only by firm auto sales. This sets up a robust consumption component to next week’s GDP figure for Q1. The loonie was trading firmer against the dollar at 1.3680.




Forex Technicals:

-     EUR/USD  -   the currency finally pushed through and beyond the 1.2070 top, which in our opinion,  put the uptrend back on track.   The positive longer-term view basically got some firm technical underpinnings   --   the ongoing rally may yet carry the currency pair to the 1.2180 area.  And if 1.2200 is further taken out, then we start focusing at 1.2450 as the initial destination of the uptrend which may eventually carry the common currency all the way to 1.2900 and beyond. There is a good chance that we have seen a significant trough at 1.1780 last week; if our analysis is correct, we may not see those levels again until very late in the year.


-     GBP/USD  -  the currency broke through the 1.7950 top with a flourish, and may have set the  currency off towards a third wave type appreciation.  The rally shrugged off the hypothetical 1.8050 resistance and is now focused at 1.8300.  The entire wave sequence may end at 1.8650 area within the next two weeks.


-     USD/JPY -    the bearish short-term  scenario may have kicked in at the 113.30 top --  indications show the greenback likely to weaken further, so we now focus at the 111.00 immediate target, then at 108.00 chart support.


-    USD/CHF  -    the currency has been sharply lower, and found support at 1.2710 area once again. But the sell-off should continue and the currency
should fall through the 1.2700 support.  The chart support there will probably give way later in the day, which would bring on 1.2500 as the next downside objective. But eventually we have to revive the 1.2200 base as primary target.


-     USD/CAD  --  the sell-off meets support at 1.3650 anew, but it is just a matter of time before the currency pair breaks it down.   The next downside target may be the area of 1.3550, then to 1.3415 further out.  But 1.3000 is shaping up to be the primary focus farther out.


 -     AUD/USD  -     the currency has marginally gone through the .7030 top, and should accelerate later in the trading day.  A new run up should set up further bull run to .7350 initial objectives. Further out, we start focusing at .7550.


 -     NZD/USD  -   the currency tests the .6153 top, but should push through shortly. A breakthrough  will likely be followed by further moves to the .6280 - .6300 area short term objectives.


-     EUR/JPY  -   has been higher and has extended gains to 136.35. Expect a pullback to 135.40 area from around here (136.15). But the upmove may continue from there and have a go at 137.00 area.


-     EUR/CHF  -   still range-bound, but the upwards bias today may push the cross towards the 1.5425 area again. The caveat is still the state of global stock markets -- the risk here is that we see the stock markets falling further for a few days which suggests that resistance at 1.5420 may keep the cross suppressed. This keeps the scenario of 1.5300 alive.   Further out, we need a rally through 1.5460 to dispel further1.5300 declines.


-    EUR/GBP  -    no change in view --  the cross should fall further -- another small recovery from .6677 to perhaps .6720 nothwithstanding.   The sell-off may yet proceed further to  .6640 from there.

News, data, references and commentaries compiled from Bloomberg, Reuters, CBSMarketWatch, Briefing.com, and Economy.com

USD/JPY -    the bearish short-term  scenario did kicked in at the 113.30 top and has taken out the 111.80 support. The downtrend should accelerate further later in the trading day.  We now focus at the 111.00  immediate target, then at 108.00 chart support much further out.

Stand aside.