Durable Goods Orders Signal Recession Losing Some Momentum

Daily Forex Fundamentals | Written by Wachovia Corporation | May 28 09 13:35 GMT |

Durable goods orders at U.S. manufacturers increased 1.9 percent in April but the March decline in orders was revised downward. The net change for the two month period is slightly negative. Non-defense capital goods orders, ex-aircraft slipped 1.5 percent. We do not expect to see lasting resurgence in business spending until 2010. Orders Jumped, but the Revision Made it Roughly a Wash While the March revision takes the shine off the jump in April, the developing trend signals this recession – the longest and deepest in the post-War era—is losing momentum. One not-so-bright spot is nondefense capital goods orders, ex-aircraft. Last month's gain was revised to a decline of 1.4 percent, and this month posted a loss of another 1.5 percent. This suggests continued weakness in business spending. Less Work in the Pipeline, but Stockpiles Still Shrinking The pace of decline is slowing in unfilled orders for nondefense capital goods ex-aircraft. This tells us the freeze in spending at the height of the financial crisis last fall has abated. This news is encouraging as a bottom in the series is commonly associated with the peak in layoffs at large manufacturers. Slowing declines are seen in the sub-components as well. Computer & electronics are even approaching positive territory. Wachovia Corporation http://www.wachovia.com Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.

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Durable Goods Orders Signal Recession Losing Some Momentum

Daily Forex Fundamentals | Written by Wachovia Corporation | May 28 09 13:35 GMT |

Durable goods orders at U.S. manufacturers increased 1.9 percent in April but the March decline in orders was revised downward. The net change for the two month period is slightly negative. Non-defense capital goods orders, ex-aircraft slipped 1.5 percent. We do not expect to see lasting resurgence in business spending until 2010. Orders Jumped, but the Revision Made it Roughly a Wash While the March revision takes the shine off the jump in April, the developing trend signals this recession – the longest and deepest in the post-War era—is losing momentum. One not-so-bright spot is nondefense capital goods orders, ex-aircraft. Last month's gain was revised to a decline of 1.4 percent, and this month posted a loss of another 1.5 percent. This suggests continued weakness in business spending. Less Work in the Pipeline, but Stockpiles Still Shrinking The pace of decline is slowing in unfilled orders for nondefense capital goods ex-aircraft. This tells us the freeze in spending at the height of the financial crisis last fall has abated. This news is encouraging as a bottom in the series is commonly associated with the peak in layoffs at large manufacturers. Slowing declines are seen in the sub-components as well. Computer & electronics are even approaching positive territory. Wachovia Corporation http://www.wachovia.com Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.

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Currency Currents

Daily Forex Fundamentals | Written by Black Swan Capital | May 28 09 13:02 GMT |

Key News The leading Bank of England official who accurately predicted the recession warns today against complacency that the worst of the slump is over and predicts a further surge of more than a million in unemployment this year. (The Times) Key Reports Due (WSJ): 8:30 a.m. Initial Jobless Claims For May 23 Week: Expected: +4K. Previous: -12K. 8:30 a.m. Apr Durable Goods Orders: Expected: +0.6%. Previous: -0.8%. 10:00 a.m. Apr New Home Sales: Expected: +2.5%. Previous: -0.6%. 10:00 a.m. DJ-BTMU Business Barometer For May 16: Previous: unch. 1:00 p.m. May 22 U.S. Energy Dept Oil Inventories Quotable "There are two things which cannot be attacked in front: ignorance and narrow-mindedness. They can only be shaken by the simple development of the contrary qualities. They will not bear discussion." Lord Acton FX Trading - Bring on the Inflation "Markets are going to increasingly demand that there be some real green shoots" of an economic recovery, said Ethan Harris, co-head of U.S. economic research at Barclays Capital Inc. in New York. "They are going to have to step in at some point and put some more easing in." If only it were as certain as Mr. Harris here makes it sound. I figured the demand for real green shoots would have come about by now. It hasn't. Granted, the stock market hasn't hit a new intermediate-term high in what, like 14 days? So maybe this means it'll start heading lower if these real green shoots don't start poking out of the ground soon. But maybe not. Short, sideways price action has become the extent of corrections these days. They're just consolidations I guess. The S&P 500 is leaving open the potential for a move in either direction - up or down: So what's up with the dollar? Am I just going to say it's stuck to stocks; whatever stocks do the dollar will do the opposite? No. The negative correlation has loosened up between currencies and stocks. Now that risk appetite has taken a breather, the buck has been re-subjected to a different threat. It's now vulnerable to inevitable inflation. Despite a small recovery so far this week, this buck has been whacked: So are consumer and producer prices rising now? With the exception of the recent uptick in some commodities, no. But the inflation-apes are banging on their chests again. And it's likely not going unnoticed. The boomer, doomer and gloomer that is Marc Faber made sure his pounding was heard ... "I am 100 percent sure that the U.S. will go into hyperinflation," Faber said. "The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate." 100 percent?? Hyperinflation?? And apparently he also used the word "Zimbabwe" during his interview with Bloomberg. Hmmm... maybe subscription sales to his report are slumping. Ok, forget the sound-bite for now. The second part of the above quote is something that's legitimately beginning to worry people. I discussed it in more detail in yesterday's Currency Strategist, but to summarize: To the extent they have the capability of deciding between inflation and deflation, the Fed will choose inflation any day of the week. That belief is based around the idea that only inflation will allow us to cover our growing debts. Yes, it's an old story - one that played largely into the US dollar's multi-year bear market till the middle of 2008. But thanks to the D-word - deficit - this story is once again prying its way into the minds of the market. [Note: From the Financial Times today... "German inflation has turned negative for the first time in more than 20 years, fueling fears of a fall I prices across the Eurozone that will add pressures facing the European Central Bank as it grapples with Europe's sever recession."] When will prices begin to rise? Shoot - I would imagine we'd need to see some real green shoots first. Because without some hard evidence for those on Main Street, as opposed to those happy-go-lucky soles on Wall Street, money simply isn't going to be circulating at anywhere near a rate conducive to hyperinflation. So let's not panic ... unless of course everyone else starts panicking. In which case the market will move in whichever direction it's pushed. And believe me: you don't want to be on the other side when a herd of stampeding buffalo starts pushing against you. Just try to keep your wits about you, whichever way the market ends up taking you. Jack Crooks Black Swan Capital http://www.blackswantrading.com Black Swan Capital's Currency Snapshot is strictly an informational publication and does not provide individual, customized investment advice. The money you allocate to futures or forex should be strictly the money you can afford to risk. Detailed disclaimer can be found at http://www.blackswantrading.com/disclaimer.html

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FX Thoughts for the Day

Daily Forex Technicals | Written by Kshitij Consultancy Services | May 28 09 12:13 GMT |

USD-CHF @ 1.0894/97...Support at 1.0800 R: 1.0916 / 1.0989-1012 / 1.1096-1114 S: 1.0817 / 1.0750 / 1.0619-0598 Dollar-Swiss has dipped after rising towards 1.0955 during the day. We had exited out of the Short entered at 1.0940 at cost as there was an outside chance of a rise towards 1.1050-70 as suggested by the 4-hourly chart. Instead, the pair faced Resistance at 1.0960-80 which was sufficient enough to keep the pair ranged between 1.0871-1.0955 during the day. On the downside, there's Support in the region of 1.0817-0800 for the US session. On a rise towards towards 1.1050, we would like to re-enter the Short, for which we place a Limit Sell Order. The chances of an eventual decline towards 1.0500 is still there only on a comprehensive break past 1.0800-0750. Limit Sell Order: Sell USD 10K at 1.1040, SL 1.1120, TP 1.0850 Cable GBP-USD @ 1.5918/23...Resistance at 1.6047-80 R: 1.5954-68 / 1.6047-80 / 1.6448 S: 1.5838 / 1.5785 / 1.5604 Cable has bounced back after recording a low of 1.5853 during the day. Overall the Cable has been oscillating between 1.58-1.61 over the last 5 days. The view continues to be the same as mentioned in the morning. A comprehensive rise past 1.6050-80 is likely to take the pair towards 1.64-65 intially and towards 1.6660 eventually over a longer time frame. On a dip, a break below 1.5838 could next target 1.56. Limit Buy Order: Buy GBP 10K at 1.5600, SL 1.5480, TP Open Aussie AUD-USD @ 0.7813/17...Could dip towards 0.77 R: 0.7889 / 0.8087 / 0.8159 S: 0.7793 / 0.7712-06 / 0.7627-15 Aussie dipped during the day toward 0.7744 and has bounced since then. We continue to believe that it could still move towards 0.7700-0.7675 over the US session or tomorrow which could provide a good opportunity to go Long. A further dip (though not likely) could prove to be very bearish which could take the pair towards the channel Support at 0.7500-7450 over the next few days, if not immediately. On a rise, we do not anticipate it to break past the Resistance at 0.7920 in a hurry. Limit Buy Order: Buy AUD 10K at 0.7720, SL 0.7650, TP 0.7850 Kshitij Consultancy Service http://www.fxthoughts.com Legal disclaimer and risk disclosure These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.

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Dollar May Fall to 87 Yen as Recovery Gathers Pace, Nomura Says

By Shigeki Nozawa

May 28 (Bloomberg) -- The dollar may fall as low as 87 yen in a year as a global economic recovery led by China and India spurs investors to cut holdings of the U.S. currency, according to Nomura Securities Co.

Banks across the world reacted to the worldwide recession by amassing dollars and they are now looking to shift those funds to emerging-market stocks and commodities, said Taisuke Tanaka, a foreign-currency strategist in Tokyo at Nomura Securities, a unit of Japan’s biggest brokerage. The dollar may also weaken as the Federal Reserve adds extra funds to its financial system to combat the recession, he said.

“Increasing expectations that the global economy will recover and the ‘punish-the-printers’ trade will push down the dollar and benefit the yen,” Tanaka said. The yen will strengthen to 90 per dollar by the end of March and reach 87 three months later, he said.

China’s 4 trillion yuan ($586 billion) stimulus package is sparking signs of a government-led recovery in the world’s third-biggest economy. Urban fixed-asset investment climbed 30.5 percent in the first four months of 2009 from a year earlier, and imports from the U.S. posted the biggest back-to-back gain in three years.

The Japanese government raised its assessment of its economy last week for the first time in three years on signs the worst of the recession may be over.

The Dollar Index, used by the Intercontinental Exchange Inc. to track the greenback against the euro, yen, pound, Swiss Franc, Canadian dollar and Swedish krona, slid to a five-month low of 79.805 on May 22, and the dollar hit its three-month low of 93.86 yen the same day. The U.S. currency traded at 95.91 yen as of 11:21 a.m. in Tokyo.

Fed’s Balance Sheet

Should the Fed begin to reduce the amount of money it pumps into the financial system through so-called quantitative easing too early, overseas investors will grow increasingly reluctant to buy U.S. stocks and bonds due to concerns about a “liquidity shock,” Tanaka said.

The size of the Fed’s balance sheet increased to $2.18 trillion yen on May 20, from $900 billion before the collapse of Lehman Brothers Holdings Inc. in September.

To contact the reporter on this story: Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net.

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Yen Declines Against Dollar, Euro as Asian Stocks Trim Losses

By Yasuhiko Seki and Ron Harui

May 28 (Bloomberg) -- The yen fell toward a two-week low against the euro and weakened versus the dollar as Asian stocks trimmed losses, reviving demand for higher-yielding assets.

The yen also declined versus all of the 16 most-active currencies after Japanese government data showed local investors boosted purchases of overseas bonds to the highest level in a month. The Australian dollar rose toward a seven-month high against the U.S. currency on optimism the global recession will ease, reviving demand for the South Pacific nation’s assets.

“Equity markets of emerging economies, including Asia, are holding a relatively firm undertone, which means risk appetite is still reasonably strong,” said Akira Takeuchi, a Tokyo-based currency dealer at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest banking group. “The yen will be sold against higher-yielding currencies.”

The yen weakened to 132.74 per euro as of 11:10 a.m. in Tokyo from 131.83 in New York yesterday, when it touched 133.52, the lowest level since May 12. The yen dropped to 95.85 per dollar from 95.34. The dollar traded at $1.3850 against the euro from $1.3825.

Australia’s currency gained 0.5 percent to 77.95 U.S. cents and advanced 1.2 percent to 74.84 yen. New Zealand’s dollar strengthened 0.4 percent to 58.81 yen.

The New Zealand dollar is the best performer against the yen this month, gaining 6.1 percent. The nation’s 10-year government bonds offer 4.43 percentage points more yield than similar-maturity Japanese debt.

‘Betting on the Optimism’

The yen weakened as the Nikkei 225 Stock Average erased losses to be little changed after falling as much as 0.9 percent.

“It seems Japanese investors are betting on the optimism that the global economy has bottomed out and are willing to spend more on assets of emerging markets,” said Shoichi Handa, a senior dealer in Tokyo at SBI Liquidity Markets Co., a unit of financier SBI Holdings Inc. “Since the Australian economy benefits significantly from a recovery of global demand, the Australian dollar may reach 80 yen.”

Benchmark interest rates are 3 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

‘Problem’ Banks

Demand for the relative safety of the yen and the dollar may increase after the Federal Deposit Insurance Corp. said yesterday the number of “problem” banks grew to a 15-year high, reviving concern about the health of the U.S. banking system.

The FDIC classified 305 banks as “problem” and the total assets involved rose 38 percent to $220 billion, the highest since 1993, the agency said, without identifying any of the lenders. The FDIC said its insurance fund slumped 25 percent to the lowest level in 15 years.

The cost of borrowing dollars for three months between banks rose for a second day yesterday after ending a 38-day decline amid renewed concern some financial institutions aren’t strong enough to weather the financial turmoil. The London interbank offered rate, or Libor, for three-month loans increased one basis point to 0.674 percent.

To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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Asia Session Recap

Daily Forex Fundamentals | Written by Forex.com | May 28 09 02:44 GMT |

Today's Asia session saw a resumption of JPY weakness, as risk seemed to be the theme. USJPY jumped through NY highs close to the 96 handle and the Yen crosses followed suit. EURJPY was higher by nearly 100 pips from opening levels, and AUDJPY was higher by the same with some slight help from a strengthening AUDUSD. Traders looking for some profit taking following massive gains in the greenback into the closing hours of NY were rewarded in most of the majors Ahead in the upcoming London session, traders will look for the bounce to continue. Also in focus will be German employment numbers and UK retail numbers. The final Asian session of the week will see Japan CPI and employment numbers. Forex.com http://www.forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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Forex Exchange Morning Report

Daily Forex Fundamentals | Written by Westpac Institutional Bank | May 28 09 01:38 GMT |

News And Views Concerns around US debt. US treasury yields rose sharply, 10yrs up 17bp, despite a solid 5yr auction (well bid by foreigners). The attributed catalyst was the rebalancing of mortgage book hedges for convexity reasons, but there is a larger theme of record bond issuance driving yield curves higher (and to historically steep levels) at play here. This aversion to 10yr bonds was duly noted by US equities, the S&P500 falling in the last 2 hours to close down 1.9%. That, in turn, seems to have negatively affected risk currencies. Also contributing to a moderately stronger US dollar was China's central bank saying their economy is still under downward pressure; and Standard & Poor's saying there is no credible replacement for the USD as reserve currency, the UK rating revision was not a warning message to the US, and the US's credit rating was very safe. Moody's also weighed in, saying the US rating was safe despite increased debt. EUR weakened in a choppy manner from around 1.40 to just under 1.39. GBP bucked the trend to rally from 1.5935 to 1.6085. USD/JPY dipped from 95.50 to 94.65, recovering to 95.20. AUD spent much of the London and NY sessions clustered around 0.7850, with a sudden drop an hour ago to 0.7770. NZD ranged around 0.6200, the sudden drop this morning to 0.6160. AUD/NZD edged higher to a 1.26 to 1.27 ranged, and will remain nervous ahead of the NZ budget release at 2pm NZT. US existing home sales continue to see-saw, most recently rising 2.9% in April, although the annualised pace remains within the 4.49mn to 4.74mn range that has prevailed since November last year (down from 2005's 7.25mn peak). On this basis, we can increasingly confidently call the “bottom” for this sector of the US housing market, as long as we recognise that sales are being supported by the distressed vending of foreclosed properties at knockdown prices. That view is supported by the price data, down 15.4% yr compared to April 2008; the excessive supply of unsold homes is likely to keep that downward pressure on prices for some time yet. US FHFA house prices down 1.1% in March. The separate government house price measure, based on homes that have been sold at least twice and financed via Freddie Mac or Fannie Mae, resumed its downtrend back in March after surprise gains in the first two months of 2009. The annual rate of decline for this index in Q1 was -7.1% yr, compared to the cycle low of -8.3% yr in Q4 last year. This single digit pace of decline compares to the much steeper annual falls recorded by the NAR price data above and Tuesday's S&P-CS measures, both well into double digit negatives. Those measures have broader coverage of housing transactions across the US and tend to feature more distressed sales than the FHFA data. Treasury Secretary Geithner said the economy was showing some initial signs of stability although we would characterise most of the data as indicating a slower pace of decline. Japan's trade balance close to expectations at -¥52bn s.a. The raw balance was +¥69bn, which is the relevant number for the analysis of financial flows. Exports moderated their rate of decline to -39% from -46%yr, while imports recorded a 36% rate of decline (-37% in March). Also today, small business confidence for May showed a modest uptick from 30.8 to 34.1, with one-month ahead expectations factoring in a further gain to 37.4. The annual German inflation rate fell to zero this month, the lowest since records for reunified Germany began in 1992, beating the previous low-point of 0.2% yr in 1999. The annual inflation rate peaked just ten months ago in July 2008 at 3.3% yr. UK banks issue 28k mortgages in April. The number of new mortgages approved by UK banks bottomed out at 18k per month in November last year (down from the 87.5k peak earlier this decade), but had shown some signs of recovery earlier this year. However that upswing seems to have stalled in recent months. Industry wide data will be published by the Bank of England next week (the banks currently have a 68% share of new approvals). Outlook The NZD is sitting on 0.6150 minor support right now, a break pointing to 0.6100 which should hold on the day, barring event shock (such as an S&P downgrade tonight after the budget). Market consensus is for NZ's AA+ rating to remain intact, but with the negative outlook attached; that scenario would likely produce only a small relief rally at best. Events Today Date Country Release Last Forecast 28 May NZ Budget 2009 NZDbn 5.64 –1.50 Aus RBA Deputy Governor Battellino Speaking Q1 Capex 6.0% –5.0% 2009/10 CAPEX Intentions, AUDbn 79.9 – Q1 Construction Work Done 1.7% –3.5% US Apr Durable Goods Orders –0.8% flat Initial Jobless Claims w/e 23/5 631k 640k Apr New Home Sales –0.6% –1.0% Jpn Apr Retail Sales %yr –3.9% –3.3% Eur May Retail PMI 48.4 – May Business Climate Index –3.33 –3.15 May Consumer Confidence –31 –29 May Economic Confidence 67.2 70 Ger Unemployment ch’ 000 58k 80k UK May CBI Distributive Trades Survey May GfK Consumer Confidence –27 –30 29 May NZ Apr Building Consents s.a. –4.6% 9.00% Aus Apr Private Credit 0.1% 0.20% US Q1 GDP, Prelim % ann’lsd –6.1% 5.00% May Chicago PMI 40.1 43.5 May UoM Consumer Confidence (F) 67.9 68.5 Westpac Institutional Bank http://www.wib.westpac.co.nz/ Disclaimer All customers please note that this information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpac's financial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is regulated for the conduct of investment business in the United Kingdom by the Financial Services Authority. © 2004 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.

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USD Rebounds Off Lows

Daily Forex Fundamentals | Written by Easy Forex | May 28 09 01:27 GMT |

U.S. Dollar Trading (USD) tested new lows in the Asian and European sessions before rebounding sharply into the close of the day. US stocks sold off in the afternoon on the back of rising US Treasury Yields hurting investor sentiment in stocks and Commodities. Existing Home Sales are forecast at 4.68M vs. 4.65M forecast. Crude Oil finished up $2.20 to finish the day at $63.20 a barrel. In US share markets, the Nasdaq was down 19 points or -1.11% and the Dow Jones was down 173 points or -2.05%. Looking ahead, Weekly Jobless Claims are forecast at 630k and New Home Sales (April) are forecast at 0.36M vs. 0.356M previously. The Euro (EUR) struggled at the 1.4000 level before falling heavily in the final hours of the day on the back on rising US yields. The pair fell to 1.3850 but speculated support failed to appear and the slide continued into Thursday. Also hurting the sentiment was a FDIC report with a negative outlook on US loan quality. German CPI fell to 0.0% on a y/y basis. Overall the EUR/USD traded with a low of 1.3822 and a high of 1.3998 before closing at 1.3980. The Japanese Yen (JPY) kept to a very tight range as the USD strengthened and Yen weakened broadly together. Most of the crosses were under pressure from the rise in risk aversion although USD/JPY was very well supported on dips under 95. Overall the USDJPY traded with a low of 94.64 and a high of 95.74 before closing the day around 95.40 in the New York session. UPDATE April Retail Sales are forecast at -2.9% vs. -3.3%. The Sterling (GBP) broke comfortably back above 1.6000 the highest level since January as EUR/GBP selling and the UK mortgage industry showed signs of rebounding off November lows. The late equity pull back saw the 1.6000 handle being given up on profit taking. Further gains will require the continuing recovery of global financial system. Overall the GBP/USD traded with a low of 1.5924 and a high of 1.6089 before closing the day at 1.5970 in the New York session. The Australian Dollar (AUD) failed at 0.7900 and the late drop in US stocks prompted heavy selling/long liquidation and the pair slipped to 0.7750. Although Commodities rallied in the US, the AUD rally is starting to show signs of exhaustion. Overall the AUD/USD traded with a low of 0.7743 and a high of 0.7894 before closing the US session at 0.7780. Looking ahead, Q1 Capex forecast at -7% vs. 6% previously. Gold (XAU) continued in the recent orbit around $950 an ounce as Gold demand was countered by USD strength. Overall trading with a low of USD$943 and high of USD$960 before ending the New York session at USD$947 an ounce. Easy Forex http://www.easy-forex.com Easy-Forex makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites and the information contained does not take into account your personal objectives, financial situation and needs. Therefore you should consider whether these products are appropriate in view of your objectives, financial situation and needs as well as considering the risks associated in dealing with those products

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FX Technical Commentary

Daily Forex Technicals | Written by Easy Forex | May 28 09 01:30 GMT |

Euro 1.3830 Initial support at 1.3728 (May 21 low) followed by 1.3728 (May 21 low). Initial resistance is now located at 1.4058 (Jan 2 high) followed by 1.4148 (Dec 31 high) Yen 95.35 Initial support is located at 93.54 (Mar 19 low) followed by 92.52 (Mar 19 low). Initial resistance is now at 96.70 (May 19 high) followed by 97.84 (May 19 high). Pound 1.5950 Initial support at 1.5757 (May 22 low) followed by 1.5576 (23.6% retrace 1.4398 to 1.5944). Initial resistance is now at 1.6198 (Nov 5 high) followed by 1.6464 (Oct 31 high). Australian Dollar 0.7765 Initial support at 0.7703 (May 26 low) followed by the 0.7630 (May 19 low). Initial resistance is now at 0.7929 (50% retracement of 0.9847-0.6012 decline) followed by 0.8097 (Sep 30 high). Gold 945 Initial support at 936 (May 21 low) followed by 925 (May 20 low). Initial resistance is now at 967 (Mar 20 high) followed by 978 (Feb 25 high). Currency Sup 2 Sup 1 Spot Res 1 Res 2 EUR/USD 1.3531 1.3728 1.3830 1.4058 1.4148 USD/JPY 92.52 93.54 95.35 96.70 97.84 GBP/USD 1.5576 1.5757 1.5950 1.6198 1.6464 AUD/USD 0.7630 0.7703 0.7765 0.7929 0.8097 XAU/USD 925.00 936.00 945.00 967.00 978.00 Easy Forex http://www.easy-forex.com Easy-Forex makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites and the information contained does not take into account your personal objectives, financial situation and needs. Therefore you should consider whether these products are appropriate in view of your objectives, financial situation and needs as well as considering the risks associated in dealing with those products

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Daily Technical Analysis

Daily Forex Technicals | Written by FX Instructor | May 28 09 02:14 GMT |

EURUSD Outlook Yesterday I said about battle between buyers and sellers reflected on resistance line at 1.4050 and trendline support on hourly chart, and the battle was won by the sellers as the trendline support violated to the downside. This fact should trigger further bearish pressure testing key support level at 1.3736 area in nearest term. However, for me this is not the best time to trade since bullish outlook of medium term still intact and this bearish momentum still considered as counter trend movement/correction of the medium term trend. CCI just cross the 100 line down on daily chart suggesting a potential downside pressure. EURUSD Daily Supports and Resistances: S1= 1.3767 S2= 1.3708 S3= 1.3592 R1= 1.3942 R2= 1.4058 R3= 1.4117 GBPUSD Outlook After breakout from the rectangle area (1.5966), yesterday the GBPUSD had bullish momentum, topped at 1.6085 but the bullish power seemed very limited as the the pair closed lower at 1.5955. I think we are now back in the no trading zone. However, if the price consistently move above 1.6000 area today, we might see further upside pressure testing 1.6125 area. Immediate support is seen at 1.5922 (yesterday's low). Break below that area could trigger further bearish pressure towards 1.5850 area. CCI just cross the 100 line down on h4 chart suggesting a potential downside pressure. GBPUSD Daily Supports and Resistances: S1= 1.5889 S2= 1.5824 S3= 1.5726 R1= 1.6052 R2= 1.6150 R3= 1.6215 USDJPY Outlook The USDJPY had moderate bullish momentum yesterday. We still have minor bullish channel seen on h4 chart with 96.60/70 resistance level to test. Immediate resistance is seen at 95.50. Break above that area could trigger further bullish momentum. Initial support at 94.50 area. CCI just cross the 100 line up on h4 chart suggesting a potential upside pressure. USDJPY Daily Supports and Resistances: S1= 94.80 S2= 94.30 S3= 93.96 R1= 95.64 R2= 95.98 R3= 96.48 USDCHF Outlook The USDCHF was corrected higher yesterday. On hourly chart below we can see that after failed to break below 1.0810 support (triple bottom) the pair had a bullish momentum. The key level at this phase is 1.0930. Break above that area could trigger further bullish momentum towards 1.1010. CCI just cross the -100 line up on daily chart suggesting a potential upside pressure. USDCHF Daily Supports and Resistances: S1= 1.0849 S2= 1.0769 S3= 1.0729 R1= 1.0969 R2= 1.1009 R3= 1.1089 FX Instructor LLC www.fxinstructor.com The information has been prepared for information purposes only. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. This information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FXInstructor LLC assumes no responsibilities for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon this information. FXInstructor LLC does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXInstructor LLC shall not be liable for any indirect, incidental, or consequential damages including without limitation losses, lost revenues or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results

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Asian Stocks Drop on ANZ Banking Share Sale, Lower Metal Prices

By Jonathan Burgos and Shani Raja

May 28 (Bloomberg) -- Asian stocks fell, led by banks and mining companies, after Australia & New Zealand Banking Group Ltd. sold shares and metal prices declined.

ANZ Banking, Australia’s fourth-largest lender, dropped 1.9 percent after selling shares at a discount. Nomura Holdings Inc., Japan’s biggest brokerage, lost 1.3 percent after Moody’s Investors Service lowered its credit rating. BHP Billiton Ltd., the world’s No. 1 mining company, sank 2 percent. Stocks also fell after a surge in bond yields sparked concern households and businesses will face higher debt burdens.

“A lot of companies are taking advantage of the better market sentiment to raise capital by selling equity,” said Ivan Tham, Singapore-based head of funds management at the state- backed Kuwaiti Finance House, which has about $24 billion in assets. “The question is whether liquidity in the market can absorb all these equity issues. I’m struggling to find value in the market.”

The MSCI Asia Pacific Index fell 0.9 percent to 99.90 at 11:25 a.m. in Tokyo. The gauge has risen 42 percent since falling to a more than five-year low on March 9 on speculation the worst of the economic crisis had passed.

Japan’s Nikkei 225 Stock Average lost 0.1 percent as the government said retail sales in the country fell for an eighth month. Australia’s S&P/ASX 200 Index dropped 1.4 percent, while Singapore’s Straits Times Index sank 1.3 percent.

Shipping stocks in the region gained, led by STX Pan Ocean Co.’s 5.9 percent surge in Seoul as cargo rates climbed. Japan Tobacco Inc. slumped 4.3 percent on plans to sell bonds.

Borrowing Costs

Futures on the Standard & Poor’s 500 Index were little changed. The gauge dropped 1.9 percent in New York yesterday, the biggest slide in two weeks, as Sheila Bair, chairman of the Federal Deposit Insurance Corp., said the asset quality of U.S. banks remains a “major concern.”

The MSCI Asia Pacific Index has lost 32 percent in the past 12 months as the deepening credit crisis caused losses at the world’s biggest financial institutions to swell to almost $1.5 trillion, according to data compiled by Bloomberg.

The yield on 10-year U.S. Treasuries dropped two basis points today, according to data compiled by Bloomberg. Yields surged 19 basis points yesterday, the most since Jan. 19, sparking concern yields on mortgage bonds will increase.

“The real concern hanging over markets globally is that high borrowing costs are going to derail any economic recovery,” said Ben Potter, a Melbourne-based analyst at IG Markets. “People are concerned government efforts aren’t going to be able to bring down those costs.”

Shipping Rally

ANZ Banking Group dropped 1.9 percent to A$15.27 in Sydney after a one-day trading halt. The company sold A$2.5 billion ($1.9 billion) of shares at A$14.40 each, a 7.5 percent discount to the previous closing price, to fund its bid for Royal Bank of Scotland Plc’s Asian assets.

Nomura lost 1.3 percent to 710 yen. Moody’s lowered the company’s credit rating by two levels to Baa2, as the financial crisis hurt earnings.

Sony Corp., the maker of PlayStation 3 game machines, fell 0.6 percent to 2,460 yen. The company had its debt rating cut one level by Moody’s to A3 on concern slowing demand, increased competition and the stronger yen will erode earnings.

BHP declined 2 percent to A$33.95. Rio Tinto Ltd., the world’s third-biggest mining company, lost 1 percent to A$63.74. A gauge of six metals in London fell 1 percent yesterday. Copper futures in New York sank 1.2 percent today, adding to yesterday’s 0.9 percent drop.

Baltic Dry

STX Pan Ocean, South Korea’s biggest bulk carrier, jumped 5.9 percent to 12,500 won. Kawasaki Kisen Kaisha Ltd., Japan’s third-biggest shipping company, added 0.8 percent to 404 yen. Its bigger rival Mitsui O.S.K Lines Ltd. gained 1.4 percent to 640 yen.

The Baltic Dry Index, a measure of shipping costs for commodities, climbed 7.6 percent in London yesterday, its 18th- straight day of gains. The measure surpassed 3,000 points for the first time since October, buoyed by Chinese demand for iron ore.

Japan Tobacco slumped 4.3 percent to 274,600 yen. The company set terms for a 100 billion yen ($1.04 billion) sale of five-year, 1.128 percent bonds at par, according to a Nomura Securities Co. banker who is managing the deal.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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Japanese Shipping Stocks Rise on Cargo Fees; Developers Slide

By Jason Clenfield and Masaki Kondo

May 28 (Bloomberg) -- Japanese shipping shares climbed after commodity-shipping fees rose to an eight-month high. Property developers slumped after a 9.4 percent rally in the past three days.

Kawasaki Kisen Kaisha Ltd., Japan’s third-biggest shipping line, rose 2.2 percent. Inpex Corp., the nation’s largest oil and gas explorer, climbed 2 percent after Nomura Holdings Inc. raised the stock to “buy.” Developer Sumitomo Realty & Development Co. sank 2.2 percent, while Sumitomo Mitsui Financial Group Inc. fell 1.3 percent after a drop in U.S. financial shares.

The Nikkei 225 Stock Average declined 14.90, or 0.2 percent, to 9,423.87 as of 9:30 a.m. in Tokyo. The broader Topix index rose 1.99, or 0.2 percent, to 894.84, with three stocks rising for every two that retreated.

The Baltic Dry Index, a measure of shipping costs for commodities, surpassed 3,000 points for the first time since October, buoyed by Chinese demand for iron ore. The gauge rose for a 17th day to the highest since Sept. 30.

The Standard & Poor’s 500 Index dropped 1.9 percent in New York, the biggest slide in two weeks, led by financial companies as the yield on 10-year U.S. Treasuries climbed 18 basis points to 3.732 percent.

To contact the reporter for this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

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GBP Breaks above 1.60

by Korman Tam

The greenback was mixed in the Wednesday session, slumping sharply against the sterling to a near 7-month low and edging up versus the yen.

Economic data from the US was better than expected earlier today. Existing home sales shot up by 2.9% in April to 4.68 million units, reversing a downwardly revised 3.4% decline in March. Traders will look ahead to data on Thursday, including weekly jobless claims, April durable goods orders and new home sales.

Sterling Rallies

The pound advanced to its highest level since October 2008 against the dollar, above the key 1.60-level to 1.6084 and its strongest level against the euro since February at 0.8655. The sterling, which has been aggressively sold in recent months, garnered the lion’s share of the move to riskier assets overnight. With speculation that US debt may also follow in the footsteps of the UK credit outlook, which was downgraded by the S&P last week from stable to negative, traders continued to bid the sterling higher from oversold territory.

The economic calendar from the UK is light, with the release of the May CBI industrial trends survey. The CBI survey is expected to post a reading of -10 in May compared with a reading of 3 in April.

Cable holds steady near the 1.6060-level with interim resistance seen at 1.6085, followed by 1.61 and 1.6130. Subsequent ceilings are eyed at 1.6160, followed by 1.62 and 1.6250. On the downside, support starts at 1.6025 backed by 1.60 and 1.5970. Additional floors are seen at 1.5940, followed by 1.59 and 1.5850.

Euro Regains Footing

The euro recovered off its session lows against the dollar to edge back above the 1.39-foothold. A barrage of economic reports from the Eurozone are slated for release in the coming session, consisting of Germany’s May unemployment data, Eurozone economic sentiment, consumer sentiment, inflation expectations and business climate.

Germany’s May unemployment rate is expected to creep higher to 8.4%, from 8.3% a month earlier, while the unemployment change is seen jumping to 64k, up from 58k in April. The May Eurozone consumer sentiment is estimated to improve moderately to -30 from -31.0 a month earlier and industrial sentiment is seen edging up to -33 versus -35 in April.

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