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Wakeup Call on Forex Markets

Long−Term Turnaround in the USD

Thu, May 8 2008, 06:49 GMT
by David Karsbøl

Saxo Bank


Figures from the US and the E-Z are about to confirm that there is no "decoupling" going on. In other words, the E-Z economy is still following the path of the US and now problems are showing in E-Z.


Overnight News Bullets

  • UK Industrial Production MoM/YoY (Mar) out at -0.5%/0.2% vs. -0.1%/0.8% expected.

  • UK Manufacturing Production MoM/YoY (Mar) out at -0.5%/0.6% vs. 0.0%/1.2% expected.

  • E-Z Retail Sales MoM/YoY (Mar) out at -0.4%/-1.6% vs. 0.2%/-0.7% expected.

  • UK BRC Shop Price Index (Apr) out at YoY 1.2%.

  • GE Factory Orders MoM/YoY (Mar) out at -0.6%/-5.0% vs. 0.3%/6.0% expected.

  • US MBA Mortgage Applications out at 15.6% vs. -11.1% prior.

  • US Nonfarm Productivity (1Q P) out at 2.2% vs. 1.5% expected.

  • US Unit Labor Costs (1Q P) out at 2.2% vs. 2.6% expected.

  • US Pending Home Sales MoM (Mar) out at -1.0% as expected.

  • US DOE Crude Oil Storage showing a build of 5654K vs. 1625K expected.

  • US Consumer Credit (Mar) out at $15.3B vs. $6.0B expected.

  • NZ Unemployment Rate (1Q) out at 3.6% vs. 3.5% expected.

  • NZ Employment Change YoY (1Q) out at -0.2% vs. 1.3% expected.

  • UK NIESR GDP Estimate (Apr) out at 0.4% vs. 0.5% prior.

  • AU Employment Change (Apr) out at 25.4K vs. 10K expected.

  • AU Unemployment Rate (Apr) out at 4.2% vs. 4.1% expected.

  • AU Participation Rate (Apr) out at 65.4% vs. 65.2% expected.

  • SZ Unemployment Rate (Apr) out at 2.6% vs. 2.5% expected.


Markets

  • FX: USD a lot stronger. We believe that the top in EURUSD is past us. E-Z and US data confirming…

  • Fixed income: Slightly higher across the board, but still in a range.

  • Stocks: Moderately positive European session, but US heavily down, lead by Transportation.

  • Commodities: Crude Oil going higher despite big build in DOE figures. Precious metals largely unaffected by new-found USD strength.


O/N Data Heat map:

Data heat map


Calendar

Today's Highlights:

Time (GMT) Region Release Consensus
07:30SW Industrial Production MoM/YoY (MAR) -0.3% / 1.9%
07:30SW Industrial Orders MoM/YoY (MAR) Prior -3.5%/1.6%
08:00NO Industrial Production MoM/YoY (MAR) 0.4%/Prior 0.3%
08:00NO Industrial Production Manufacturing MoM/YoY (MAR) 0.0% / 2.3%
10:00GE Industrial Production MoM/YoY (MAR) -0.5% / 4.8%
11:00UK BoE Interest Rate decision (MAY) 5.00% (unch)
11:45EC ECB Announces Interest Rates (MAY) 4.00% (unch)
12:15CA Housing Starts (APR) 225.0K
12:30US Initial Jobless Claims (MAY) 370K
12:30US Continuing Claims (APR) 3020K
14:00US Wholesale Inventories (MAR) 0.50%
17:30US ICSC Chain Store Sales YoY (APR) Prior -0.5%
23:50JN Official Reserve Assets (APR) Prior USD1015.6B


This and Next Week’s Highlights:
Date Region Release
Mar-09GE Wholesale Price Index
May-09NO Producer Prices, CPI,
May-09CA Unemployment Rate, Net Change in Employment, Int’l Mercandise Trade
May-09US Trade Balance
May-12AU Home Loans, Investment
May-12UK Trade Balance, BRC April Retail Sales Monitor
May-12CA New Housing Price Index
May-12US Monthly Budget Statement


What's going on?

  • European Commission said in its report yesterday that Slovakia has met criteria for joining the euro in 2009. The 8 countries in line behind Slovakia, are unlikely to receive similar verdict and the earliest time any of them are expected to join the currency union is at least 3 years.

  • The American stocks declined the most in a month on news that Securities and Exchange Commission would require Wall Street firms to disclose capital and liquidity levels. Not surprisingly, the financials were leading the losses.

  • Recent hawkish comments from the US has added to expectations of ECB signaling concerns on slowing growth, taking EURUSD now to 1.53 area.


FX

GBPUSD Break-Out Play

fx graph

Fx trading strategies

FX Trading Strategies

Pair Supp. Resis. Comments
GBPUSD 1.9341.976The pair plunged yesterday as UK figures continued to disappoint and more dovish notes from BoE could trigger further downside. However, as we have seen big corrections to major move, we play both sides. Sell 1.9504 offer, stop bid at 1.9522, targeting 1.9360. We buy at 1.9542 bid, stop offer at 1.9526, targeting 1.96.

Published on  Thu, May 8 2008, 07:03 GMT

Archive

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