Best Money

BOJ spurs carry trade

To no ones surprise, the Bank of Japan has announced that it would maintain Japanese interest rates at the current level of .25%. Carry traders seized upon the opportunity to continue borrowing Yen at near-record lows, and selling the Japanese currency in favor of higher-yielding alternatives. In fact, the news was met with such gusto that the Euro was almost immediately propelled to an all-time high against the Yen, which continues to plumb the depths of forex disfavor. At this point, analysts and economists are feeling fairly certain that Japanese interest rates will remain at current levels in the near-term, a sentiment which supports the viability of the carry trade. Forbes reports:

One analyst commented: with BoJ expectations stable, currency market volatility subsiding and risk aversion abating, carry trades are recovering, keeping the yen under pressure. He sees no immediate catalyst for a yen recovery.

Read More: http://www.forbes.com/markets/feeds/afx/2007/04/10/afx3597315.html

USD to be driven by economic data

Most analysts reckon that the USD has resumed its downward path against the worlds major currencies, after a two month hiatus. The fear is that the mess in the real estate market (via subprime mortgages) will spread to the rest of the economy, with loan defaults and a decline in consumption. In such a case, the Federal Reserve Bank would be forced to cut interest rates dramatically in order to prevent the US from sinking into a full-fledged recession, which would decrease the relative attractiveness of US assets. Traders will be eying a couple pieces of economic data this week for any indication as to the direction of the economy.

The Wall Street Journal reports: This weeks data parade is bracketed by two key releases: Mondays national report on U.S. manufacturing activity in March from the Institute for Supply Management and Friday’s payrolls report.

Read More: http://www.wsj.com

Mid-Day Report: Dollar Falls after Unexpected Drop in Existing Home Sales

Action Insight | Written by ActionForex.com | May 25 07 14:40 GMT |
Forex Mid-Day Technical Report Dollar Falls after Unexpected Drop in Existing Home Sales

Existing home sales missed expectation by dropping -2.6% from an upwardly revised 6.15m annualized rate to 5.99m. The disappointment in today’s data casts much doubt on any sign of stabilization in the housing market suggested by yesterday’s strong new home sales data. House prices are down 0.8% yoy while inventory jumped to 8.4 months. Dollar weakens mildly after the news, most notably against the Euro. However, market actions could be limited with market holiday on Monday in sight. EUR/USD

Daily Pivots: (S1) 1.3408; (P) 1.3435; (R1) 1.3455; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

EUR/USD’s rebound from 1.3410 extends further in early US session. Break of 1.3410 indicates and short term low could be formed at 1.3410 already and further rebound could be seen to 4 hours 55 EMA (now at 1.3481) or higher). But still, it will take a break above 1.3609 resistance to confirm that fall from 1.3681 has completed. Otherwise, another decline is still in favor and below 1.3410 again will encourage further fall towards 100% projection of 1.3681 to 1.3461 from 1.3609 at 1.3389 first and then 1.3364 cluster support (38.2% retracement of 1.2865 to 1.3681 at 1.3369).

In the bigger picture, risk of 1.3681 being an important medium term top remains high. As discussed before, medium term up trend from 1.1639 is interpreted as having first move completed with three waves up to 1.2978, subsequent sideway consolidation completed at 1.2483. Rise from 1.2483 is treated as resumption of the whole up trend from 1.1639. With such interpretation, we’d expect risk of medium term reversal to increase significantly after EUR/USD met resistance zone between 1.3668 and 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. Hence, focus is now on reversal signals.

On the downside, break of the short term rising channel support is already a warning that the rise from 1.2865 has completed. Decisive break of 1.3364 cluster support (38.2% retracement of 1.2865 to 1.3681 at 1.3369) will confirm such case. More importantly, with bearish divergence condition in daily MACD and RSI, this will warn that the whole rally from 1.2483 has also completed, and, so is the whole up trend from 1.1639. Focus will then be back to medium term rising channel support (now at 1.3032).

GBP/USD

Daily Pivots: (S1) 1.9817; (P) 1.9852; (R1) 1.9877; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

Cable’s sideway consolidation from 1.9895 continues today. As discussed before, further consolidation could not be ruled out and could bring retreat to 4 hours 55 EMA (now at 1.9810). But still, it will take a break below 1.9716 support to indicate fall from 2.0132 has resumed for medium term rising channel support (now at 1.9561) and 1.9545 cluster support (61.8% retracement of 1.9183 to 2.0132 at 1.9546). Otherwise, further rebound is still in favor towards short term falling trend line (now at 1.9960) and 1.9999 resistance.

In the bigger picture, risk of medium term reversal continues to increase. Firstly, the whole up trend from 1.7047 is not clearly impulsive. One interpretation is that rally from 1.7047 ended with three waves up to 1.9024. Subsequent correction ended at 1.8090. Rally from 1.8090 has already met mentioned target of 100% projection of 1.7047 to 1.9024 from 1.8090 at 2.0067. Secondly, regardless of the larger trend, rise from 1.8090 can be interpreted as being a five wave sequence with first wave ended at 1.9142, second at 1.8517, third at 1.9913 and fourth at 1.9183. The channeling property supports this interpretation too. In such case, the fifth wave rally from 1.9183 has also met target of 61.8% projection of 1.8517 to 1.9913 from 1.9183 at 2.0046 too. With bearish divergence condition remains in weekly RSI and daily MACD and key 2.0106 resistance (92 high) not decisively taken out, 2.0132 could be the important medium term top already.

On the downside, firm break of the medium term rising channel support (now at 1.9569) will indicate that the whole rally from 1.8090 has completed and add much credence to the case that an important medium term top is already formed and put focus to 1.9183 low. However, sustained trading above mentioned 2.0106 resistance will dampen the above interpretation and indicates that underlying bullishness in cable is much stronger then we thought.

USD/CHF

Daily Pivots: (S1) 1.2257; (P) 1.2284; (R1) 1.2305; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

USD/CHF’s consolidation from 1.2231 continues and weakens mildly to 4 hours 55 EMA (now at 1.2253) in early US session. At this point, further retreat cannot be ruled out as long as USD/CHF stays below 1.2313 resistance. Bust still, rally from 1.1993 is in force with short term rising trend line (now at 1.2204) remains intact. Above 1.2313 resistance will suggest that rise from 1.1993 has resumed for next upside target of 61.8% retracement of 1.2571 to 1.1993 at 1.2350.

In the bigger picture, previous break of 1.2282 cluster resistance (50% retracement of 1.2571 to 1.1993 at 1.2282) confirms that fall from 1.2571 has already completed at 1.1993 with bullish convergence condition in daily MACD and RSI. More importantly, this will increase the chance that USD/CHF is about to complete a medium term head and shoulder bottom formation (ls: 1.1919, h: 1.1878, rs: 1.1993). Sustained break of 61.8% retracement at 1.2350 and neckline resistance (1.2768 to 1.2571, now at 1.2347) will add more weight to this case. Stronger rally should then be seen to 1.2571 first and then 1.2768.

However, below 1.2124 support 61.8% retracement of 1.1993 to 1.2331 at 1.2122) will indicate that rebound from 1.1993 has possible completed and save the case that recent choppy price actions could merely be part of a medium term triangle consolidation. And, down trend from 1.3283 should still resume after completing such consolidation in such case.

USD/JPY

Daily Pivots: (S1) 121.19; (P) 121.43; (R1) 121.62; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

USD/JPY rebound strongly after dipping to 120.85 but is still limited below 121.87 high. Consolidation is still in progress as long as USD/JPY stays below this 121.87 high and another fall could be seen. Break of the inner rising trend line support (now at 120.60 will encourage further fall towards 119.43 support. On the upside, above 121.87 will indicate recent rally has resumed for 122.17 high. But still, upside momentum is unconvincing at this moment and upside of the current rally from 117.60 could be limited by this 122.17 key resistance.

In the bigger picture, previous break of medium term rising channel support (108.99, 114.41, 117.87) indicates the whole medium term rally from 108.99 has completed at 122.17. However, current strong rally from 115.13 suggest that price actions from 122.17 is just developing into sideway consolidation to rise from 108.99 only, instead of a sharp reversal. Hence, a retest of 122.17 high is expected to be seen. But still, firm break above this resistance is needed to confirm medium term rally from 108.99 has resumed. Otherwise, medium term outlook will be neutral at best and there should still be another fall to retest 115.13 low before completing such consolidation.

On the downside, below 119.43 support will indicate that the rise from 117.60 has finished and thus warn that the whole rebound from 115.13 has completed too. Focus will then be on 117.60 support and firm break will confirm such case. Deeper fall should then be seen to retest this low and probably further towards 114.02/41 support zone (61.8% retracement of 108.99 to 122.17 at 114.02).

EUR/JPY

Daily Pivots: (S1) 162.67; (P) 163.20; (R1) 163.53; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

EUR/JPY’s recovery from 162.18 extends further into US session and is set to retest 164.01 high. However, risk of short term reversal remains high after previous break of the short term rising channel, with bearish divergence condition staying in 4 hours MACD and RSI and with daily MACD remains below signal line. EUR/JPY could now be in formation of a diagonal triangle to conclude the rally from 150.75. Hence, even though another rise could be seen to above 164.01 again, upside will likely be limited by 61.8% projection of 137.16 to 159.63 from 150.75 at 164.64 on further loss of momentum and bring reversal. On the downside, break of 161.05 support will add much weight that rise from 150.75 has ended and deeper decline should then follow to 159.60 support first.

In the bigger picture, EUR/JPY’s previous break above medium term rising channel resistance suggests that strength of the rally from 150.75 is stronger than we originally thought. But still, interpretation of rally from 130.60 remains unchanged. First wave up ended at 143.60, subsequent correction ended at 137.167. The third wave up ended at 159.63 while fourth wave correction has ended at 150.75. Rise from there represents the final advance in this structure, targeting 61.8% projection of 137.16 to 159.63 from 150.75 at 164.64 and could terminate there.

On the downside, rise from 150.75 could still resume as long as 159.60 support holds. However, sustained trading below 159.60 will warn that prior break of medium term rising channel resistance was merely a throw-over. Also, this will give a serious warning signal that the whole rise rise from 130.60 has ended. EUR/JPY should set to test the medium channel support (now at 153.51) in such case.

Forex News Digest

http://www.bloomberg.com/apps/news?pid=20601087&sid=agxKazDf_Z7U&refer=home

http://www.bloomberg.com/apps/news?pid=20601083&sid=aLcZH7w93zpI&refer=currency

http://www.bloomberg.com/apps/news?pid=20601083&sid=aTbYLa6TNh20&refer=currency

http://www.bloomberg.com/apps/news?pid=20601083&sid=a71cW_7ZGvYE&refer=currency

http://c.moreover.com/click/here.pl?r949642015
Fri, 25 May 2007 12:29:00 GMT from Street Insider

http://c.moreover.com/click/here.pl?r949635107
Fri, 25 May 2007 12:25:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r949574390
Fri, 25 May 2007 11:37:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r949548448
Fri, 25 May 2007 11:16:00 GMT from Bloomberg

http://www.actionforex.com/latest_news/latest_news/forex_news_20060323537/ Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
23:30 JPY Japan CPI Y/Y Apr 0.00% 0% -0.10%
23:30 JPY Japan Core CPI Y/Y Apr -0.10% -0.10% -0.30%
23:30 JPY Japan Tokyo CPI Y/Y Apr 0.00% 0.00% 0.00%
06:00 EUR Germany Gfk index Jun 7.3 6 5.5 5.7
06:00 EUR Germany Import price M/M Apr 0.90% 0.50% 0.60%
06:00 EUR Germany Import price Y/Y Apr 0.50% 0% 0.90%
08:30 GBP U.K. GDP Q/Q Q1 0.70% 0.70% 0.70%
08:30 GBP U.K. GDP Y/Y Q1 2.90% 2.80% 2.80%
09:30 CHF Swiss KOF indicator May 1.96 1.95 1.9
14:00 USD U.S. Existing home sales Apr 5.99M 6.14 M 6.12 M 6.15M
14:00 USD U.S. Existing home sales M/M Apr -2.60% -0.10% -8.40% -7.90%

http://www.actionforex.com/general_information/forex_newsletters/forex_newsletter_200507301487/

Japanese industrial output falls in January for 1st time in 3 months - UPDATE

TOKYO (XFN-ASIA) - Industrial output fell last month for the first time in three months as makers of automobiles and general machinery reduced their production, preliminary data from the Ministry of Economy, Trade and Industry show.

The index of the output of factories and mines last month, at 108.0 points, was a seasonally adjusted 1.5 pct lower than in December, when it had gained 0.9 pct month-on-month to reach a record 109.5 points.

However, the ministry is keeping its assessment of industrial output unchanged, saying that, on the whole, it is on a rising trend.

And the decline in the index last month was smaller than the market’s consensus forecast of a month-on-month fall of 1.9 pct and the ministry’s estimate of a drop of 2.8 pct.

Compared to a year before, industrial output last month was 4.3 pct higher, rising for the 18th consecutive month.

The ministry predicted that output this month would be 1.8 pct lower than in January, but that it would surge by 2.4 pct month-on-month in March.

Production last month in the transportation equipment sector, which includes makers of automobiles, was 10.2 pct lower than in December, falling for the first time in four months, because of the lower output of standard-size vehicles. The output of cars with an engine displacement of over 2,000 cc dropped by 9.7 pct because fewer new models were launched into the market.

Production in the general machinery sector, which includes manufacturers of equipment for making semiconductors and flat panels, declined by 1.7 pct, falling for the fifth month in the past eight. Output of equipment for making flat panels fell 5.4 pct because fewer flat-screen television sets were sold than in the year-end shopping season.

Production in the electronic devices sector increased by 0.4 pct, rising for the 17th month in the past 21, led by a rise of 31.1 pct in the output of charge-coupled devices used in digital cameras. But the output of small liquid crystal display panels fell by 4.3 pct and the output of large LCD panels fell by 6.3 pct.

Production of electronic toys dropped 18.7 pct, having risen by 11.4 pct in December, as Sony Computer Entertainment and Nintendo Co Ltd reduced their output of new game consoles.

The inventory index for the electronic devices sector (which the Bank of Japan is closely watching to see if there is any inventory adjustment risk) was 1.4 pct higher last month than in December, rising for the eighth month in the past nine.

(1 usd = 118.24 yen)

yasuhiko.seki@xfn.com

For more information and to contact AFX: www.afxnews.com and www.afxpress.com

US Congress Discusses Yen Manipulation

This week, the US Congress conducted a hearing on Currency Manipulation And Its Effects On American Businesses And Workers, for which it invited numerous experts to weigh in on undervalued currencies. Among those who testified was General Motors Chief Economist, who discussed Japans purported policy of holding down the Yen, within the context of the auto industry. He argued that by maintaining an already large and growing reserve of foreign exchange, by purchasing US assets through quasi-governmental institutions, and by threatening to intervene in forex markets if the Yen appreciated, Japan has successfully prevented the Yen from rising over the last few years, despite such a course being justified by economic fundamentals.

Japan’s policies provided anywhere from a $2,000 to $14,000 cash windfall for each of the 2.2 million vehicles Japan’s automakers exported to the U.S. in 2006.

Read More: http://www.autoindustry.co.uk/news/11-05-07_1