Economic growth in Japan rose for the second constructive quarter during the first quarter of the year to confirm that the world's second largest economy is on the right way to recovery from the worst recession since the World War II.
Exports is the main pillar for the economic recovery, is increasing as higher demand, but the economic expansion is not strong, because it is facing deflation risks that makes worry about the strength of recovery.
Increasing exports was the main reason behind the economic growth in the world's second largest economy. Japan's exports rose 6.9% in the first quarter of the year from the previous three months which boosted optimism in the economic recover, feeding in wages and the labor market.
Japan's GDP rose by 1.2% in the first quarter of the year, compared with the previous reading 0.9% in the fourth quarter last year, which revised was revised to 1%, while forecasts referred to 1.4%.
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Stocks and commodities have come under significant pressure in the wake of Germany's recent decision – via the Federal Financial Supervisory Authority (BaFin) - to temporarily ban the so-called 'naked' short-selling of certain types of euro-zone debt and credit default swaps, along with selected German financial stocks. The Euro extended losses already experienced this week falling to a four-year low of €/$ 1.22 - although it has since regained some ground.
We look for UK retail sales volumes to fall by 0.4% (1.8% y-o-y) in April, consistent with recent survey evidence. Households are expected to remain cautious as job security concerns and the impact of budget tightening measures continue to weigh on spending.
Coffee closed sharply lower on Friday as it consolidated some of the rally off last week's low. The mid-range close sets the stage for a steady opening on Monday. Stochastics and the RSI remain neutral to bullish signalling that sideways to higher prices are possible near-term. Closes above the reaction high crossing are needed to renew the rally off April's low. If it renews last week's decline, the reaction low crossing is the next downside target. http://www1.hymarkets.com
Crude Oil closed sharply lower on Friday as it extended the decline off April's high but fell short of testing February's low crossing. The low-range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are oversold but remain neutral to bearish signalling that sideways to lower prices are possible near-term. If it extends today's decline, February's low crossing is the next downside target.
DJI closed lower due to profit taking on Friday as it consolidates some of the rally off last week's low. The low-range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI remain neutral to bullish signalling that sideways to higher prices are possible near-term. SPI closed sharply lower on Friday due to profit taking as it consolidated some of the rally off last week's low. The low-range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI remain neutral to bullish hinting that sideways to higher prices are still possible near-term. NDI closed sharply lower on Friday as it consolidated some of the rally off last week's low. The mid-range close sets the stage for a steady to lower opening on Monday. Closes above the 20-day moving average crossing are needed to confirm that a short-term low has been posted.
Gold closed lower on Friday as it extended the rally off February's low. Profit taking tempered early gains and the mid-range close sets the stage for a steady opening on Monday. Stochastics and the RSI are overbought, diverging but remain neutral to bullish signalling that sideways to higher prices are possible near-term. If it extends this year's rally into uncharted territory, upside targets are hard to project. Closes below the 20-day moving average crossing would confirm that a short-term top has been posted.
EUR/USD plunged to a new low for the year on Friday as it extended this week's decline. The low-range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are oversold but remain bearish signalling that additional weakness is possible near-term. If it extends this month's decline, the 2008 low on the weekly continuation chart crossing is the next downside target. Closes above the 20-day moving average crossing are needed to confirm that a short-term low has been posted.
EQUITIES
The US Equities were down last week. The Dow (11008.61) was down 1.75% and the Nasdaq (2461.19) was down 2.73%. The Dow is at a very important trendline Resistance on the Weekly charts (110100-200) which has been honoured for the past six weeks and we need to see which way it finally breaks to decide the way forward.
All Asians are down today. The Hang Seng (20828.68) is down 1.33%. Japan is closed on account of Constitution day and China is closed on account of May Day (May 1 - May 3) today. In India, the Sensex (17558.71) was down 0.77% and the Nifty (5278.00) was down 0.49% last week. The Sensex is just above the an important Support at 17500 and a weekly break below 17500 may pull it towards 16500 in the coming weeks.
In Australia, the All Ordinaries (4804.70) is down 0.60% today.
COMMODITIES
Crude (86.33) is continuing to trade strong. Resistance is seen at 87, a break above which might take it further up towards 90. While 87 holds, we might see a pull back to 85-84 in the coming days.
Risk sentiment was weaker during the US session, hurting US equities, risk currencies and depressing US treasury bond yields. The S&P500 closed down 1.7% to form a bearish key week reversal. Better US data and continued earnings improvements were overshadowed by the potential elevation of the probe into Goldman Sachs to criminal status, its stock falling 9% and fi nancials down 3.5%. S&P downgraded Goldman stock to “sell” from “hold”, the early NY news marking the start of the declines. Meanwhile, the EU and IMF spent the weekend crafting a three year rescue package worth €110bn in exchange for austerity measures, a deal at the high end of market expectations and EUR-supportive today. Commodities were infl uenced more by the positive US data, the CRB index rising 0.9%. Equities infl uenced US 10yr treasuries which shed 7bp in yield, the 2-10yr curve fl attening by 4bp.
The US dollar index turned upwards during the European afternoon to close little changed from the Sydney session. EUR fl uctuated between 1.3250 and 1.3350, and is trading at the upper end this morning. The yen fi rmed against the dollar, from 94.60 to 93.80, and is lower (93.60) at this morning's open.
AUD left Sydney at around 0.9320 and declined to 0.9250, the US equities fall and concerns around the tax reforms affecting mining companies weighing on the commodity currency through to the NZ open, where it has traded down to 0.9215.
U.S. Dollar Trading (USD) strengthened as market sentiment was hit from multiple angles and traders fled to safe haven USD. Stock markets were hammered on an Explosion in Greece and Portugal debt yields and as Goldman Sachs was grilled by the US Government. Economic Data was strong however, CB Consumer Confidence jumped to 57.9 vs. 52.3 previously. In US stocks, DJIA -210 points closing at 10991, S&P -28 points closing at 1183 and NASDAQ -51 points closing at 2471. Looking ahead, FOMC Rate Meeting forecast to remain at 0.25%. The Euro (EUR) fell dramatically as Greece and Portugal was downgraded by S&P and risk of European Debt Contagion increased. European Stocks were down -3% and US stock did little to improve the situation. EUR/JPY was particularly hard hit down over 300 pips. Overall the EUR/USD traded with a low of 1.3143 and a high of 1.3397 before closing at 1.3170. Looking ahead, BUBA President Weber speaks. The Japanese Yen (JPY) was the strongest currency in the market as crosses sent the major down through Y93 support. EUR/JPY and GBP/JPY were the worst hit down over 3 Yen and technically the recovery uptrend in both has been broken. USD/JPY outlook is now mixed with the FOMC rate announcement the next major event risk. Overall the USDJPY traded with a low of 92.80 and a high of 94.05 before closing the day around 93.20 in the New York session. UPDATE MARCH RETAIL SALES 4.7% vs. 3.7% forecast.
EUR/USD closed lower on Tuesday as it consolidates below the 20-day moving average. The low-range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI remain neutral to bearish signalling that sideways to lower prices are possible near-term. If it extends last week's decline, the 87% retracement level of 2009's rally crossing is the next downside target. Closes above the 10-day moving average crossing are needed to confirm that a short-term low has been posted. USD/JPY closed lower on Tuesday and the low-range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI remain bullish signalling that sideways to higher prices are possible near-term. If it extends last week's rally, the reaction high crossing is the next upside target. Closes below the 10-day moving average crossing would confirm that a short-term high has been posted.
On April 30th, Japan is scheduled to release March CPI and the BOJ will conclude a one-day policy meeting. March CPI is expected to rise by 0.3% compared to 0.1% decline last month with the annual inflation rate declining by 1.2%. This would mark the 13th straight month that Japan's annual inflation rate has declined. Japan's annual inflation rate has been positive for only four months since 1998. The March CPI report is expected to confirm that rate of decline slowed but deflationary pressures continue in Japan and the. The Japanese government has pressured the BOJ to take aggressive actions to combat deflationary pressures. In March the BOJ doubled its lending program but stopped short of taking additional measures to combat deflation like buying government bonds to increase the money supply and liquidity. Recent Japanese economic data points to improving Japanese economy. Japan reported that exports climbed 43.5% in March .This marked the fourth straight month of improving exports sales. The BOJ's March Tankan business sentiment survey confirmed improving business confidence and a smaller decline in anticipated CAPEX spending. The improvement in Japan's economic outlook makes it more difficult for the BOJ to justify additional easing monetary policy and contributes to a moderate drop in Japanese government pressure for the BOJ to ease policy. The moderate weakening of the JPY makes monetary conditions less tight and may help reduce deflationary pressure. USD/JPY bottomed at 86 last November and is currently trading near 94.
Euro 1.3200 Initial support at 1.3145 (Apr 28 low) followed by 1.3121 (Apr 29 2009 low). Initial resistance is now located at 1.3422 (Apr 18 high) followed by 1.3692 (Apr 12 high) Yen 93.30 Initial support is located at 92.74 (Apr 22 low) followed by 92.25 (38.2% retracement of 88.13 - 94.77). Initial resistance is now at 94.79 (Aug 5 high) followed by 95.29 (Aug 18 High). Pound 1.5270 Initial support at 1.5227 (Apr 28 low) followed by 1.5193 (Apr 19 low). Initial resistance is now at 1.5522 (Apr 15 low) followed by 1.5688 (Feb 18 low). Australian Dollar 0.9215 Initial support at 0.9131 (Mar 31 low) followed by the 0.9035 (Mar 29 low). Initial resistance is now at 0.9364 (Apr 15 high) followed by 0.9406 (Nov 16 high).
As Greece engages with the IMF over additional fiscal austerity measures prior to the release of emergency funds, European equity and government bond markets have sold off on concerns about possible contagion effects. Portugal is a case in point. The spread of Portuguese 10-year government bond yields over equivalent German bunds now stands at some 260bp, while the Greek spread is 660bp even after the announcement of last week's rescue package. In terms of debt refinancing and servicing costs in a number of euro-zone countries, much hinges on the ability of Greece to adhere to a fiscal austerity plan in its enhanced form. Today's main event will be the US Federal Reserve's latest monetary policy meeting, where we look for the target range for the federal funds rate to remain at 0%-0.25%. The US economic outlook has improved – which we expect to be acknowledged in the accompanying policy statement - although not sufficiently in our view to warrant an increase in rates at this time. We look for the Fed to maintain its stance of low interest rates for an ‘extended period'. However, financial markets will be watching closely for any signs of a decisive shift towards other (i.e. 'non-conventional') policy tightening measures such as asset sales, reverse repo operations or an increase in the rate paid on bank reserves.
Coffee closed higher on Friday as it extends last week's rally. The mid-range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are oversold but are turning bullish signalling that sideways to higher prices are possible near-term. Closes above the 20-day moving average crossing would temper the bearish outlook. If it extends this month's decline, the reaction low crossing is the next downside target.
Crude Oil closed higher on Friday and above the 20-day moving average crossing tempering the bearish outlook. The high-range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are neutral to bullish signalling that sideways to higher prices are possible near-term. If it extends Friday's rally, the reaction high crossing is the next upside target. Closes below Thursday's high crossing would open the door for a larger-degree decline into early-May.
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