USD/JPY Fundamental Analysis March 14, 2012, Forecast

Analysis and Recommendation: (close of Asian session)

USD/JPY  is trading close to the open of 82.23, currently sitting at 82.19 after a crazy morning of trading. Investors anticipating the BoJ decision and statements pushed the Yen as high as 82.48 and as low as 81.97 but after a short time the markets leveled close to the open and have stayed within the channel.

Japan, like the rest of the world is awaiting the Fed decision and statements late Tuesday afternoon.

JUST RELEASED

 ”Overseas economies still have not emerged from a deceleration phase on the whole but some improvement has recently been observed in the U.S. economy and the sluggish European economy has stopped deteriorating,” the central bank said. The BoJ kept key rates and also announced it would increase the amount of loans available through its growth supporting facility by 2 trillion yen ($24.35 billion)

Economic Data March 12-13, 2012 actual v. forecast

 

08:00

 

EUR

 

 

German WPI (MoM) 

1.0%

 

1.1% 

 

1.2% 

 

 

 

10:00

 

EUR

 

 

Italian GDP (QoQ) 

-0.7%

 

-0.7% 

 

-0.7% 

 

 

 

11:30

 

EUR

 

 

German 6-Month Bubill Auction 

0.053%

 

 

 

0.076% 

 

 

 

12:00

 

ALL

 

 

OECD Composite Leading Indicators 

100.9

 

100.6 

 

100.5 

   

 

16:30

 

USD

 

 

3-Month Bill Auction 

0.095%

 

 

 

0.080% 

 

 

 

19:00

 

USD

 

 

Federal Budget Balance 

-231.7B

 

-229.3B 

 

-27.4B 

 

 

 

22:45

 

NZD

 

 

FPI (MoM) 

0.6%

 

 

 

0.0% 

 

 

Mar. 13

00:50

 

JPY

 

 

Tertiary Industry Activity Index (MoM) 

-1.7%

 

0.4% 

 

1.8% 

   

 

01:01

 

GBP

 

 

RICS House Price Balance 

-13%

 

-14% 

 

-16% 

 

 

 

01:30

 

AUD

 

 

Home Loans (MoM) 

-1.2%

 

-0.1% 

 

2.1% 

   

 

01:30

 

AUD

 

 

NAB Business Confidence 

1

 

 

 

 

 

 

Upcoming Economic Events that effect the AUS, NZD and the JPY

00:30     AUD      Westpac Consumer Sentiment                                 4.20%   

The Westpac Consumer Sentiment Index measures the change in the level of consumer confidence in economic activity. On the index, a level above 100.0 indicates optimism; below indicates pessimism. The data is compiled from a survey of about 1,200 consumers which asks respondents to rate the relative level of past and future economic conditions.           

00:50     JPY         BSI Large Manufacturing Conditions                        1.3                          -6.1

The Business Sentiment Index (BSI) Large Manufacturing Conditions Index measures business sentiment in manufacturing. The data is derived from a survey of large Japanese manufacturers. It is a key indicator of the strength of the Japanese economy, which relies heavily on the manufacturing industry. A level above zero indicates improving conditions; a level below indicates worsening conditions. This survey may help to predict the Bank of Japan’s Tankan Large Manufacturing Index which is generally released about a week later.                   

 05:30    JPY         Industrial Production (MoM)                                     2.1%                      2.0%       

Industrial Production measures the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities.        

06:00     JPY         BoJ Monthly Report       

The Bank of Japan’s (BoJ) monthly report contains the statistical data that policymakers evaluate when setting interest rates. The report also provides detailed analysis of current and future economic conditions from the bank’s perspective                                                                                                

13:30     USD       Current Account                                -114.0B                                 -110.0B

The Current Account index measures the difference in value between exported and imported goods, services and interest payments during the reported month. The goods portion is the same as the monthly Trade Balance figure. Because foreigners must buy the domestic currency to pay for the nation’s exports the data can have a sizable affect on the USD.

13:30     USD      Import Price Index (MoM)                                           0.6%                      0.3%

The Import Price Index measures the change in the price of imported goods and services purchased domestically.

15:00     USD      Fed Chairman Bernanke Speaks

Federal Reserve Chairman Ben Bernanke (February 2006 – January 2014) is to speak. As head of the Fed, which controls short term interest rates, he has more influence over the U.S. dollar’s value than any other person. Traders closely watch his speeches as they are often used to drop hints regarding future monetary policy       

 

Government Bond Auction Schedule     (this week)

Mar 14  10:10  Italy   BTP/CCTeu auction

Mar 14  10:10  Sweden  Auctions T-bills

Mar 14  10:30  Swiss  Bond auction

Mar 14  15:30  Sweden  Details nominal bond exchange auction on Mar 21

Mar 14  18:00  US  Auctions 30Y Bonds

Mar 15  09:30  Spain  Obligacion auction

Mar 15  09:50  France  BTAN auction

Mar 15  10.30  UK  Auctions 4.5% 2042 conventional Gilt

Mar 15  10:50  France  OATi auction

Mar 15  16:00  US  Announces auction of 10Y TIPS on Mar 22

Is Japan Headed for a Financial Meltdown

Over the past few weeks, most economists and investors have been watching the story in Greece unfold. Waiting at the back door are Hungary, Portugal, Spain and Italy. The EU has spent a lot of time and effort pushing austerity measures and using standardized calculations to evaluate budgets and financial projections, in many cases ignoring cultural and financial differences.  EU ministers have tied debt to GDP, which is a text book approach. Except it doesn’t always work and sometimes it just is plain old fashion wrong. Let’s take a look at our close ally and friends, but a country no one can really figure out.

Japan’s debt to GDP ratio is the worst in the developed world, yet the BoJ’s interest rates are the lowest available, excluding Switzerland.

The main reason is that for the close to 15 years we’ve seen an excess of Japanese savings and a deficit of demand for those savings. So the Japanese government was able to issue debt without any competition from the private sector. But the Japanese demographic profile means that more workers are withdrawing from the workplace and drawing down their retirement savings.

The Japanese government is running a fiscal deficit of 10 to 11 per cent of GDP. Expenses for social security accounts for ¥27 trillion against total revenues of approximately ¥45 trillion. In addition, the Japanese government has interest expense of ¥10 trillion. Add them both together, and the Japanese government is spending 90 per cent of its total revenue on these two items.

We think that we are in the midst of an inflexion point, where there’s not enough Japanese savings to finance Japanese government debt. That means that the Japanese government will have to borrow in international capital markets. Given Japan’s risk profile – its debt to GDP ratio is 230 per cent – Japan may have to pay, say, 3 to 3.5 per cent to borrow. But that would push Japan’s interest expense to ¥30-35 trillion. We believe that is a recipe for disaster. The Bank of Japan has announced that it will start buying a lot of Japanese government debt, which will temporarily allay the problem. But if the market starts thinking that Japanese inflation will pick up, interest rates will be pushed higher.

One important item that has provided stability in Japan and peace of mind for investors in Japanese bonds has been Japan’s consistent current account surplus. However beginning before, but accelerating after the accident at Fukushima, Japan has seen its trade balance decline sharply. The reactor meltdowns and subsequent closure of the vast majority of nuclear plants has forced Japan to aggressively shift away from nuclear base load power. But that has meant it has had to pay a lot for LNG, oil and coal for its power generators. But this shift can and will be addressed and changed. This is only a temporary adjustment, large and important but temporary.

Last year, Japan’s had a trade deficit for the first time since 1980. New data just released shows that Japan also ran the largest single month full current account deficit since the oil shocks of the 1970’s. 

Will a Japanese crisis happen – there are some clear warning signs. If so it will happen sooner rather than later. No one ever thought we would see what we are witnessing in the EU, and even when all the signs were present politicians, lawmakers, economists and analysts turned a blind eye. 

USD/JPY Fundamental Analysis March 13, 2012, Forecast

Analysis and Recommendation: (close of Asian session)

USD/JPY as always marches to its own band. The pair are trading down 82.28 opening at 82.51. Although Friday’s US jobs report had added some strength to the USD. The Yen continued to be strong. Over the weekend the culmination of negative data from China, did not seem to hurt the Yen and this morning wit the release of a positive Core Machinery Orders, which came in way over forecast, the Yen was able to continue to mount strength against the dollar. Tomorrow brings decisions and policy from the BoJ.

 

Economic Releases actual v. forecast

 

Mar. 10

04:00

 

CNY

 

 

 

Chinese Trade Balance 

-31.5B

 

-8.2B 

 

27.3B 

 

 

 

Mar. 12

00:50

 

JPY

 

 

 

CGPI (YoY) 

0.6%

 

0.6% 

 

0.5% 

 

 

 

 

00:50

 

JPY

 

 

 

Core Machinery Orders (MoM) 

3.4%

 

2.3% 

 

-7.1% 

 

 

 

06:00

 

JPY

 

 

 

Household Confidence 

39.5

40.6  

 

40.0  

 

 

                                       

 

Scheduled Economic Events for March 13, 2012

Asia

00:50   JPY     Tertiary Industry Activity Index (MoM)            0.4%               1.4%

The Tertiary Industry Index measures the change in the total value of services purchased by businesses. It is a leading indicator of economic health.

 01:30  AUD    Home Loans (MoM)                                        -0.1%               2.3%

Home Loans record the change in the number of new loans granted for owner-occupied homes. It is a leading indicator of demand in the housing market.       

01:30   AUD    NAB Business Confidence                               4

The National Australia Bank (NAB) Business Confidence Index rates the current level of business conditions in Australia. Changes in business sentiment can be an early signal of future economic activity such as spending, hiring, and investment. The index is based on data collected from a survey of around 350 companies. A level above zero indicates improving conditions; below indicates worsening conditions.           

Tent     JPY      Interest Rate Decision                                   0.10%             0.10%

 Tent    JPY      BoJ Press Conference             

Bank of Japan (BOJ) policy board members come to a consensus on where to set the rate. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation.

The Bank of Japan (BOJ) press conference looks at the factors that affected the most recent interest rate decision, the overall economic outlook, inflation and offers insights into future monetary policy decisions.

US                                                                 

 13:30  USD     Core Retail Sales (MoM)                               0.8%                0.7%     

 13:30  USD     Retail Sales (MoM)                                      1.0%                0.4%

(Core and ) Retail Sales measures the change in the total value of sales at the retail level in the U.S., excluding automobiles. It is an important indicator of consumer spending and is also considered as a pace indicator for the U.S. economy.        

19:15   USD    Interest Rate Decision                                    0.25%             0.25%            

 19:15  USD    FOMC Statement                                                                               

Federal Open Market Committee (FOMC) members vote on where to set the rate. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation. Along with the Decision the U.S. Federal Reserve’s Federal Open Market Committee (FOMC) statement is the primary tool the panel uses to communicate with investors about monetary policy. It contains the outcome of the vote on interest rates, discusses the economic outlook and offers clues on the outcome of future votes.

Government Bond Auction Schedule     (this week)

Mar 13  09:30  Netherlands Eur 2.5bn-3.5bn re-opened Apr 2015 DSL

Mar 13  10:10  Italy   BOT auction

Mar 13  10:30  Belgium  Auctions 3 & 12M T-bills

Mar 13  15:30  UK  Details gilt auction on Mar 22

Mar 13  18:00  US  Auctions 10Y Notes

Mar 14  10:10  Italy   BTP/CCTeu auction

Mar 14  10:10  Sweden  Auctions T-bills

Mar 14  10:30  Swiss  Bond auction

Mar 14  15:30  Sweden  Details nominal bond exchange auction on Mar 21

Mar 14  18:00  US  Auctions 30Y Bonds

Mar 15  09:30  Spain  Obligacion auction

Mar 15  09:50  France  BTAN auction

Mar 15  10.30  UK  Auctions 4.5% 2042 conventional Gilt

Mar 15  10:50  France  OATi auction

Mar 15  16:00  US  Announces auction of 10Y TIPS on Mar 22

USD/JPY Forecast March 12, 2012, Technical Analysis

The USD/JPY pair took off again on Friday as the Non-Farm Payroll numbers came in better than expected. The pair continues to attract inflows as the Bank of Japan continues to add to their bond buyback program, and is starting to buy 90 % of the JGBs in the market. In other words, they are monetizing the debt, which is a backdoor way of printing Yen. With this in mind, we are only buying this pair now, and will continue to do so on pullbacks that show support. We don’t sell until we see the 80 level give way on a daily close. 

USD/JPY Forecast March 12, 2012, Technical Analysis
USD/JPY Forecast March 12, 2012, Technical Analysis

USD/JPY Forecast for the Week of March 12, 2012, Technical Analysis

The USD/JPY pair fell at first in the week as the large breakout came back for a pause. The market certainly is starting to recognize that something is happening, and once we pulled back; there were many participants willing to jump in from the bullish side.

The recent break of the long-term trend line tells us that we could very well be in the middle of a trend change. At the very least, we think that the move should run to the 85 level. The market still looks very strong to us, and it must be remembered that the last two candles have seen nice pullbacks, so even though this move looks a little bit parabolic, it isn’t as steep as it first looks. We are already long of this pair, and will add to it on shorter timeframes as we see signs of support.

USD/JPY Forecast for the Week of March 12, 2012, Technical Analysis
USD/JPY Forecast for the Week of March 12, 2012, Technical Analysis

USD/JPY Weekly Fundamental Analysis March 12-16, 2012, Forecast

Rule: In the USD/JPY trade, trying to pick tops or bottoms during that time would have been difficult. However, with the bull trend so dominant, the far easier and smarter trade was to look for technical opportunities to go with the fundamental theme and trade with the market trend rather than to trying to fade it.
Against the Japanese yen, whose central bank held rates steady at zero, the dollar appreciated 19% from its lowest to highest levels. USD/JPY was in a very strong uptrend throughout the year, but even so, there were plenty of retraces along the way. These pullbacks were perfect opportunities for traders to combine technicals with fundamentals to enter the trade at an opportune moment. 

  • The interest rate differential between the Bank of Japan (BoJ) and the Federal Reserve
  • Japanese government intervention to maintain their currency sends USD/JPY lower

Analysis and Recommendation:

The USD/JPY is trading at 82.48 as the greenback climbed against all of its trading partners on above forecast jobs data. This was a tough week for the Yen, with a lot of negative news from Japan. The Yen traded as high as 82.64 but was coming off a bottom of 80.58 earlier this week. The pair are going to be unpredictable early in the week, as BoJ will be making announcements and policy decisions, which always seems to surprise the markets. This is a sit tight until Tuesday situation

Highlights of the past week

USA

The U.S. created 227,000 jobs in February and more people found work in the prior two months than previously reported, suggesting the economy’s recent momentum is likely to continue.

The unemployment rate, meanwhile, was unchanged at 8.3% as nearly half-a-million workers reentered the labor force in search of job, the Labor Department.

Household debt edged up 0.3% in the fourth quarter, the Fed reported in its flow-of-funds report, as consumer credit surged at a 7% annualized rate. Household debt had declined for 13 consecutive periods before the slender fourth-quarter advance.

The U.S. trade deficit widened sharply in January, driven higher by record imports of autos, capital goods and food, government data reported.  The trade gap expanded 4.3% in January to $52.6 billion from $50.4 billion in December.

The Fed is considering a new form of “sterilized” quantitative easing that would allow asset purchases despite high oil prices, according to a report in The Wall Street Journal. Under the new approach, the Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates. The aim of such an approach would be to relieve anxieties that money printing could fuel inflation later, a fear widely expressed by critics of the Fed’s previous efforts to aid the recovery.

The Canadian Central Bank held rates today at 1% following the lead of banks around the world.

The Institute of Supply Management said its non-manufacturing PMI climbed to 57.3 in February from a reading of 56.8 the previous month. Economists had expected the index to decline to 56.1.

Another report showed that U.S. factory orders fell, but at a slower than forecast rate in January, declining by a seasonally adjusted 1.0%, compared to forecasts for a 1.3% slide.

Asia

Australia posted a seasonally-adjusted trade deficit of 673 million Australian dollars ($717.2 million) in January, the Australian Bureau of Statistics said Friday. Economists had been expecting a surplus of A$1.5 billion

China’s consumer price index rose at a weaker-than-expected rate of 3.2% in February from the same month a year earlier. The producer price index for February came in at 0%, also weaker than expected and slowing from January’s 0.7% year-on-year increase.

China’s industrial production and retail sales growth weakened in the first two months of 2012 from the year-earlier period, an official data release showed Friday.

The New Zealand Reserve Bank has held the official cash rate at its historic low of 2.5 per cent at its review. Reserve Bank Governor Alan Bollard opted against making a rate change when releasing the quarterly monetary policy statement. He said if the New Zealand dollar remained at its high levels it would lessen the need to raise the rate. Dr Bollard says the New Zealand economy was continuing to improve despite the export sector being impacted by the high dollar.

Australia’s seasonally-adjusted unemployment rate increased 0.1 percentage points to 5.2% in February, the Australian Bureau of Statistics said Thursday Australia’s fourth-quarter gross domestic product rose 0.4% against economists’ expectations of a 0.8% gain, disappointing government officials and the markets.

South Korea kept its key interest rate on hold at 3.25% on Thursday, according to reports. The decision was widely expected.

Japan’s trade deficit widened in January to 1.382 trillion yen ($17.0 billion), up 245.9% compared to the year past. Japan’s current account deficit totaled 437.3 billion yen in the month. The trade deficit and current account deficit were the largest on record.

China will extend yuan-denominated loans to other nations that make up the Bric group of nations.

Japan’s crude imports from Iran in January fell 23 percent from a year ago to 1.67 million kiloliters, or 338,900 barrels a day, according to data from the Ministry of Economy, Trade and Industry

Premier Wen Jiabao, in his annual state-of-the nation report to China’s parliament, reduces growth for 2012 of 7.5 percent. That would be the slowest pace of expansion since 1990 and well down on last year’s 9.2 percent growth rate.

Japan’s unemployment rate inched up to 4.6 per cent in January from a revised 4.5 per cent in the previous month.

January household spending fell by an inflation-adjusted 2.3 per cent year-on-year. The fall was bigger than a 0.8 per cent drop economists had expected.

The nation didn’t sell any of its currency from Jan. 30 to Feb. 27, the ministry’s month-end data posted on its website shows.

Companies’ capital spending jumped by the most in nearly five years in the fourth quarter. Capital spending excluding software rose 4.9 percent from a year earlier, after declining 11 percent in the previous quarter.

 

Economic Events for AUD-NZD-JPY-USD this week

Mar. 12

19:00

 

USD

 

 

 

Federal Budget Balance 

 

 

Mar. 13

00:30

 

AUD

 

 

 

Home Loans (MoM) 

 

 

 

00:30

 

AUD

 

 

 

NAB Business Confidence 

 

 

 

03:30

 

JPY

 

 

 

Interest Rate Decision 

 

 

 

Tentative

 

JPY

 

 

 

BoJ Press Conference 

 

 

 

12:30

 

USD

 

 

 

Core Retail Sales (MoM) 

 

 

 

12:30

 

USD

 

 

 

Retail Sales (MoM) 

 

 

 

18:00

 

USD

 

 

 

10-Year Note Auction 

 

 

 

18:15

 

USD

 

 

 

Interest Rate Decision 

 

 

 

18:15

 

USD

 

 

 

FOMC Statement 

 

 

 

21:00

 

NZD

 

 

 

Westpac Consumer Sentiment 

 

 

 

23:50

 

JPY

 

 

 

BSI Large Manufacturing Conditions 

 

 

Mar. 14

05:00

 

JPY

 

 

 

BoJ Monthly Report 

 

 

 

12:30

 

USD

 

 

 

Current Account 

 

 

 

12:30

 

USD

 

 

 

Import Price Index (MoM) 

 

 

 

23:30

 

AUD

 

 

 

Westpac Consumer Sentiment 

 

 

 

23:50

 

JPY

 

 

 

Tertiary Industry Activity Index (MoM) 

 

 

Mar. 15

00:30

 

AUD

 

 

 

RBA Financial Stability Review 

 

 

 

04:30

 

JPY

 

 

 

Industrial Production (MoM) 

 

 

 

12:30

 

USD

 

 

 

Core PPI (MoM) 

 

 

 

12:30

 

USD

 

 

 

PPI (MoM) 

 

 

 

12:30

 

USD

 

 

 

Initial Jobless Claims 

 

 

 

12:30

 

USD

 

 

 

NY Empire State Manufacturing Index 

 

 

 

12:30

 

USD

 

 

 

Continuing Jobless Claims 

 

 

 

13:00

 

USD

 

 

 

TIC Net Long-Term Transactions 

 

 

 

14:00

 

USD

 

 

 

Philadelphia Fed Manufacturing Index 

 

 

 

23:50

 

JPY

 

 

 

Monetary Policy Meeting Minutes 

 

 

Mar. 16

12:30

 

USD

 

 

 

Core CPI (MoM) 

 

 

 

12:30

 

USD

 

 

 

CPI (MoM) 

 

 

 

13:15

 

USD

 

 

 

Industrial Production (MoM) 

 

 

 

13:55

 

USD

 

 

 

Michigan Consumer Sentiment Index 

 

 

 

Government Bond Auction Schedule     (this week)

Mar 12  10:30  Germany  Eur 4.0bn new Sep 2012 Bubill

Mar 12  18:00  US  Auctions 3Y Notes

Mar 13  09:30  Netherlands Eur 2.5bn-3.5bn re-opened Apr 2015 DSL

Mar 13  10:10  Italy   BOT auction

Mar 13  10:30  Belgium  Auctions 3 & 12M T-bills

Mar 13  15:30  UK  Details gilt auction on Mar 22

Mar 13  18:00  US  Auctions 10Y Notes

Mar 14  10:10  Italy   BTP/CCTeu auction

Mar 14  10:10  Sweden  Auctions T-bills

Mar 14  10:30  Swiss  Bond auction

Mar 14  15:30  Sweden  Details nominal bond exchange auction on Mar 21

Mar 14  18:00  US  Auctions 30Y Bonds

Mar 15  09:30  Spain  Obligacion auction

Mar 15  09:50  France  BTAN auction

Mar 15  10.30  UK  Auctions 4.5% 2042 conventional Gilt

Mar 15  10:50  France  OATi auction

Mar 15  16:00  US  Announces auction of 10Y TIPS on Mar 22

USD/JPY Forecast March 9, 2012, Technical Analysis

 

The USD/JPY pair rose a bit during the Thursday session as the Yen lost against most other major currencies. The recent break of the 80 level is a very strong signal, and as a result we are “long only” in this market. The 80 will continue to be overly supportive in our opinion, and the trend is starting to change, based upon a recent break of a multi-year trend line. The 200 day EMA has been broken above recently as well, so we are buying pullbacks going forward. The 0.85 level above is our next longer-term target, and if we can get above it – we think this trade goes to parity eventually.

USD/JPY Forecast March 9, 2012, Technical Analysis
USD/JPY Forecast March 9, 2012, Technical Analysis

USD/JPY Fundamental Analysis March 12, 2012, Forecast

Analysis and Recommendation: (close of Asian session)

USD/JPY  gained against the yen and most major rivals on Friday, with details on Greece’s bond swap due as well as key U.S. jobs data. The ICE dollar index which measures the greenback against a basket of six currencies traded at 79.21, from 79.090 late the previous day. Pre-release information shows that the US jobs data today will be very positive. The Yen is closing on Friday at 81.83 having opened at 81.56

The deal is done, finally. Greece finished their debt swap with private creditors. Bondholders representing some 85% of Greece’s outstanding private-sector debt, well above the government’s minimum threshold, have agreed to the swap, easing pressures on the eurozone.

Australia posted a seasonally-adjusted trade deficit of 673 million Australian dollars ($717.2 million) in January, the Australian Bureau of Statistics said Friday. Economists had been expecting a surplus of A$1.5 billion

China’s consumer price index rose at a weaker-than-expected rate of 3.2% in February from the same month a year earlier, according to data released Friday. The CPI print is lower than the 3.4% expected by economists surveyed by Dow Jones Newswires and FactSet Research, and is sharply lower than the 4.5% increase seen in January. The producer price index for February came in at 0%, also weaker than expected and slowing from January’s 0.7% year-on-year increase

In America:

U.S. employers announced workforce reductions totaling 51,728 during February, down 3.3% from January levels, according to the latest job-cut report released Thursday by global outplacement firm Challenger.

Jobless claims in the U.S. rose to the highest level in five weeks, climbing by 8,000 to a seasonally adjusted 362,000, the Labor Department said Thursday. Markets had estimated claims would rise to 355,000 in the week ended March 3. Continuing claims – payments to people already approved for jobless benefits – increased by 10,000 to a seasonally adjusted 3.42 million in the week ended Feb. 25. 

Household debt edged up 0.3% in the fourth quarter, the Fed reported in its flow-of-funds report, as consumer credit surged at a 7% annualized rate. Household debt had declined for 13 consecutive periods before the slender fourth-quarter advance.

The Fed is considering a new form of “sterilized” quantitative easing that would allow asset purchases despite high oil prices, according to a report in The Wall Street Journal. Under the new approach, the Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates. The aim of such an approach would be to relieve anxieties that money printing could fuel inflation later, a fear widely expressed by critics of the Fed’s previous efforts to aid the recovery.

In northern America, the Canadian Central Bank held rates today at 1% following the lead of banks around the world.

In Europe:

The Greek government will announce early Friday the results of investors’ participation in the country’s ambitious debt-restructuring plan. More than 75% of private creditors have agreed to participate in Greece’s debt swap deal, the Associated Press reported Thursday, citing an unnamed Greek government official close to the situation.

The Bank of England announced their current rate decision which was as expected to hold rates. No new additions to their monetary easing policies announced in February.

The European Central Bank committee held lending rates at the current rate of 1% and made no comments on any additional lending policies.

ECB President Draghi said in his monthly press conference in Frankfurt on Thursday that the central bank’s long-term refinancing operation has had a positive effect on markets and sentiment in the euro zone but that “all non-standard measures are temporary.” He also said that the three-year LTROs have been an “unquestionable success.”

In a later presentation, ECB President Mario Draghi said higher-than-expected energy prices, along with increases in various state-administered prices, meant that “inflation is expected to remain above 2% in 2012, with upside risks prevailing.” The central inflation forecast for 2012 is now 2.4%, up from 2% three months ago, Mr. Draghi said.

At the same time, ECB forecasters now expect the bloc’s economy to shrink by 0.1% this year. For 2013, the ECB now expects growth of 1.1%, compared with a prior forecast of 1.3%.

Prices for Italian government bonds jumped and Spanish bonds also rose Thursday, sending yields lower on expectations Greece will successfully complete its voluntary debt swap with private investors. Italy’s 10-year bond yield fell 0.20

German production climbed 1.6% from December. Economists were expecting an increase of 1.1% in the euro zone’s largest economy. 

 

Economic Releases actual v. forecast

Mar. 09

00:30

 

AUD

 

 

 

Trade Balance 

-0.67B

 

1.51B 

 

1.33B 

   

 

01:30

 

CNY

 

 

 

Chinese CPI (YoY) 

3.2%

 

3.6% 

 

4.5% 

 

 

 

01:30

 

CNY

 

 

 

Chinese PPI (YoY) 

0.1%

 

0.0% 

 

0.7% 

 

 
                             

Mar. 08

01:00

 

KRW

 

 

 

South Korean Interest Rate Decision 

3.25%

 

3.25% 

 

3.25% 

 

 

 

06:30

 

EUR

 

 

 

French Non-Farm Payrolls (QoQ) 

-0.1%

 

-0.1% 

 

-0.2% 

 

 

 

08:15

 

CHF

 

 

 

CPI (MoM) 

0.3%

 

0.2% 

 

-0.4% 

 

 

 

12:00

 

GBP

 

 

 

Interest Rate Decision 

0.50%

 

0.50% 

 

0.50% 

 

 

 

12:45

 

EUR

 

 

 

Interest Rate Decision 

1.00%

 

1.00% 

 

1.00% 

 

 

 

13:15

 

CAD

 

 

 

Housing Starts 

201K

 

199K 

 

198K 

 

 

 

13:30

 

USD

 

 

 

Initial Jobless Claims 

362K

 

350K 

 

354K 

   

 

13:30

 

USD

 

 

 

Continuing Jobless Claims 

3416K

 

3385K 

 

3406K 

   

 

13:30

 

EUR

 

 

 

ECB President Draghi Speaks 

 

 

 

 

 

 

 

 

14:00

 

CAD

 

 

 

Interest Rate Decision 

1.00%

 

1.00% 

 

1.00% 

   

 

Upcoming Economic Events

Mar. 10 Tentative            CNY       Chinese Trade Balance                       -8.2B                      27.3B

The Trade Balance measures the difference in value between imported and exported goods and services over the reported period. A positive number indicates that more goods and services were exported than imported.

Mar. 11 23:50                    JPY         CGPI (YoY)         

The Corporate Goods Price Index (CGPI) measures the change in the selling prices of goods purchased by Japanese corporations. The CGPI measures the change in the rate of inflation in Japan from the perspective of the manufacturer and is correlated with consumer price inflation.            

                23:50                    JPY         Core Machinery Orders (MoM)

Core Machinery Orders measures the change in the total value of new orders placed with machine manufacturers, excluding ships and utilities. It is a key indicator of investment and a leading indicator of manufacturing production.

Mar. 12 05:00                    JPY         Household Confidence               

Household Confidence rates the relative level of overall economic conditions.

                 19:00                   USD       Federal Budget Balance

The Federal Budget Balance measures the difference in value between the federal government’s income and expenditure during the reported month. A positive number indicates a budget surplus; a negative number indicates a deficit.                              

                21:45                    NZD       FPI (MoM)

The Food Price Index (FPI) measures the change in the cost of food and food services purchased by households.

USD/JPY Forecast March 8, 2012, Technical Analysis

The USD/ JPY pair bounced nicely in a show of strength on Wednesday, after falling on Tuesday. The pair has recently been very bullish as the Bank of Japan announced an expansion of the bond buying program it currently does. This should flood the market with Yen, trillions of them, and this makes the action a bit more substantial than previous BoJ actions.

The action will more than likely be the beginning of the end of the massive Yen buying the market has seen over the last several years, but this won’t be an overnight phenomenon. With that in mind, we will see choppiness on the way up like we have over the last week or so. Besides, no market can go in one direction forever.

The recent breakout included several things. The breaking of the 80 mark was significant as intervention couldn’t even break it previously. The fact that it was sliced through with almost no real hesitation was our first clue at the seriousness of this move. The move also broke the pair above a massive weekly trend line from the start of the financial crisis. Both are significant moves, and likely noticed by all participants in this market. The real question is whether or not the momentum can keep building. The market certainly has come a long way in a short amount of time, but we are willing to buy this market on dips while we are above the critical 80 line. If it drops below that, things will have changed for us.

The pullbacks are going to be by far the best opportunities for traders going forward. The market needs to build up a long position on the whole, and this will take time. Because of this, we are willing to be very patient, as we feel this could be the start of a multi-month, if not multi-year move higher. Selling isn’t a thought at the moment, and certainly couldn’t be done until we get back below 80. In the meantime though, we are building a large core position from which to move forward.

USD/JPY Forecast March 8, 2012, Technical Analysis
USD/JPY Forecast March 8, 2012, Technical Analysis

USD/JPY Fundamental Analysis March 9, 2012, Forecast

Analysis and Recommendation: (close of Asian session)

USD/JPY  is trading at 81.29 up from the start at 81.09, the JPY lost strength on negative trade balance reports. Whereas the USD had strong data to rely on. This morning,  Japan’s trade deficit widened in January to 1.382 trillion yen ($17.0 billion), up 245.9% compared to the year-ago period the country’s Ministry of Finance said Thursday. Japan’s current account deficit totaled 437.3 billion yen in the month, larger than the 322.4 billion yen expected by economists polled by Dow Jones Newswires. The trade deficit and current account deficit were the largest on record.

Australia’s seasonally-adjusted unemployment rate increased 0.1 percentage points to 5.2% in February, the Australian Bureau of Statistics said Thursday.  The numbers were in line with forecasts.

Australia’s fourth-quarter gross domestic product rose 0.4% against economists’ expectations of a 0.8% gain, disappointing government officials and the markets.

The New Zealand Reserve Bank has held the official cash rate at its historic low of 2.5 per cent at its review. Reserve Bank Governor Alan Bollard opted against making a rate change when releasing the quarterly monetary policy statement. He said if the New Zealand dollar remained at its high levels it would lessen the need to raise the rate. Dr Bollard says the New Zealand economy was continuing to improve despite the export sector being impacted by the high dollar.

South Korea kept its key interest rate on hold at 3.25% on Thursday, according to reports. The decision was widely expected.

China will extend yuan-denominated loans to other nations that make up the Bric group of nations, according to a report in the Financial Times on Thursday.

In the US the ADP Payroll report showed a 216,000 increase from a revised 173,000 jobs added in January, and topped the 208,000 new jobs economists surveyed by Thomson Reuters had been expecting. Conditions continue to improve at a moderate pace and are consistent with other indicators suggesting some firming of the labor market. This pick-up is consistent with the recent acceleration of the nation’s gross domestic product which, in the fourth quarter.

The Fed is considering a new form of “sterilized” quantitative easing that would allow asset purchases despite high oil prices, according to a report in The Wall Street Journal.

 

March 8, 2012 Economic Releases actual v. forecast

 

 AUD

Employment Change 

-15.4K

 

5.0K

 

46.2K

 

 

AUD

Unemployment Rate 

5.2%

 

5.2%

 

5.1%

 

 

March 7, 2012 Economic Release actual v. forecast

 

GBP

 

 

 

BRC Shop Price Index (YoY) 

1.20%

 

 

 

1.40% 

 

 

 

AUD

 

 

 

GDP (QoQ) 

0.4%

 

0.7% 

 

0.8% 

   

 

MYR

 

 

 

Malaysian Trade Balance 

8.75B

 

8.20B 

 

8.31B 

 

 

 

JPY

 

 

 

Leading Index 

94.9

 

95.1 

 

93.8 

   

 

CHF

 

 

 

Unemployment Rate 

3.1%

 

3.1% 

 

3.1% 

 

 

 

EUR

 

 

 

Spanish Industrial Production (YoY) 

-4.2%

 

-4.0% 

 

-3.5% 

   

 

TWD

 

 

 

Taiwanese Trade Balance 

2.83B

 

1.10B 

 

0.42B 

 

 

 

EUR

 

 

 

German 5-Year Bobls Auction 

0.790%

 

 

 

0.910% 

 

 

 

EUR

 

 

 

German Factory Orders (MoM) 

-2.7%

 

0.6% 

 

1.6% 

   

 

CLP

 

 

 

Chilean Trade Balance 

 

 

1.00B 

 

1.98B 

 

 

 

USD

 

 

 

MBA Mortgage Applications  

-1.2%

 

 

 

-0.3%

   

 

March 9, 2012 Economic Events Schedule

00:30     AUD      Trade Balance                                 1.51B                     1.71B    

The Trade Balance measures the difference in value between imported and exported goods and services over the reported period. A positive number indicates that more goods and services were exported than imported.        

 01:30    CNY       Chinese CPI (YoY)                         3.6%                      4.5%                     

 01:30    CNY      Chinese PPI (YoY)                          0.0%                     0.7%                     

 05:30    CNY       Chinese Fixed Asset Invest          19.6%                    23.8%     

05:30     CNY      Chinese Industrial Pro                   12.4%                   12.8%                   

 05:30    CNY       Chinese Retail Sales (YoY)          17.4%                    18.1%

Beginning this month we will start including China in our economic reports, since their economic data has such a large effect on the global economy. Second only to the USA. The link inserted, will allow you to visit the English section of the Chinese government website where all the details and data are released in English.        

13:30     USD      Average Hourly Earnings             0.2%                      0.2%                     

 13:30    USD       Nonfarm Payrolls                         210K                      243K                     

13:30     USD       Unemployment Rate                     8.3%                      8.3%                     

 13:30    USD       Average Weekly Hours                34.5                       34.5                       

 13:30    USD      Private Nonfarm Payrolls            215K                      257K

The Nonfarm Payroll report consists of several sections each having its own releases and data, which the markets interpret. This are crucial reports, giving investors and economists deep insight to the American Economy and are excellent predictions of what is to come. 

13:30     USD      Trade Balance                              -49.0B                   -48.8B    

The Trade Balance measures the difference in value between imported and exported goods and services over the reported period. A positive number indicates that more goods and services were exported than imported.

.              

Sovereign Bond Auction Schedule

Mar 12, 10Y Notes on Mar 13 & 30Y Bonds on Mar 14

Mar 08  16:30  Italy   Details BOT auction on Mar 13

Mar 09  11:00  Belgium  OLO mini bond auction

Mar 09  16:30  Italy   Details BTP/CCTeu on Mar 14 

 

 

USD/JPY Fundamental Analysis March 8, 2012, Forecast

Analysis and Recommendation: (close of Asian session)

USD/JPY is trading at 80.77 after hitting a high earlier of 80.94 and then settling as investors were reassured over Greece.

The Yen benefited as a safe haven escape as worries that Greece was still at risk of a pushed investors to move from risky assets. Doubts about the success of the Greek debt-swap deal on Thursday have risen with only 20 per cent of private creditors so far agreeing to the deal. The Greek government has set a 75 per cent participation rate as a threshold for proceeding with the transaction.

There is an immense amount of risk surrounding this scenario if it doesn’t go according to plan there will be huge risk aversion taking place – which might push the Yen even higher..

Greece and the IIF seem to have calmed the markets by assuring publicly that everything was on track late in the day as pressure seemed to ease of and the investors moved back out of the yen.

The statements over the weekend by the Chinese Premier, reducing growth estimates for 2012 is having a reverberating effect the entire pacific.

 

March 7, 2012 Economic Release actual v. forecast

AUD

 

GDP (QoQ) 

0.4%

 

0.7% 

 

0.8%

March 6, 2012 Economic Releases actual v. forecast

 

AUD

 

 

 

Current Account 

-8.4B

 

-8.0B 

 

-5.8B 

 

 

 

AUD

 

 

 

Interest Rate Decision 

4.25%

 

4.25% 

 

4.25% 

 

 

 

GBP

 

 

 

Halifax House Price Index (MoM) 

-0.5%

 

0.3% 

 

0.6% 

 

 

 

EUR

 

 

 

GDP (QoQ) 

-0.3%

 

-0.3% 

 

-0.3% 

 

 

 

CAD

 

 

 

Ivey PMI 

66.5

 

62.1 

 

64.1 

   

 

Scheduled Economic Events for March 8, 2012 (GMT)

00:30     AUD       Employment Change                                     5.0K                       46.3K                    

 00:30    AUD       Unemployment Rate                                     5.2%                      5.1%

Employment Change measures the change in the number of people employed. Job creation is an important indicator of consumer spending. The Unemployment Rate measures the percentage of the total work force that is unemployed and actively seeking employment during the previous month.                          

13:30     USD      Initial Jobless Claims                                    350K                      351K                     

13:30     USD       Continuing Jobless Claims                           3385K                    3402K     

Initial Jobless Claims measures the number of individuals who filed for unemployment insurance for the first time during the past week. This is the earliest U.S. economic data, but the market impact varies from week to week. Continuing Jobless Claims measures the number of unemployed individuals who qualify for benefits under unemployment insurance.       

Sovereign Bond Auction Schedule

Mar 08  16:00  US Announces auctions of 3Y Notes

Mar 12, 10Y Notes on Mar 13 & 30Y Bonds on Mar 14

Mar 08  16:30  Italy   Details BOT auction on Mar 13

Mar 09  11:00  Belgium  OLO mini bond auction

Mar 09  16:30  Italy   Details BTP/CCTeu on Mar 14 

USD/JPY Forecast March 7, 2012, Technical Analysis

USD/JPY fell during the session on Tuesday as the “risk off” trade came back due to Greek fears, and the news that several economies are reporting a slowdown in such places as Europe, China, and Brazil. With all of this in mind, there are a lot of traders that wish to own Yen. However, this pair is being moved against by the Bank of Japan, and a break of the 80 resistance level was a monumental move. With this in mind, we think this is simply the pause before a move higher. In fact, the 4 hour chart shows a hammer at the moment, and this shows just how resilient this pair really is. We are buying on dips going forward, and building a position for the long-term in the market.

USD/JPY Forecast March 7, 2012, Technical Analysis
USD/JPY Forecast March 7, 2012, Technical Analysis

 

USD/JPY Forecast March 6, 2012, Technical Analysis

The USD/JPY pair fell for most of the session on Monday, but bounced later in the trading day to form a nice hammer. The pair looks like it is still willing to go higher, and this latest pullback may actually be a one-day event. The 0.8150 level now looks a bit supportive, and the pair also looks very constructive in general. 

The 80 level is now our signal. If we can stay above that mark, we are willing to buy dips that show support, such as the Monday candle as we are going to add to our long position if we can break above the Monday highs.. Until we close on the daily timeframe below the 80 level, we are not willing to sell under any circumstance. 

USD/JPY Forecast March 6, 2012, Technical Analysis
USD/JPY Forecast March 6, 2012, Technical Analysis

USD/JPY Fundamental Analysis March 7, 2012, Forecast

Analysis and Recommendation: (close of Asian session)

 Against  the USD/JPY , the dollar was trading at ¥81.41, falling from ¥81.81. Worries about the world economic growth and recovery disturbed investors in early trading.

Yesterday Chinese Premier Wen Jiabao, in his annual state-of-the nation report to China’s parliament, reduces growth for 2012 of 7.5 percent. That would be the slowest pace of expansion since 1990 and well down on last year’s 9.2 percent growth rate.

In the Asian Session Tuesday, Crude-oil slipped, following falls across equity markets amid concerns about slowing global growth.

Oil had dipped in the US market to close below $107 a barrel but continued to be pressured by a mixed bag of economic data and China’s cut to its economic growth target. Dropping to 106.70

The Reserve Bank of Australia kept its key cash rate on hold at 4.25% Tuesday, as expected. RBA Governor Stevens said, “Recent information is consistent with the expectation that the world economy will grow at a below-trend pace this year, but does not suggest that a deep downturn is occurring. With growth expected to be close to trend and inflation close to target, the board judged that the setting of monetary policy remained appropriate for the moment.”

From the USA on Monday:  Only a dire situation would call for the Federal Reserve to buy more assets, and that is unlikely given the better-looking economic data, a top central bank official said on Monday. Dallas Fed President Richard Fisher, an outspoken policy hawk, added that he was perplexed by Wall Street’s continued preoccupation with the possibility that the Fed could engage in a third round of large-scale buying of assets

The services sector expanded at its fastest pace in a year in February helped by a gain in new orders and as the housing market shows signs of stabilizing. The Institute for Supply Management said its services index rose to 57.3 in February last month from 56.8 in January, in sharp contrast to economists’ expectations for a drop to 56.1. It was the index’s highest level since February 2011. 

Major Greek bondholders announced their support for a deal that will deeply cut the value of their holdings as their contribution to keeping the country afloat. The steering committee of creditors, which includes 12 major investors in Greek bonds and was involved in drawing up last month’s landmark deal, said it would accept the bond swap offer

March 6, 2012 Economic Releases actual v. forecast

 

GBP

 

 

 

BRC Retail Sales Monitor (YoY) 

-0.3%

 

 

 

-0.3% 

 

 

 

AUD

 

 

 

Current Account 

-8.4B

 

-8.0B 

 

-5.6B 

 

 

 

JPY

 

 

 

Average Cash Earnings (YoY) 

0.0%

 

-0.3% 

 

-0.1% 

 

 

 

AUD

 

 

 

Interest Rate Decision 

4.25%

 

4.25% 

 

4.25% 

 

 

 

Economic Events: (GMT)

00:30     AUD       GDP (QoQ)                                     0.7%                      1.0%

Gross Domestic Product (GDP) measures the annualized change in the inflation-adjusted value of all goods and services produced by the economy. It is the broadest measure of economic activity and the primary indicator of the economy’s health.

A higher than expected reading should be taken as positive/bullish for the AUD, while a lower than expected reading should be taken as negative/bearish for the AUD.                           

13:15     USD      ADP Nonfarm Employment        205K                      170K                     

 13:30    USD      Nonfarm Productivity (QoQ)      0.8%                      0.7%                     

 13:30    USD       Unit Labor Costs (QoQ)             1.2%                      1.2%

The ADP National Employment Report is a measure of the monthly change in non-farm, private employment, based on the payroll data of approximately 400,000 U.S. business clients. The release, two days ahead of government data, is a good predictor of the government’s non-farm payroll report. The change in this indicator can be very volatile.

Nonfarm Productivity measures the annualized change in labor efficiency when producing goods and services, excluding the farming industry. Productivity and labor-related inflation are directly linked-a drop in a worker’s productivity is equivalent to a rise in their wage.

Unit Labor Costs measure the annualized change in the price businesses pay for labor, excluding the farming industry. It is a leading indicator of consumer inflation.

20:00     NZD      Interest Rate Decision                2.50%                    2.50%                   

 20:00    NZD      RBNZ Rate Statement                                                                                                  

 20:00    NZD       RBNZ Monetary Statement          

The Reserve Bank of New Zealand (RBNZ) governor decides where to set the rate after consulting senior bank staff and external advisers. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation.           

The Reserve Bank of New Zealand’s (RBNZ) quarterly Monetary Policy Statement outlines how the bank will achieve its inflation targets, how it proposes to formulate and implement monetary policy during the next five years and how monetary policy has been implemented since the last statement’s release.                                                        

 23:50    JPY        GDP (QoQ)                                                        -0.2%                     -0.6%                    

23:50     JPY        GDP Price Index (YoY)                                 -1.6%                     -1.6%

Gross Domestic Product (GDP) measures the annualized change in the inflation-adjusted value of all goods and services produced by the economy. It is the broadest measure of economic activity and the primary indicator of the economy’s health.

Sovereign Bond Auction Schedule

Mar 07  10:10  Sweden  Nominal bond auction

Mar 07  10:30  Germany  Eur 4.0bn Feb 2017 Bobl

Mar 07  10.30  UK  Auctions new Sep 2017 conventional Gilt

Mar 08  16:00  US

Announces auctions of 3Y Notes on Mar 12, 10Y Notes on Mar

13 & 30Y Bonds on Mar 14

Mar 08  16:30  Italy   Details BOT auction on Mar 13

Mar 09  11:00  Belgium  OLO mini bond auction

Mar 09  16:30  Italy   Details BTP/CCTeu on Mar 14 

In The Eyes of the Experts – 5/3/2012

What is this report?

In the morning the experts meet in the dealing room in order to prepare themselves for another trading day. They read the business press, and note relevant economic announcements expected during the day. They also consider the support and resistance lines and discuss the important rates in the major pairs; they indicate which pairs may strengthen and those which could weaken. Afterwards they wish everyone a successfully day of trading and turn on the computer screens…

Below you can find pairs the experts assume may be strengthen and weaken during the trading day; support and resistance lines relevant to the day’s trading and critical time for trading each day (important news etc.).

Currencies to watch for Long:

  • JPY
  • USD

 

Currencies watch for Short:

  • NZD
  • AUD
  • CAD

 

Today’s important times (GMT+2):

  • 11:30 GBP
  • 17:00 USD

 

Important rates:

Pair R2 R1 Pivot S1 S2
EURUSD    1.3095    1.3149    1.3240    1.3294    1.3385   
GBPUSD 1.5730 1.5783 1.5874 1.5926 1.6017
USDJPY 80.79 81.29 81.57 82.07 82.35
USDCHF 0.9006 0.9071 0.9109 0.9174 0.9212
USDCAD 0.9828 0.9856 0.9874 0.9902 0.9920
AUDUSD 1.0669 1.0704 1.0757 1.0788 1.0845

USD/JPY Fundamental Analysis March 6, 2012, Forecast

Analysis and Recommendation: (close of Asian session)

USD/JPY  opened the week trading at 81.77 and dropped a bit to end the trading day close to 81.61. The pair are expected to maintain this range with little economic data due in the US and Japan on Monday, there is little to move the pair. The only reaction will most likely be in response to the EUR/USD or USD weakness. The duo should open pretty close to where they are at present. On Tuesday there is also very little news, but Wednesday will bring several economic reports in Japan as well as employment reports in the US

 

Economic Events:  (GMT)

Mar. 06

00:30

 

AUD

 

 

 

Current Account 

 

03:30

 

AUD

 

 

 

Interest Rate Decision 

 

03:30

 

AUD

 

 

 

RBA Rate Statement 

 

Government Bond Auction Schedule

Mar 05  10:10  Norway  Bond auction

Mar 06  10:10  Greece  Auctions 6M T-bills

Mar 06  10:15  Austria  Bond auction

Mar 06  10.30  UK  Auctions 0.75% 2034 I/L Gilt

Mar 06  15:30  UK  Details gilt auction on Mar 15

Mar 07  10:10  Sweden  Nominal bond auction

Mar 07  10:30  Germany  Eur 4.0bn Feb 2017 Bobl

Mar 07  10.30  UK  Auctions new Sep 2017 conventional Gilt

Mar 08  16:00  US

Announces auctions of 3Y Notes on Mar 12, 10Y Notes on Mar

13 & 30Y Bonds on Mar 14

Mar 08  16:30  Italy   Details BOT auction on Mar 13

Mar 09  11:00  Belgium  OLO mini bond auction

Mar 09  16:30  Italy   Details BTP/CCTeu on Mar 14

USD/JPY Forecast March 5, 2012, Technical Analysis

The USD/JPY pair rose yet again on Friday. The USD/JPY pair is a rapidly evolving one. The pair was being pressured to the downside for the longest time, but it looks as if the Bank of Japan may have finally gotten its way, as the Yen continues to slide overall, and in a very rapid fashion. Being a net exporter, the Japanese actually prefer a weakened currency in order to sell their goods to other nations. The United States is the largest market for Japan, and as a result this pair gets the most attention from the Japanese central bankers.

The recent announcement of an expanded bond buying program may have finally broken the back of the bears in this market. There have been several signs of trend reversals in this pair, not the least of which includes the pair trading above the 200 day EMA now. The pair has also seen a recent break of a multi-year downtrend line, and the smashing through of the 80 level as well. This level was even resistive enough to repel central bank intervention, so you know it was a serious one.

The bullish action form the Friday session certainly suggests that we are heading higher and it should be mentioned that the weekly chart suddenly looks very bullish as well. Because of this, we think that perhaps we are entering a bull market in this pair, and will treat it as such as long as we are over the 80 level.

Going forward, we are buying dips as long as we are above that level, and will try to add to our positions as we think that the 85 level is almost a given sooner or later, and the 90 and parity levels could be next. The move won’t necessarily be a smooth one all the time, but the sudden and impulsive natures of this surge cannot be denied – this trend has changed as far as we can tell. We buy dips on the short timeframes, and look to add on further shallow dips above the current levels.

USD/JPY Forecast March 5, 2012, Technical Analysis
USD/JPY Forecast March 5, 2012, Technical Analysis

USD/JPY Forecast for the Week of March 5, 2012, Technical Analysis

The USD/JPY pair initially fell during the week as the market went back down to retest the 80 level. Now that the level has held as support, this could be the start of a much larger move. The weekly candle shape is that of a hammer, and it is sitting just above the 80 line. This is an area that offered tremendous resistance previously, and now looks as if it is going to offer significant support again. With this in mind, we think that the previous consolidation range of 80 – 85 will be the new “rectangle” we trade in for the moment. However, with this surge – we think that eventually 85 will give way. We are buying on a break of the highs from the week, and cannot sell until we are well below the 80 level. 

USD/JPY Forecast for the Week of March 5, 2012, Technical Analysis
USD/JPY Forecast for the Week of March 5, 2012, Technical Analysis

USD/JPY Weekly Fundamental Analysis March 5-9, 2012, Forecast

Rule: In the USD/JPY trade, trying to pick tops or bottoms during that time would have been difficult. However, with the bull trend so dominant, the far easier and smarter trade was to look for technical opportunities to go with the fundamental theme and trade with the market trend rather than to trying to fade it.
Against the Japanese yen, whose central bank held rates steady at zero, the dollar appreciated 19% from its lowest to highest levels. USD/JPY was in a very strong uptrend throughout the year, but even so, there were plenty of retraces along the way. These pullbacks were perfect opportunities for traders to combine technicals with fundamentals to enter the trade at an opportune moment. 

  • The interest rate differential between the Bank of Japan(BoJ) and the Federal Reserve
  • Japanese government intervention to maintain their currency sends USD/JPY lower

Analysis and Recommendation:

The USD/JPY last week tumbled to an almost nine-month low against the dollar after the Bank of Japan on Feb. 14 unexpectedly added ¥10 trillion to an asset-purchase program and set an inflation goal of 1 percent. The yen is trading at this writing at 81.80 and should hold here until release of US data mid week

Last week, USD/JPY extended the impressive post BOJ rally. The move was clearly in the first place due to yen weakness, rather than dollar strength. The trade-weighted dollar even lost some ground on a weekly basis. The USD/JPY got also no support from rising core bond yields last week. A reasonably positive sentiment on risk reinforced the rally. USD/JPY reached a new recovery high at 81.67 on Monday morning February 27. In this respect, the augmentation of the amount of BOJ asset purchases and especially the installation of a 1% inflation target proved to be a more efficient weapon than interventions on the currency market.  Of course at some point, the current rally will have incorporated that new policy approach of the BOJ. On February 01, USD/JPY was still near to 76.00 area. Given the limited price swings that we had become used to in this cross rate of late, the gains of the previous four weeks are impressive. So, there might be room for a correction. After the policy change of the BOJ, we also look out which currency will has become the preferred safe haven in case of a deterioration in sentiment on risk. The jury is still out but with market probably long USD/JPY after the recent change in the approach of the BOJ, we wouldn’t be surprised if the first correction would be rather violent, too. That said, the BOJ applying an inflation target is a potential game changer. So, we maintain a USD/JPY positive bias longer term. At some point, the pair might also still get support from a further improvement of US eco data and higher US bond yields. We maintain a buy on-tips strategy as long as the pair is holding above the 78.29 range top. On the top side 82.23 (19May high), is the next high profile target on the charts.

Only Good News from the US:

Existing home sales US existing home sales picked up unexpectedly in January, but the previous figures were downwardly revised. 

Initial jobless claims US initial jobless claims stayed unchanged in the week ending February the 18th, while the consensus was looking for an increase.

University of Michigan consumer confidence The final figure of Michigan consumer confidence for February showed a strong upward, revision from 72.5 to 75.3, while only a minor one was expected.

New home sales After increasing for four consecutive months, US new home sales dropped at the start of 2012. 

Federal Reserve Chairman Bernanke testified before the Senate, this week, the markets found his comments a bit dovish and drew conclusions that any additional QA was off the table for the time being. Although the Chairman warned that the economy was recovering, he stated it was fragile and he was still worried about jobs. Gold soared on his comments.

News from the Eurozone

This week starts off with an agreement on the Greek bailout and approval from the EU, ECB and IMF. Greece passes a major hurdle and now needs to complete their agreement with the IIF.

There are worries about the CDS swaps triggering a credit event, at first, the initial ruling ruled that there would be no credit event, but it turns out that ruling was on a very small question concerning the ECB, it seems now that now that Greece has passed the new laws so they can force bondholders to accept the agreement, it will now trigger a credit event and CDS insurance will have to payout.

The ECB, liquidity operation, although successful, loans funds to over 800 banks, in excess of 500 billion euros. Markets are now worried about the consequences.

Spain reported that they will miss their budget deficit target this year, but still remain on track for 2013.

The EU approved the next tranche for Portugal.

The G20 meeting in Mexico ended without any results with non euro nations saying that the eurozone needs to pick up their game and show their money before any others would consider participating.

The EU Summit this past week went off quietly without much in the way of announcements.

 Consumer confidence European Commission’s consumer confidence improved for a second straight month in February. Consumer confidence rose from -20.7 to -20.2, marginally  weaker than expected (-20.1).

Industrial new orders  Euro zone industrial new orders rebounded by 1.9%  M/M in December, while only a moderate pick up was expected.

IFO business climate indicator The German IFO index rose for a fourth consecutive month in February. The indicator jumped from 108.3 to 109.6, while a more moderate increase was expected.

Manufacturing PMI Euro zone manufacturing PMI extended its rebound in  February, rising for a third consecutive month, but at a  slower pace.  Services PMI After three consecutive increases, euro zone services PMI fell back in February, from 50.4 to 49.4, while a  slight increase was expected.

In January, the euro zone unemployment rate rose unexpectedly. The unemployment rate jumped from an upwardly revised 10.6% (earlier reported as 10.4%) to 10.7%, while the consensus was looking for stabilization at 10.4%. Eurostat estimates that the number of people unemployed rose by 185 000 in the euro area in January, to a total level of 16.925 million. The highest unemployment rates were observed in the Spain (23.3%), Greece (19.9% in November), Ireland and Portugal (both 14.8%). The youth unemployment rate (under 25) was 21.6% in the euro zone. The euro zone unemployment rate is now at the highest level since October 1997 and is just 0.2% below its all time high, suggesting that a jump above the all-time highs is not excluded in the coming months.

News from the Far East

In Australia Prime Minister Gillard won her battle against ex Prime Minister Rudd, who is now retiring from public life.

China’s official purchasing managers’ index (PMI) rose to 51.0 from 50.5 in January.

China also signaled this week that they are considering offering assistance to the EU and the EFSF.

Japan’s unemployment rate inched up to 4.6 per cent in January from a revised 4.5 per cent in the previous month, the government said on Friday. The figure was roughly in line with economists’ forecasts.

The ministry also said January household spending fell by an inflation-adjusted 2.3 per cent year-on-year. The fall was bigger than a 0.8 per cent drop economists had expected.

Japan refrained from selling yen in the foreign-exchange market last month, according to the Finance Ministry.The nation didn’t sell any of its currency from Jan. 30 to Feb. 27, the ministry’s month-end data posted on its website shows.

 

Economic Events:  (GMT)

Mar. 05

00:30

 

AUD

 

 

 

Company Gross Operating Profits

 

 

 

 

 

 

 

 

15:00

 

USD

 

 

 

ISM Non-Manufacturing Index 

 

 

 

 

 

 

 

Mar. 06

00:30

 

AUD

 

 

 

Current Account 

 

 

 

 

 

 

 

 

03:30

 

AUD

 

 

 

Interest Rate Decision 

 

 

 

 

 

 

 

 

03:30

 

AUD

 

 

 

RBA Rate Statement 

 

 

 

 

 

 

 

Mar. 07

00:30

 

AUD

 

 

 

GDP (QoQ) 

 

 

 

 

 

 

 

 

13:15

 

USD

 

 

 

ADP Nonfarm Employment Change 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

Nonfarm Productivity (QoQ) 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

Unit Labor Costs (QoQ) 

 

 

 

 

 

 

 

 

20:00

 

NZD

 

 

 

Interest Rate Decision 

 

 

 

 

 

 

 

 

20:00

 

NZD

 

 

 

RBNZ Rate Statement 

 

 

 

 

 

 

 

 

20:00

 

NZD

 

 

 

RBNZ Monetary Policy Statement 

 

 

 

 

 

 

 

 

23:50

 

JPY

 

 

 

GDP (QoQ) 

 

 

 

 

 

 

 

 

23:50

 

JPY

 

 

 

GDP Price Index (YoY) 

 

 

 

 

 

 

 

Mar. 08

00:30

 

AUD

 

 

 

Employment Change 

 

 

 

 

 

 

 

 

00:30

 

AUD

 

 

 

NAB Business Confidence 

 

 

 

 

 

 

 

 

00:30

 

AUD

 

 

 

Unemployment Rate 

 

 

 

 

 

 

 

 

Tentative

 

CNY

 

 

 

Chinese Trade Balance 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

Initial Jobless Claims 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

Continuing Jobless Claims 

 

 

 

 

 

 

 

 

19:00

 

USD

 

 

 

Federal Budget Balance 

 

 

 

 

 

 

 

Mar. 09

00:30

 

AUD

 

 

 

Trade Balance 

 

 

 

 

 

 

 

 

02:00

 

CNY

 

 

 

Chinese CPI (YoY) 

 

 

 

 

 

 

 

 

02:00

 

CNY

 

 

 

Chinese Fixed Asset Investment (YoY) 

 

 

 

 

 

 

 

 

02:00

 

CNY

 

 

 

Chinese Industrial Production (YoY) 

 

 

 

 

 

 

 

 

02:00

 

CNY

 

 

 

Chinese PPI (YoY) 

 

 

 

 

 

 

 

 

02:00

 

CNY

 

 

 

Chinese Retail Sales (YoY) 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

Average Hourly Earnings (MoM) 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

Nonfarm Payrolls 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

Trade Balance 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

Unemployment Rate 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

NY Empire State Manufacturing Index 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

Private Nonfarm Payrolls 

             

 

1st of the month global economic data releases actual v. forecast

 

AUD

 

 

 

Building Approvals (MoM) 

0.9%

 

2.1% 

 

-1.0% 

 

 

 

AUD

 

 

 

Private New Capital Expenditure (QoQ) 

-0.3%

 

3.9% 

 

14.6% 

   

 

INR

 

 

 

Indian Trade Balance 

-14.8B

 

-11.0B 

 

-12.7B 

 

 

 

CHF

 

 

 

GDP (QoQ) 

0.1%

 

-0.1% 

 

0.3% 

   

 

GBP

 

 

 

Nationwide HPI (MoM) 

0.6%

 

0.3% 

 

-0.3% 

   

 

CHF

 

 

 

SVME PMI 

49.0

 

48.5 

 

47.3 

 

 

 

EUR

 

 

 

French Manufacturing PMI 

50.0

 

50.2 

 

50.2 

 

 

 

EUR

 

 

 

German Manufacturing PMI 

50.2

 

50.1 

 

50.1 

 

 

 

EUR

 

 

 

Manufacturing PMI 

49.0

 

49.0 

 

49.0 

 

 

 

PLN

 

 

 

Polish GDP (YoY) 

4.3%

 

4.2% 

 

4.2% 

 

 

 

GBP

 

 

 

Manufacturing PMI 

51.2

 

52.0 

 

52.0 

   

 

EUR

 

 

 

CPI (YoY) 

2.7%

 

2.6% 

 

2.6% 

 

 

 

EUR

 

 

 

Unemployment Rate 

10.7%

 

10.4% 

 

10.6% 

   

 

USD

 

 

 

Core PCE Price Index (MoM) 

0.2%

 

0.2% 

 

0.1% 

   

 

CAD

 

 

 

Current Account 

-10.3B

 

-9.6B 

 

-12.3B 

   

 

USD

 

 

 

Personal Spending (MoM) 

0.2%

 

0.4% 

 

0.0% 

 

 

 

USD

 

 

 

Initial Jobless Claims 

351K

 

353K 

 

353K 

   

 

USD

 

 

 

Continuing Jobless Claims 

3402K

 

3400K 

 

3404K 

   

 

USD

 

 

 

ISM Manufacturing Index 

52.4

 

54.6 

 

54.1 

 

 

 

USD

 

 

 

Fed Chairman Bernanke Testifies 

 

 

 

 

 

 

 

 

KRW

 

 

 

South Korean CPI (YoY) 

3.1%

 

3.5% 

 

3.4% 

 

 

 

JPY

 

 

 

Unemployment Rate 

4.6%

 

4.5% 

 

4.6% 

 

 

 

JPY

 

 

 

Tokyo Core CPI (YoY) 

-0.3%

 

-0.4% 

 

-0.4% 

 

 

 

Government Bond Auction Schedule

Mar 05  10:10  Norway  Bond auction

Mar 06  10:10  Greece  Auctions 6M T-bills

Mar 06  10:15  Austria  Bond auction

Mar 06  10.30  UK  Auctions 0.75% 2034 I/L Gilt

Mar 06  15:30  UK  Details gilt auction on Mar 15

Mar 07  10:10  Sweden  Nominal bond auction

Mar 07  10:30  Germany  Eur 4.0bn Feb 2017 Bobl

Mar 07  10.30  UK  Auctions new Sep 2017 conventional Gilt

Mar 08  16:00  US

Announces auctions of 3Y Notes on Mar 12, 10Y Notes on Mar

13 & 30Y Bonds on Mar 14