Japan’s BSI Manufacturing

Japan’s BSI All Industry Index came in down -2.4% quarter over quarter for the 1st quarter of 2010, while the Large Manufacturing Index came in up 4.3% quarter over quarter, however much less than the prior rise of 13.2%. Although the USD/JPY pair has maintained a bid in March, it has not been unable to break the 91 handle. A move toward that level would intersect with trendline resistance and a break could lead through the 200 day moving average and toward 2010 (calendar) highs. It is also noteworthy that the pair has found support recently at the intertwined 21 day and 100 day moving averages.

Westpac Leading Index

The January Westpac Leading Index came in weaker at 0.2% versus the prior reading of 0.5% (revised higher to 0.6%.) The Aussie has had a limited reaction to this release as it traded through the 92 cent handle at the end of the prior trading day and is now trading at .9185 level. On the chart below we see the AUD/USD pair had finally penetrated the 92 cent handle at the end of the prior trading day after creating a short-term double top in March. This could prove to be a bullish signal for the AUD and other commodity currencies.

RBA Meeting Minutes

The RBA Meeting Minutes have moved the AUD/USD pair lower by ~ 20 pips as the market remains in a tight range to start the new trading day, early in the Asian session. The details of the minutes are as follows:

• Global growth at ‘reasonable pace’ is the most likely result.
• “Appropriate for rates to gradually move to normal.
• Australia growth may now be ‘at or close to trend.’
• March Minutes show the RBA is ready to respond to other outcomes.
• Mining industry to provide ’significant’ growth boost.
• Europe debt concerns unlikely to impact global growth.
• Europe remains ‘weakest area’ in global economy.
• March increase a ‘timely’ step toward normal rates.
• Main risk from Greek debt problems is contagion.
• Recent economic figures ‘quite firm.’
• Established home market is very ‘buoyant.’
• Underlying inflation falling further in near term.
• Discussed sovereign risk issues associated with Greece.
• Policy decision based on ‘most likely’ outcome.’

Moody’s Concerns Have Risk Pairs Lower

Risk pairs have been under pressure since opening higher for the week, on reports that Moody’s rating agency is concerned  that the UK and US could be moving closer to losing there AAA debt rating. Although we have heard this rhetoric before, the market continues to react to this headline. Looking at the daily chart below, we see the pair could find support at the former trendline resistance and  move back up could be defended by the 38.2% retracement of the move in 2010.

BOJ on the Wire Pushing Yen Lower

The following comments from the BOJ against the Yen have helped push the USD/JPY pair higher even as the USD remains under some pressure. In addition to comments from Morgan Stanley earlier that ‘Japan is increasingly likely to sell Yen and that Yen could weaken to 109 per dollar at year-end.’

• Hatoyama says markets should set exchange rates.
• Hayatoma says to take appropriate measures on the Yen if needed.
• Hayatoma says need to take proper action on stronger Yen.
• Shirakawa says BOJ’s accommodative policy is affecting the Yen.
• Shirakawa says liquidity injection has limited impact on prices.
• Shirakawa says shouldn’t be influenced by short-term prices.
• Kan says up to BOK to decide specific policy measures, expects BOJ to take appropriate policy measures.
• Kan says intervention always option if moves are abrupt.

EUR/USD Testing Resistance Again

The EUR/USD is again has tested the descending trendline resistance we examined yesterday on the 4-hr chart, with the 4-200hr moving average directly above that line and the 1.37 handle.  The trendline had held yesterday and the pair is continuing to test it early in the Asian session. The signals on this chart might suggest a break through as the moves lower from the last few hits have been less significant than the ones before.

However on the daily chart we this is the 10 daily attempt at the trendline with some bearish signals as the 100 day moving average is about to move below the 200 day mavg.

China’s Industrial Production Weaker YoY

China’s Industrial Production for February came in significantly weaker year over year at +12.8% versus the expectation of +19%, although the YTD release was marginally firmer than expected (20.7% vs. 19.5%.) Producer Prices were also higher than expected, all of which has helped the USD continue its bid this Asian session. On the EUR/USD chart below we see the negative bias against the Euro gradually continue to give the pair lower highs. We will look to see if the trendline resistance shown below can once again hold the pair and whether the mid 1.34 figure will keep on supporting the pair, a break either way could provide a new short-term dynamic for the pair.

Aussie Unemployment Reprt

The February Australian Unemployment Report came out worse than expected, sending the risk pairs toward session lows. The economywas expected to grow by 15,000 new employees, but February’s job growth expanded by only 400. The employment rate came in as expected at 5.3%. The AUD immediately dropped on the release, however finding support again on the trendlne we reviewed yesterday.