Currency Correlation

 Gold wkly/ dollar

Audjpy/ Equities

Cadjpy /OIL

These charts i will watch and montior and see if i can get an edge on the Markets

The Beige Book, April 11, 2012

By Joel Kruger, Technical Strategist for DailyFX.com

• Euro continues to chop around; no clear directional bias
• Yen gains have been impressive and leave room for some more upside
• Fed officials remain hawkish and upbeat despite softer NFPs
• Canadian Dollar takes hit on downbeat FinMin comments

Markets have seen some choppy trade in the early week and it seems as though more time will be needed to establish a clearer short-term directional bias. Initially, the buck had been well offered across the board on the back of a softer NFP report, with the data reigniting hopes for additional stimulus from the Fed. But any of these post NFP offers were easily absorbed, as broader global macro uncertainty once again reared its head. Questionable data out of China (hard landing back on thetable with higher inflation readings and concerning components in trade data), softer Eurozone Sentix investor sentiment, widening EMU bond spreads, and fears of further deterioration in the Spanish economy were all seen driving the liquidation of risk correlated assets and infusing strength into safe haven currencies. Although the USD was a solid beneficiary of the flows, it was the Yen that emerged as the real stand out outperformer. Nevertheless, any gains in the Yen are expected to be well capped over the coming sessions, and we continue to project relative outperformance in the US Dollar over the medium-term, even against the Yen. Also seen putting some bids back into the buck were comments from various hawkish Fed officials on Tuesday, with all of these officials maintaining their respective outlooks, even after the weaker Friday employment data. Elsewhere, the risk off trade continued to have a negative impact on the correlated commodity bloc currencies, with the Canadian Dollar standing out as the weakest of the bunch. Despite its lower yield relative to its commodity cousins, the Loonie took a hit and traded back below parity against the buck after Canada FinMin Flaherty projected only moderate growth in Canada this year and also cited risks associated with the Eurozone crisis. Perhaps the weaker performance in oil prices compared to gold also factored into the relative weakness in the Canadian Dollar. Looking ahead, the European economic calendar is razor thin, and as such, the markets will likely continue to trade off of the broader macro themes. As always, we will look to the Euro for directional insight over the coming day, and a break and close back above 1.3145 or below 1.3030 will dictate our outlook for the remainder of the week.  

Summary of Commentary on Current Economic Conditions by Federal Reserve District
Prepared by the Federal Reserve Bank of Cleveland based on information collected on or before April 2, 2012. This document summarizes comments received from business and other contacts outside the Federal Reserve and is not a commentary on the views of Federal Reserve officials.
Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest to moderate pace from mid-February through late March. Activity in the Boston, Atlanta, Chicago, Dallas, and San Francisco Districts grew at a moderate pace, while Cleveland and St. Louis cited modest growth. New York reported that economic growth picked up somewhat. Philadelphia and Richmond cited improving business conditions. The economy in Minneapolis grew at a solid pace and Kansas City's economy expanded at a faster pace. Manufacturing continued to expand in most Districts, with gains noted in automotive and high-technology industries. Manufacturers in many Districts expressed optimism about near-term growth prospects, but they are somewhat concerned about rising petroleum prices. Demand for professional business services showed modest to strong growth and freight volume was mainly higher. Reports on retail spending were positive, with the unusually warm weather being credited for boosting sales in several Districts. While the near-term outlook for household spending was encouraging, contacts in several Districts expressed concerns that rising gas prices could limit discretionary spending in the months to come. New-vehicle sales were reported as strong or strengthening across much of the United States. Tourism increased in most reporting Districts. Residential real estate showed some improvement, with many contacts citing expansion in the construction of multi-family housing. Activity in nonresidential real estate increased or held steady in most Districts. Agricultural conditions were generally favorable. Mining activity expanded and oil extraction rose, while natural gas drilling slowed. Banking conditions were largely stable, with some improvement seen in loan demand. Several Districts reported increased credit quality.
Hiring was steady or showed a modest increase across many Districts. Difficulty finding qualified workers, especially for high-skilled positions, was frequently reported. Upward pressure on wages was constrained. Overall price inflation was modest. However, contacts in many Districts commented on rising transportation costs due to higher fuel prices.
Manufacturing
Manufacturing continued to expand in most Districts, although respondents in the Boston and St. Louis Districts reported that manufacturing was mixed and Chicago reported that growth in manufacturing production leveled off after a strong start to the year. Contacts in automotive industries reported gains in Cleveland, Atlanta, and Chicago. The Kansas City, Dallas and San Francisco Districts reported increased sales for high-technology manufacturers, with Dallas noting key demand drivers continue to be mobile applications, cloud computing, and automobiles. The Philadelphia and Dallas Districts indicated improvement in demand for manufacturing with ties to residential housing and construction. Cleveland steel producers and service centers reported that volume was trending slightly higher, while Chicago steel producers said that capacity utilization was steady. For refiners in San Francisco, capacity utilization rates continued to hold largely stable, as weak domestic gasoline demand was offset by strong foreign demand for distillate products. In Dallas, Gulf Coast refiners noted steady margins overall.
Manufacturers in Boston, Cleveland, and Chicago are expanding payrolls but finding it difficult to find highly-skilled workers. Comments from the Cleveland, Atlanta, Chicago, and Kansas City Districts indicated a rise in capital spending. Manufacturers in over half the Districts commented on increasing input costs, focusing, in particular, on rising petroleum prices. Contacts in Boston, Philadelphia, Chicago, Kansas City, and San Francisco remained optimistic that activity will increase in the near term. However, several respondents in Cleveland and Dallas noted that their outlooks have become more cautious. Manufacturers in Boston and Cleveland expressed concern about the European economy. Expectations were mixed in St. Louis.
Nonfinancial Services
Demand for professional business services was characterized as modest to strong in the Boston, Philadelphia, Richmond, Kansas City, and Dallas Districts. St. Louis, Minneapolis, and San Francisco reported that demand was mixed. Boston and Richmond cited rising demand for advertising, marketing, and consulting services, while accounting services saw a modest pickup in Minneapolis and Dallas. Growth in technology-related services to the energy sector was noted in the Minneapolis and Kansas City Districts. St. Louis and San Francisco reported that activity in the healthcare sector was flat to down. Both Richmond and San Francisco noted increased sales for restaurants and food-related service providers. Freight transportation services were higher in the Cleveland, Richmond, and Kansas City Districts. Reports from Atlanta and Dallas were mixed due to declining air cargo volumes and railroad shipments. St. Louis reported that plans have been announced to close certain freight transport and distribution facilities. Contacts in Cleveland, Richmond, and Kansas City noted a shortage of qualified truck drivers.
Consumer Spending and Tourism
Retail spending continued to improve in almost all Districts. Contacts in the Boston, New York, and St. Louis Districts characterized retail activity as strong. Reports from Chicago and Richmond indicated a significant strengthening in retail spending. Sales expanded at a modest or moderate pace in Philadelphia, Minneapolis, Kansas City, and Dallas. Unseasonably warm weather boosted sales in the Boston, Philadelphia, Cleveland, Richmond, and Chicago Districts. Grocers in Cleveland and San Francisco reported sales as unchanged. Apparel sales were strong in Boston and New York. Purchases at home improvement stores were up in Richmond and Chicago. Reports from Boston, Atlanta, St. Louis, and Kansas City indicate a positive near-term outlook for retail spending; however, contacts in Philadelphia, Cleveland, Atlanta, Chicago, and Kansas City expressed concerns that rising gas prices could limit discretionary spending in the months to come.
Automobile sales were reported as stronger or strengthening during late February and early March in most Districts. Mild winter weather boosted sales in Cleveland but depressed motor vehicle service spending in New York and Minneapolis. Rising gas prices lead to increased purchases of fuel-efficient vehicles in Kansas City, Dallas, and San Francisco. Contacts in Philadelphia and Kansas City expect continued sales strength. Reports from Cleveland showed a mixed outlook, with some respondents expecting solid sales and others seeing the current pace of sales as unsustainable. Used-vehicle sales were reported as strong or robust in Cleveland and San Francisco.
Tourism was characterized as strong by respondents in the Boston, New York, Richmond, and Atlanta Districts. Minneapolis indicated a slowdown in activity due to a general lack of snow this winter. Conversely, warm weather boosted tourism in Richmond. Bookings were strong in New York, and occupancy rates improved in the Boston, New York, Atlanta, and San Francisco Districts. In Boston and Kansas City, business travel continues to be the main driver of tourism activity. Contacts in Boston and Atlanta expressed concern over high fuel prices as a possible drag on leisure spending.
Real Estate and Construction
Residential real estate activity improved in most Districts, though Cleveland and San Francisco noted that activity remained lackluster or at low levels. The St. Louis and Minneapolis Districts reported increases in building permits. The construction of multi-family housing units, including apartments and senior housing, expanded in many Districts. Home prices continued to decline in Boston, New York, and Minneapolis, but were largely flat in San Francisco. Contacts in Boston, Philadelphia, and Kansas City indicated that mild weather had boosted real estate activity.
Non-residential construction activity improved in the Philadelphia, Cleveland, Richmond, Atlanta, Chicago, and St. Louis Districts, though many of these contacts characterized the improvement as slow. Boston, New York, and San Francisco characterized non-residential real estate activity as unchanged or steady. The energy and high-tech sectors were driving much of the demand in the Dallas District. San Francisco noted a rise in the demand for office space from the technology sector. Cleveland and Chicago saw a boost in healthcare-related construction. Projects related to the education sector are showing growth in Boston, Cleveland, Philadelphia, and Richmond. The outlook of builders is described as positive or slowly improving in the Philadelphia, Cleveland, Atlanta, and Kansas City Districts, and as cautiously optimistic in Boston.
Banking and Finance
For most Districts reporting on financial services, banking conditions remained stable, with modest improvements in demand for lending. Loan demand was reported as improved in New York, Philadelphia, Cleveland, Richmond, Chicago, Kansas City, Dallas, and San Francisco, while lending activity was unchanged in St Louis. The Dallas District reported improved sentiment by national and regional banks due to improved middle-market and large corporate lending. Contacts in Cleveland, Richmond, and San Francisco reported that increased competition among lenders has been driving more aggressive loan pricing. In general, the demand for commercial and industrial loans remained steady, while several Districts reported an increase in commercial real estate lending activity. The Philadelphia and Cleveland Districts reported increased lending for multifamily housing and health care, and contacts in Richmond cited increased lending to small business to finance inventory and capital expenditures. Consumer lending has remained stable or risen modestly across a few Districts. The Cleveland and Richmond Districts reported increased home equity and auto lending, while bankers in Chicago noted improved credit availability for auto loans and credit cards. Several Districts reported that credit standards remain stable, but Richmond bankers reported that they were offering easier terms to attract new commercial borrowers. Several Districts reported increased credit quality, as delinquencies have continued to decline and few problem loans have been reported.
Agriculture and Natural Resources
Recent rain and snowfall has helped alleviate dry agricultural conditions from earlier in the year. Nonetheless, the Atlanta, Minneapolis, Kansas City, and Dallas Districts have all reported certain areas where drought conditions continue to persist. Due to unseasonably warm weather, contacts in several Districts reported that the planting of some crops is beginning earlier than normal, including corn in Chicago and wheat in Minneapolis. San Francisco commented that there has been an increase in certain input costs, such as fertilizer, while Chicago reported tight supplies of some agricultural chemicals and corn seed. Atlanta and Chicago reported an increase in the prices paid to farmers for soybeans; Chicago noted that the increase was due to lower-than-expected harvests in South America. Livestock prices rose in the Chicago, Minneapolis, and Kansas City Districts, while orders for livestock were robust in San Francisco. Farmland values in Kansas City continue to rise and are at record highs.
Activity in natural resources remained strong. The Kansas City, Dallas, and San Francisco Districts reported a shift from natural gas to oil exploration and production due to low natural gas prices and growing demand for oil. In the Cleveland District, leasing activity in the Utica shale is expanding. Cleveland and St. Louis noted that the production of coal has slowed over the past few months. The mining sector is expanding in San Francisco due to high prices for a variety of precious metals, and iron ore mines in the Minneapolis District continued to operate near capacity. Contacts in Kansas City reported a shortage of engineers and experienced technical support for oil and gas drilling.
Employment, Wages, and Prices
Hiring was steady or showed a modest increase in the Boston, New York, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Dallas, and San Francisco Districts. Industries reporting some employment growth included manufacturing, freight transport, professional business services, and information technology. A preference for part-time and temporary workers was seen in the Richmond and Atlanta Districts. Atlanta noted that temporary workers were being utilized in order to contain costs and retain flexibility, while some employers in Richmond prefer temporary workers due to uncertainty about future demand. Some employers in the Boston, Cleveland, Atlanta, Chicago, Kansas City, and Dallas Districts reported having difficulty finding qualified workers, especially for certain high-skilled positions. Contacts in Philadelphia and Cleveland noted that new federal regulations are exacerbating a truck-driver shortage. New York commented that employers are planning to step up hiring activity in the months ahead. Boston, Richmond, and Atlanta said that employers in their Districts are cautious and need to see more robust growth before they expand their permanent payrolls further.
Wage pressures were characterized as contained or modest among reporting Districts. Contacts in Chicago, Dallas, and San Francisco noted some upward pressure on wages for skilled jobs, especially in manufacturing and information technology. In the Minneapolis District, strong oil-drilling and production activity continued to bid up pay. Transportation contacts in Cleveland noted some wage pressure due to a tightening of the driver pool. And medical benefits continue to put pressure on labor costs in Philadelphia.
Overall price inflation was modest in most Districts. However, contacts in the Cleveland, Richmond, Atlanta, Chicago, Kansas City, and Dallas Districts cited rising transportation costs due to higher fuel prices. Minneapolis and Dallas noted that airlines have raised their fares to offset higher fuel costs. Richmond reported that rising fuel costs were a serious problem for both land and ocean shippers, while intermodal transportation firms in Dallas said that they had increased prices in response to higher fuel costs. In Atlanta, higher transportation costs were passed through to consumers without much difficulty. In contrast, contacts in Cleveland, Chicago, and San Francisco said it was difficult to pass through higher costs to consumers. Input costs for manufacturers in Boston, Cleveland, and Kansas City rose somewhat, but with little pass-through. Price pressures have eased somewhat for manufacturing firms in Philadelphia. Higher prices for construction materials narrowed profit margins for contractors in Kansas City.

4hr butterfly needs to hold above 84.26   200dma

Thursday 11/04/2012

Data for Australia this week showed that home loans fell at the biggest pace in since March 2011 while consumer confidence continued to decline in March. That continues this string of poor fundamentals from that economy and increases the pressure for the RBA to lower interest rates.

In the upcoming Thursday Asian morning session (or 9:30 PM on Wednesday NY time) we get latest reading on the labor market. The expectation is for a rebound in March with economy adding 6.4K jobs after having shed 15.4K jobs in February.

today 12/04/2012

We awaite unemployment report

Release: Australia Employment Change (Mar)
Consensus Forecast: 6.4K
Previous: -15.4K
Date/Time: 04/11/12 9:30PM EDT (01:30 GMT, 04/12/12)

Will March Employment Data Be A Catalyst for AUD?

Data for Australia this week showed that home loans fell at the biggest pace in since March 2011 while consumer confidence continued to decline in March. That continues this string of poor fundamentals from that economy and increases the pressure for the RBA to lower interest rates.

In the upcoming Thursday Asian morning session (or 9:30 PM on Wednesday NY time) we get latest reading on the labor market. The expectation is for a rebound in March with economy adding 6.4K jobs after having shed 15.4K jobs in February.


ok we have had a good unemployment figures coming in at

AUD Employment Change  44.0K  6.0K -15.4K

AUD Unemployment Rate 5.2% 5.3%  5.2%

up we go!!!

NZDJPY

NZDJPY

With the weakness in Europe, concerns around China and lessen expectations around further stimulus from the Federal Reserve the Japanese yen has managed either sideways action (vs GBP and EUR) or strength (vs USD, AUD, NZD, CAD) in the last few weeks.

Those three factors could be key to seeing a pullback in US equities which can weaken risk sentiment and therefore continue to favor the Japanese yen as traders and investors wind down some of their carry trade strategies.

However from its own fundamentals the Japanese yen has been weak in 2012 on the back of easing bias by the Bank of Japan.

pls let me know your thoughts on this pair;-)

Jpy fundermentals from fxtimes

What if the Japanese investors and households which have been financing this debt load decide they do not want Japanese bonds any more, or demand a higher yield to hold them? That situation could come about if Japanese investors believe that inflation will rise – perhaps the Bank of Japan’s latest round of QE helping to spur those expectations. A crisis of confidence could also cause a sell off in the Japanese bond market.
Even a 1% move in the 10-year Japanese yields can create a big surge in the cost to finance the debt load.

From Marketwatch: “Even though the yield on 10-year Japanese Government Bonds (JGB) is only 1%, the interest expense is expected to top ¥22.3 trillion in the fiscal year that begins next month. This is one-quarter of the general account budget. If the bond yield rises to 2%, the interest expense would surpass the total expected tax revenue of ¥42.3 trillion.”

Here’s a look at the trend in the cost to finance the Japanese debt load, again up through 2010:

Bank of Japan To Buy As Much Bonds as Government is Issuing in Upcoming Year

What has the market concerned is that the deteriorating outlook in the government’s fiscal position will be massaged by the bond buying program of the Bank of Japan.

From The Wall Street Journal: “The distinction—between buying bonds to stimulate the economy and doing so to bail out free-spending politicians—is important to economists and central banks. The controversial practice of “monetizing the debt” is considered dangerous because it could encourage profligate governments to keep borrowing, risk setting off runaway inflation, and undermine central-bank independence by lashing monetary policy to political spending decisions.

The total amount of the central bank’s planned government debt purchase through the end of this year jumped to nearly ¥38 trillion ($465 billion), an amount roughly equal to all the new bond issuance planned by the Japanese government for the period. This is the first time since the program began in October 2010 that central-bank-asset purchases came anywhere near the amount of government new issuance.

From the program’s inception in October 2010 through the February meeting, the BOJ bought ¥4 trillion in JGBs through that facility. Gov. Shirakawa said the central bank will purchase ¥15 trillion more through the end of this year.”

Larger BOJ Balance Sheet Should Continue to Pressure JPY

One of the few ways out for the Japanese economy, its government and the central bank is for the JPY to continue its depreciation. It seems that the BOJ will be playing from the Fed’s and BOE’s playbook at this point – buy up bonds from a government that is spending at an unsustainable level, and through QE try and weaken the currency to help exporters and restore competitiveness for the economy.

That means that the BOJ gets more aggressive in expanding its balance sheet as a percentage of GDP, and with that increase, further downward pressure on the JPY.

Therefore, the theme of a weaker Yen may be here to stay, and we should look for opportunities to play pullback on JPY crosses, and to build some longer term positions short the JPY.

We cover these macro and finance themes as part of our daily Market Intelligence Briefings. For information on special subscription rates for FXTimes briefings, click here.

Nick Nasad is a macro economist, market analyst, and educator; and one of the main contributors to  FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading
resources.



12/042012    Tagarget Reached 66.87

Fat bearish Engulfing  on the Daily

Long term dwn trend, However we have a rally correction 5th wave ended wxy correction in play if 126.51 holds otherwise dwn we go

however gbpu has had some good fundermental

The latest Lloyds TSB survey indicated an acceleration in growth of London’s private sector economy in March. Business activity rose at the second-sharpest rate of all UK regions, underpinned by a robust increase in new orders. Backlogs of work rose as a result, although this did not prevent companies cutting employment further. Solid increases in both input and output prices were recorded.

Output and demand

Private sector firms in the capital reported a marked rise in business activity during March. Growth of output picked up to the sharpest since July 2011. Service providers were the principal drivers of the expansion. The current period of growth now stretches to four months.

Underpinning higher activity was a further increase in the level of new business received by London private sector companies. The latest rise in new work was the strongest for eight months and much sharper than the UK average. There were reports that improved client confidence and activity levels had supported the increase in new business.

Employment and backlogs

Strong growth of activity and new business did not prevent London private sector firms from cutting their staffing levels further in March. Employment decreased for the fifth consecutive month, albeit at a modest pace. Lower payroll numbers were recorded in both the manufacturing and service sectors.

Correspondingly, there was a modest rise in backlogs of work during March. The increase in outstanding business was the first in six months and in contrast to a reduction across the UK as a whole.

Input and output prices

Input costs continued to rise in March, with a number of panellists commenting on higher fuel prices. The rate of cost inflation remained solid, albeit weaker than in February and below the UK average.

Companies attempted to offset part of the rise in their input prices by raising their charges in March. The increase in selling prices was the first since August 2011 and at a solid pace. Manufacturers indicated a stronger rise in output prices than service providers.

against
The Bank of Japan kept monetary policy steady on Tuesday, holding fire until a more thorough assessment of the economy at another rate review in two weeks that may show further action is needed to nudge inflation up towards its 1 percent target.
As widely expected, the central bank maintained its key policy rate at a range of zero to 0.1 percent by a unanimous vote.

The BOJ kept its assessment of the economy roughly unchanged, saying that while economic activity has remained more or less flat it has shown some signs of picking up.

Governor Masaaki Shirakawa will hold an embargoed news conference with his comments expected to come out sometime after 4:15 p.m. (0715 GMT).

The BOJ also announced details of a new dollar lending arrangement established as part of measures to boost Japan's potential growth.

Financial institutions can tap the loans offered by the BOJ at the six-month dollar LIBOR rate, with a duration of one year. The loans may be rolled over up to three times.

The deadline for applications for the new loans was set at March 2014.

　

CADJPY in Play

Short term bounce

By Joel Kruger, Technical Strategist for DailyFX.com

• Euro continues to chop around; no clear directional bias
• Yen gains have been impressive and leave room for some more upside
• Fed officials remain hawkish and upbeat despite softer NFPs
• Canadian Dollar takes hit on downbeat FinMin comments

The risk off trade continued to have a negative impact on the correlated commodity bloc currencies, with the Canadian Dollar standing out as the weakest of the bunch. Despite its lower yield relative to its commodity cousins, the Loonie took a hit and traded back below parity against the buck after Canada FinMin Flaherty projected only moderate growth in Canada this year and also cited risks associated with the Eurozone crisis. Perhaps the weaker performance in oil prices compared to gold also factored into the relative weakness in the Canadian Dollar. Looking ahead, the European economic calendar is razor thin, and as such, the markets will likely continue to trade off of the broader macro themes. As always, we will look to the Euro for directional insight over the coming day, and a break and close back above 1.3145 or below 1.3030 will dictate our outlook for the remainder of the week.  

Yen Fundermentals

Here we have the yen against the Canadian, Australian, and New Zealand dollars and we see the very strong bearish candles for today’s session as risk aversion picks up. That is an indication that this trend we’ve seen in late March and in early April has staying power, with the key fundamental impediment – the BOJ decision – out-of-the-way.

The unwinding of carry trade happens quite quickly. For all six of these JPY crosses our target could be reversion to the mean which for us would be the 200 daily EMA. That leaves a bit more scope for further downside in the USD/JPY, GBP/JPY, NZD/JPY, and CAD/JPY as the EUR/JPY and AUD/JPY have been leading the way down and have already reached the 200-daily EMAs.

The question is will there be much of a pullback, and whether equity markets are able to stabilize at all this week. Depending on the catalyst that causes them to do so, I would be looking at opportunities to sell any short term rallies in these JPY crosses.


16/04/2012

[15:40:57] Nick Valsamis:  Stronger 2H 2011 growth coupled with strong momentum in 2012 should see the Bank of Canada upgrade its growth outlook in 2012 to 2.2% from 2.0%, Nomura's Charles St-Arnaud said. That increased growth should also help to close the output gap in 2Q 2013, one quarter earlier than expected, St-Arnaud notes. And like nearly every other economist forecasting what BoC will say tomorrow, St-Arnaud expects the policy rate to remain at 1% with a "slightly hawkish" communique. There remains a risk the BoC could change its policy guidance, but "we believe that the mostly likely timing for the BoC to start hiking rates is in September," he said.