AIG Performance of Services
The AIG Performance of Services Index fell in May to 47.5, from 52.3 the prior month, an indication of contraction in that sector of the economy. However, the AUD/USD pair gained on the negative release as the USD is absorbing some pressure early in Asia.
Japan’s Q1 Capital Spending
Japan’s Capital Spending reading for the 1st quarter of 2010 was expected to be down by 9.6%, better than the prior reading of -17.3%, however the actual reading was worse than expected at -11.5% and the Yen gained a light bid moving toward the 92 handle. The Capital Spending reading minus software expenditures was much worse than expected at -12.9%. The market has been ranging to open the Asian session with the USD losing some momentum.
UBS Comments on FX
- USD may become growth currency in coming decade.
- Dollar to shed haven status as US outpaces Europe.
- ECB to face more pressure to intervene amid crisis.
- Volatility makes central bank intervention likelier.
- Oil nations may start to favor the USD more.
The dollar opened firmer against the euro by ~40 pips from last weeks close and has traded in a tight range to open the trading week. The pair has found support on Friday of last week and continues to gain a bid around the 1.25 handle, the 38.2% retracement of last weeks move.
AUD/USD Break Support Again?
The AUD/USD pair continues its freefall, breaking the 100 week moving average to start the new day, after finding support there yesterday and trading higher. Equities closed on their lows in the US and oil found new intraday lows above the 64 dollar handle not seen since the Summer of 2009. The next level of support on the pair could be seen at the 50% retracement from the all time highs, interesting to note the 50-% level of the all-time high low on Euro was also seen this week.
Aussie Consumer Inflation Expectation
The Australian May Consumer Inflation Expectation was released lower than the prior month at 3.6% vs. 4.1%. This was a relatively significant decrease pushing the AUD lower as the market will be pricing in less aggressive rate hikes putting further pressure on the AUD. On the chart below we see the AUD/USD pair broke through what we thought was support around the 85 cent handle and went down to the 61.8% retracement of the move from the July 2009 lows where it found support, a fairly technical move in a market trading on macro conditions.
Coincidentally the pair reached the 61.8% retracement of the move from the all time highs on Aussie in July of 2008 to the lows of October 2008 as well; with further support visible on the 200 week moving average right below that level.
Japan’s Finance Minister Kan on the Wire
- Japan GDP report shows a firm recovery.
- Must be cautious about calling recovery self sustained.
- Must be mindful of risks including deflation.
- Economy still in mild deflationary state.
- Will fight deflation with BOJ.
- Still sees downward pressure on prices.
- Asia economies and Japan stimulus leading the recovery.
Japan’s Q1 GDP
The Japanese Q1 preliminary GDP reading came in lower than expected, with a significant decline from expectations in the annualized figure although all were an improvement from the prior reading. The Yen had a mild reaction to this somewhat negative release moving to better rates against the USD, as USD/JPY trades off session highs.
- GDP (QoQ) – Survey:1.4% Actual:1.2% Prior:0.9%
- GDP Annualized – Survey:5.5% Actual:4.9% Prior:3.8%
- Nominal GDP (QoQ) – Survey:1.3% Actual:1.2% Prior:0.1%
- GDP Defaltor (QoQ) – Survey:-3.0% Actual:-3.0% Prior:0.9%
Westpac Consumer Confidence
The May Westpac Consumer Confidence reading fell by -7.0% from the prior months reading of -1.0% and the Index fell from 116.1 in April to 108. This release has put more pressure on the already battered Aussie and moving it below the 86 cent handle and toward the support we noted yesterday.
Loading ...
