The RBA forecast that nation’s gross domestic product will rise 3 percent, compared to the previous estimate of 3.5 percent. Inflation growth was revised from 3 percent to 2.5 percent. The central bank wrote in its policy statement:

The assumed high level of the exchange rate and a weak short-term outlook for building construction are expected to result in subdued growth outside of the mining sector in the near term.

Risk aversion sentiment that was ruling markets yesterday wasn’t helping the Aussie. The MSCI Asia Pacific excluding Japan Index slipped 0.6 percent. Between domestic problems and bad news from overseas, it is no surprise that the growth-linked Australian currency was weakening.

AUD/USD slid from 1.0262 to 1.0170 — the lowest rate since January 9. AUD/JPY sank from 82.31 to 81.22, while the daily low of 81.17 was the lowest since February 1. EUR/AUD climbed from 1.2811 to 1.2918, the highest level since December 22 before closing at 1.2857.

source from: topforexnews

Greece is the country that was most damaged by the crisis and its parliamentary elections on May 6 are very important for the well-being of the euro. As Holger Schmieding, a chief economist at Berenberg Bank, outlined:

The biggest risk for markets is that in Greece we just don’t get a government and it becomes completely unclear whether or not Greece will be able to comply with the austerity program. If we’re unlucky on Monday morning, markets may wonder whether Greece will be out of the euro within a few months.

There are also presidential elections in France and mayoral in Italy. Votes in German states of Schleswig-Holstein and North Rhine-Westphalia should show how popular (or unpopular) is Angela Merkel and her party.

The euro jumped against the US dollar after the unfavorable US non-farm payrolls, but quickly resumed its decline. The elections may actually be positive for the euro if the eurozone will change its “austerity” path to the one of ”stimulating growth”.

EUR/USD climbed from 1.3152 to 1.3178, but then sank to 1.3083 as of 20:52 GMT today. EUR/JPY slid from 105.45 to 104.42, touching 104.39 intraday — the lowest rate since February 17. EUR/GBP sank from 0.8127 to its daily low of 0.8094 (was the lowest since June 30, 2010).

source from: topforexnews

Fundamental Forecast for the US Dollar: Neutral

The US Dollar (ticker: USDOLLAR) rallied sharply off of multi-month lows despite clear disappointments in US Nonfarm Payrolls data, setting the stage for further USD strength as it challenges key short-term highs. The question is—can it break to fresh peaks?

Last week the Dollar Index seem coiled to break strongly in either direction on a pivotal week for news and price action. It briefly tested important lows, but the USD bounced strongly on the sudden flight to safety and targets resistance. A nearly-empty US economic calendar suggests that volatility will remain low, but recent price action emphasizes that sharp moves can happen at a moment’s notice.

Traders should watch for surprises out of the weekend’s elections in France and Greece—especially as news out of Europe was one of the major catalysts for the Dollar’s sharp rallies into Friday’s close. French elections are of interest as all signs point to victory for Socialist candidate François Hollande over incumbent Nicolas Sarkozy, but Greece may prove the bigger market mover.

Many claim that Hollande’s tax-and-spend agenda could put further pressure on France’s fiscal balances and a Socialist victory could push the Euro lower. In this author’s opinion, however, neither candidate has presented anything that resembles real commitment to closing fiscal deficits. In other words—French debt won’t meaningfully shrink under Sarkozy or Hollande. Is it possible a Socialist victory puts pressure on the Euro and pushes the US Dollar higher? Perhaps, but a major Dollar breakout seems unlikely on such news.

Elections in Greece could otherwise spark market tensions and USDOLLAR volatility, and this might ultimately be the bigger market-mover on any disappointing results. Why? The ruling Socialist Pasok party looks certain to lose as Greeks punish the politicians who have presided over two years of biting austerity measures. The rise of fringe anti-bailout parties means that it will be difficult for the Socialists or the Conservatives to form a ruling coalition, and Greece may very well be without a government through the foreseeable future. These elections could leave Greece without the ability to enforce bailout agreements and ultimately lead to a Greek debt default.

What of US economic data? April US Nonfarm Payrolls figures put a damper on growth forecasts for the world’s largest economy, and a light week of domestic news releases is unlikely to change that. Yet we don’t want to overstate the effects of lackluster NFP’s; few expected the strong results seen in January and February to continue. So we end the week where it began: it’s clear that the US economy continues to grow at a moderate—if unspectacular—pace. Such figures will keep US Federal Reserve officials reasonably happy as growth is too slow to warrant higher interest rates but strong enough to make further easing unnecessary.

We’ll keep an eye out for further surprises out of lower-tier economic data in the days ahead. Yet the real fireworks are likely to come on the weekend’s developments out of Europe. If there are any strongly negative surprises out of Greece or France, expect the US Dollar to trade higher.

source from: dailyfx

The US NFP release showed a disappointing 115K job increase in April, down from the already tepid 154K and missing estimates that have been scaling to 160K, and even 140K in some sources. The poor data did not have an immediately clear effect for the USD. However, after risk aversion filtered through, the USD was supported at a recent consolidationsupport as well as 200-hour simple moving average.

The RSI remained above 40 and tagged 70 after the dust settled reflecting a persistent bullish momentum in the 1H chart’s time-frame.

Despite today’s reaction, the daily chart shows that the market is still trading between rising and declining trendlines. Even if the market breaks out of the triangle, it is still within a range roughly between 78.10 and 80.75.

The daily RSI reading is also stuck between 40 and 60. Tagging 70 will be a sign of bullish momentum and should be seen with a break above 80.75 to open up a bullish outlook. Tagging 30 should accompany a break below 78.10 and the 200-day simple moving average to open up the bearish scenario.

Join the Market Intelligence Briefings to get fundamental analysis, technical setups, trade plan assessments for major currency pairs as well as commodities and metals.

source from: fxtimes

Monetary policy meeting minutes released by the Reserve Bank of Australia portray a Board markedly reserved in regard to Australia’s economic outlook. With regard to international conditions, governors noted “ongoing weakness in Europe,” a slowing Chinese growth, falling terms of trade, and concerns that higher oil prices will negatively affect supply. Domestically, board members emphasized mixed business activity indicators, modest export growth, a subdued labor market, and a weak housing market. Overall, the Board stated that, in the event of moderating inflation during the coming period, “then a case could be made for further easing of monetary policy.” However, the RBA will wait for theAussie CPI data’s release on April 24th before making a decision regarding its cash rate.

Following the release, which was widely expected to be dovish in tone, traders initially sold, then repurchased the Aussie dollar. The AUDUSD fell from 1.0340 to as low as 1.0330, and then rose up to 1.0350.

source from: dailyfx

The greenback is markedly weaker at the close of North American trade with the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) off by 0.57% on the session after moving a full 115% of its daily average true range. Equity markets were mixed at the close as headlines out of Europe and mixed US economic data weighed on stocks with the S&P and NASDAQ off by 0.05% and 0.76% respectively while the Dow climbed higher by 0.56%. Remarks made by Cleveland Fed President Sandra Pianalto were surprisingly less dovish than expected with the central banker citing the need for the Fed to take “balanced approach” to an exit strategy while noting that the economy continues to display, “forward momentum.” Despite the remarks from Pianalto, a known dove, the dollar remained on the defensive with its European counter-parts outperforming early in the week.

The dollar closed back below the 61.8% Fibonacci extension taken from the August 1st and October 27th troughs at 9945. The index has continued to straddle this level for the past few sessions with key daily support seen at the relative three way confluence of the 50 & 100-day moving averages and the 9900 support level. This level remains paramount for the greenback with a break below eyeing support targets at the 50% extension at 9850. Daily topside advances are limited by channel resistance dating back to the 2012 high, currently just above the psychological 10,000 level. Note that the relative strength index continues to trade within the confines of a descending channel with a topside break needed to dispel further dollar weakness.

An hourly chart shows the index trading back in the confines of a descending channel formation after briefly dipping below channel support late last week. A break below this formation eyes subsequent floors at 9900, 9875, and the 50% extension at 9850. Interim resistance stands at the key 61.8% extension at 9945 backed by 9975 and channel resistance. A breach above the 10,000 mark shifts our focus higher with such a scenario eyeing primary objectives at 10,040 and the 78.6% extension at 10,080. Look for the dollar to take cues off broader risk trends as the European crisis comes back into focus with a substantial shift into risk aversion likely to offer ample support for the reserve currency.

The greenback declined against three of the four component currencies highlighted by a 0.58% decline against the Japanese yen. The USD/JPY has remained under pressure since last week when the BoJ yielded no plans to further ease policy. Risk aversion flows have also continued to support the low yielder as traders flock into so called “haven” assets such as the yen, the greenback, and US Treasuries. For complete USD/JPY scalp targets refer to today’s Winners/Losers Report. The Australian dollar was the weakest performer of the lot with a decline of 0.16% on the session. Although the greenback saw broad-based losses against its European counterparts like the pound, the euro and the swissie, commodity backed currencies remained on the defensive with the aussie, the kiwi, and the cad all closing weaker on the session. Global growth concerns continue to limit advances in the commodity bloc with the greenback well supported in the interim. Traders will be closely eyeing the minutes from the most recent RBA interest rate decision with our medium-term bias on the aussie remaining weighted to the downside.

Tomorrow’s economic docket is highlighted March housing starts, building permits, manufacturing production and industrial production data. Traders will be closely eying the housing data as the sector continues to drag on the economy with housing starts expected to rise to 1.0% m/m, up from a previous contraction of 1.1% m/m. Building permits are expected to remain under pressure with consensus estimates calling for a decline of 0.6% m/m, down from a previous gain of 5.1% m/m. We remain neutral on the greenback at these levels while noting that our longer-term outlook remains weighted to the topside. However in light of recent price action, further declines in the index are likely with such a scenario to offer favorable long entries.

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source from: dailyfx

China announced that it will allow the yuan to float a little more freely against the US dollar, allowing the currency to move one per cent to either side of the US dollar currency peg. The yuan will not be a truly free floating currency as a result of the new policy, but it will have a little more flexibility.

For years, Western countries, especially the United States, have charged that the Chinese undervalue their currency, keeping it artificially low against the US dollar. This allows for an edge in exports, as a weaker yuan makes goods cheaper to purchase by consumers in other countries. Many expect that if Chinese policymakers were to ever let the yuan freely float, it would appreciate quite quickly.

This appears to be something of a step in a direction for more flexibility. Chinese leaders can maintain the dollar peg, but slowly ease the yuan into the currency market. Right now, the dollar/yuan is at 6.3149.

source from: topforexnews

Now Apple is sliding the other way and taking the Nasdaq with it.

Apple stock dropped more than $25 on Monday, its fifth straight day of declines. The losing streak has wiped out about $60 billion of Apple’s market value. That’s more than the most optimistic projections of the value of Facebook.

Apple helped push the Nasdaq composite index down 22.93 points on Monday to 2,988.40. The index is now up about 15 percent for the year after almost reaching 20 percent by the end of March.

“It’s been a very quirky market because it’s been a few companies that have delivered most of the rally this year,” said Mark Lamkin, CEO of Lamkin Wealth Management in Louisville, Ky. “It’s not been a broad-based rally.”

Apple, still the most valuable company in the world, accounts for 12 percent of the Nasdaq, more than any other stock. It has been on an almost uninterrupted climb for three years, powered by its hot iPhones and iPads.

But last week, a veteran technology analyst boldly issued a downgrade for Apple. He predicted that cellphone companies would probably stop offering such generous subsidies for customers to adopt the iPhone.

Investors may also be locking in profits and getting out before Apple reports earnings April 24. Even after the five-day decline, Apple stock is up 43 percent for the year.

“It’s had a huge run,” said Burt White, chief investment officer of LPL Financial in Boston. “Some investors probably said, ‘Might as well take some profits.’”

The broader stock market was flat, helped by strong March retail sales but hurt by continuing concerns about rising borrowing costs for debt-troubled Spain. The Standard & Poor’s 500 index dropped 0.69 point to 1,369.57.

Apple dragged down other technology stocks, which fell more than any other industry group in the S&P. Google, which went to trial Monday against Oracle in a copyright case over the Android phone, dropped for the second day in a row.

Utility stocks and banks rose, while energy companies and so-called consumer discretionary stocks fell.

The Dow Jones industrial average rose 71.82 points to 12,921.41, a gain of 0.6 percent. All but six of the 30 stocks that make up the Dow rose for the day, explaining why it rose while the S&P was flat. Apple is not part of the Dow.

The government reported that retail sales rose 0.8 percent compared to the previous month, twice what analysts had been expecting. Skeptics noted that was less than February’s 1 percent increase.

They also wondered whether the buying was just a result of the mild winter, rather than a sign of recovery: If people are buying lawn mowers and other warm-weather goods now, then they probably won’t be later in the year. Building materials and garden equipment enjoyed the biggest jump in March.

“It’s nice to see the retail sales were strong, but it’s one month and it’s one data point and it’s not even the biggest data point,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research in Cincinnati. “Honestly, jobs are much more important.”

Earlier this month, the government reported that the U.S. added 120,000 jobs in March, about half the pace of the previous three months.

Spain’s borrowing costs climbed above the closely watched 6 percent mark as investors grew more worried about the country’s ability to pay its debts. Seven percent is the rate at which other European countries have been forced to seek bailouts. Sweden cut its economic forecast for the year, saying that problems elsewhere in Europe were spreading its way.

The yield on the 10-year Treasury note was steady at 1.98 percent.

Among stocks making moves:

— Mattel plummeted more than 9 percent after reporting a 53 percent drop in first-quarter earnings. The country’s largest toy maker is wrestling with lower sales of Hot Wheels and Barbies. It just bought HIT Entertainment, the company behind Thomas the Tank Engine and Bob the Builder.

— Endocyte doubled to $7.62 after reporting that Merck, the world’s second-largest drugmaker, will develop and market its experimental cancer drug. Endocyte, based in West Lafayette, Ind., has no products on the market.

source from: yahoo

The Budget and the OBR’s March 2012 Economic & Fiscal Outlook contained no major surprises, with the key details already well covered by the media in recent days. The Budget was fiscally neutral, and Chancellor Osborne remains on course to achieve his fiscal mandate and supplementary target according to the OBR. The public finance projections were flattered by the planned transfer of Royal Mail pension assets. But, underlying all that, nothing much changed. The government finances are looking only slightly better than they did last November (i.e., moving in the right direction, but still rather unhealthy).

Full Story

FX: Another Bump in the Road

Sverre Holbek, Senior Analyst, Danske Bank

Yesterday (Thursday) saw a series of negative surprises for global investors. Signs of weakness in the Chinese and European manufacturing sectors contributed to undermining faith in the strength of the global recovery. China’s PMI index fell somewhat surprisingly for the fifth consecutive month to signal growth of around 7% q/q annualised. Hence, there is still no indication of this all-important global growth engine shifting up a gear. The second major negative surprise of the day was the PMI number from Europe, which suggested that the recession may not be over yet. Meanwhile, concerns about the Spanish housing market pushed Spanish yields sharply higher.

Full Story

European Rates Have Receded

John E. Silvia, Chief Economist, Wells Fargo

As we discussed in this space in our January 20, 2012 weekly report, LIBOR rates declined after central banks took some steps to improve liquidity in funding markets. First, on Nov. 30, six central banks (including the Federal Reserve) reduced interest rates that they charge each other for swap-line borrowing. Second, not only did the European Central Bank (ECB) cut its main policy rate by 50 bps late last year, but it conducted two long-term refinancing operations that allowed European banks to lock up funding from the ECB for three years.

Full Story

United States – Bond Bulls Will Have Another Run

Martin Schwerdtfeger, Senior Economist,TD Bank Financial Group

This week was relatively light in terms of data releases in the U.S. and the calendar was dominated by housing market data. Housing starts, existing and new home sales all came slightly below expectations. However, the softness was chalked up to month-to-month volatility and did not alter the market perception that a modest improvement remains under way in the housing market. So, despite the negative surprises, these reckonings did not rock the markets. What did move the markets this week were the manufacturing purchasing managers’ indexes of the euro zone and China. The former dropped to 48.7 in March, down from 49.3 in February, pushed down by contractions in both the German and French indexes. In China, the HSBC/Markit PMI came down to 48.1 in March, which put it below the 50-point mark that separates contraction from expansion for the fifth consecutive month. These indicators suggested that manufacturing activity is having a hard time gaining momentum globally, which combined with the recent spike in crude-oil prices, casts a shadow on the short-term global economic outlook.

Full Story

source from: dailyfx

The People’s Bank of China set the fixing at 6.2840 yuans per dollar today. That’s the highest level since the end of the dollar-peg in 2005. The yuan is allowed to trade at the range of 0.5 percent on either side of the fixing. Hu told Obama in a meeting in Seoul yesterday that China is going to ”let the market play a greater role” and increase flexibility of the currency.

USD/CNY dropped from 6.3160 to 6.3080 as of 10:57 GMT today after it climbed as high as 6.3331.

source from: topforexnews