Greg Michalowski's blog

The Japan PPI came out higher than expected at 0.6% MoM and 3.7% YoY.  The Index was pushed up by higher commodity prices.  The high inflation threatens to slow growth in Japan and decrease profits for corporations.  This should be slightly bearish for the JPY. 

• Yellen says surprised by persistence of food, energy gains
• SHE WON'T GUESS WHEN RATE CUTS MIGHT REVERSE
• MUST TAKE BACK CUTS IN TIMELY MANNER AS GROWTH GAINS
• SHE'S STILL SURPRISED OIL PRICES SOARING
• WHAT MATTERS IS HEADLINE INFLATION
• IT WILL TAKE TIME TO GET BACK TO FULL EMPLOYMENT
• ANTICIPATES DECLINES IN PAYROLLS, WEAK JOB MARKET
• SECOND HALF GROWTH IMPROVEMENT WON'T BE ROBUST
• DOESN'T SEE NEED FOR SECOND ROUND OF FISCAL STIMULUS
• RISK OF REPEAT OF '70S INFLATION WOULD SPUR FED TO ACT
• SAYS FED CAN'T ALLOW REPEAT OF 1970S TYPE INFLATION
• WORRIED ABOUT RISK OF HOUSE PRICE DROP ROILING ECONOMY

Fed's Hoenig says: 

• Inflation can never be taken for granted. 
• Should not assume that inflation is under control
• US faces very difficult set of circumstances
• Rise in oil has taken about 1% off the GDP
• Inflation is at an unacceptable level
• Inflation may become a way of life.
• Monetary policy is accomodative
• Limiting inflation is a major challenge for the Fed

Fed's Fisher says:

Oil has risen sharply again today and as a result, the USDCAD is being sold off hard with the important 1.0000 being breached

One minute the market is back above 1.9460, the next below the intraday low of 1.9425.  Then back up to test the 1.9460. 

The herky jerky movement suggests a neutral market ahead.  Traders are being whipped around and with that action, it is time to move to sidelines for a more friendly trading range to continue. 

The 100 day moving average (I sound like a broken record) comes in at 0.7665 (see chart below).  The pair has gotten below the level for three days in a row, but has not been able to close below the level.  A close below the level should attract longer term traders.  The pair closed below the level one day in 2008 (on January 21st - see chart below).  The next day, the pair rallied sharply higher. 

On Wednesday evening in NY, a key Retail Sales figure will be released. Growth has been slowing in New Zealand due to record interest rates.   The chances are that inflation will remain elevated due to higher food and energy prices.  However, if growth slows abruptly, the Reserve Bank of New Zealand, may be more inclined to ease given the restrictive monetary policy. 

The GBPUSD made it below the 1.9450-54 level and moved to a intraday low of 1.9425. (Click here to see earlier post on the level).  The pair has since moved back to the 1.9450 level and the level has held so far.  Now, a break of the 1.9425 level should attract additional sellers on the confirmation of the bearish break.  Should the market move back above the 1.9450-60 level, the market will be more neutral.