The dollar fell versus its counterparts on Friday on signs Greece will get an international bailout package as early as this weekend. Economic optimism improved as US wholesale inventories climbed for a second month. Gold prices rose to the highest level since December. The S&P 500 increased 7.93 to 1,194.37, posting a sixth straight weekly gain. The yen advanced. Japanese Finance Minister Naoto Kan said the government and the Bank of Japan will likely meet regularly. The first meeting will be on Friday. The topic was not disclosed, but we bet Japan's prolonged deflation will be at the top of the agenda. Sterling broke its 1.53-handle resistance, supported by accelerating UK producer-price inflation. The Australian dollar rose to important resistance. The Canadian dollar declined modestly as Canada's employment rose less than anticipated.

The EUR/USD rose on reports the European Union is ready to support Greece. French President Nicolas Sarkozy said a support plan has been agreed and we are ready to activate at any moment to come to the aid of Greece. The EU is ready to intervene, EU President Herman van Rompuy said. The EUR/USD showed little reaction to news that Fitch Ratings cut Greece's long-term foreign and local currency issuer default ratings to BBB- from BBB+ and said the country's economic outlook is negative. Technically, the EUR/USD has been trending lower in a well established trading channel. The pair surged today and closed just below resistance from the upper trading band. If this resistance is broken, the EUR/USD outlook will improve.

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Financial and Economic News and Comments

US & Canada

  • US wholesale inventories rose for a second month in February, rising a more-than-expected 0.6% m/m to $393.5 billion, after an upwardly revised 0.1% m/m January increase, figures from the Commerce Department showed, signaling sustainable US economic growth. Wholesale sales grew 0.8% m/m, an 11th straight monthly gain, to $338.7 billion, the most since October 2008, following January's downwardly revised 0.9% m/m advance. The inventories/sales ratio was 1.16 at the end of February, the same as in January, compared with February 2009's 1.38. Inventories declined 7.4% y/y in February while sales rose 9.8% y/y.

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  • Canada's employment increased a less-than-estimated 17,900 in March, the sixth gain in eight months, to 16,963,200, after a 20,900 rise in February, according to figures from Statistics Canada. The unemployment rate was unchanged as forecast at 8.2%. Full-time employment declined 14,200 to 13,724,600 in March while part-time positions increased 32,200 to 3,238,700. The participation rate was unchanged at 67.0. Average hourly wages increased 2.2% y/y in March.

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Europe

  • Germany's seasonally adjusted exports rose a more-than-expected 5.1% m/m in February, the fifth gain in six months and the largest since June 2009, after a revised 6.5% m/m decline in January, figures from the Federal Statistical Office showed. Imports were up 0.2% m/m, a third consecutive monthly increase, following a downwardly revised 5.6% m/m January advance. Exports rose 9.5% y/y in February; imports increased 4.2% y/y. The trade surplus widened more than expected to €12.6 billion ($16.96 billion) in February from €8.0 billion in January. The current account surplus rose to €9.1 billion from January's upwardly revised €4.4 billion.
  • March UK producer-price inflation accelerated more than anticipated. PPI output rose 0.9% m/m in March, a 13th straight monthly rise and the most since May 2008, after a 0.3% m/m increase in February, reflecting price increases in petroleum products, other manufactured items and chemical products, according to PPI data from the Office for National Statistics. March PPI output rose 5.0% y/y, the highest annual pace since November 2008, following an upwardly revised 4.2% y/y February rise. Core PPI output climbed 0.7% m/m in March after an upwardly revised 0.4% m/m advance the prior month. March core PPI output rose 3.6% y/y, following an upwardly revised 3.0% y/y February increase. PPI input grew 3.6% m/m in March, a sixth straight monthly gain and the largest since June 2008, after an upwardly revised 0.6% m/m advance in February, reflecting price rises in crude oil, other imported parts and equipment, and imported metals. March PPI input rose 10.1% y/y, a sixth consecutive year-on-year rise and the most since October 2008, following an upwardly revised 7.5% y/y February gain.

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Asia-Pacific

  • The Australian Industry Group/Housing Industry Association performance of construction index declined to 48.7 in March from 52.8 in February, indicating Australia's construction sector contracted slightly for the first time in three months but improved remarkably from March 2009's severe contraction-level 30.0, according to an AiG/HIA report. This weaker result was underpinned by falls in new orders and activity and highlighted the on-going toughness of industry conditions, according to the report.
  • Bank of Korea Governor Choongsoo Kim left the 7-day repurchase rate unchanged at a record-low 2.00% at his first meeting, adding that inflation may accelerate in H2 2010. The central bank will maintain the accommodative policy stance for the time being in such a way as to help sustain the trend of recovery in economic activity, taking into overall consideration financial and economic conditions domestically and abroad, according to today's BOK statement.

 

FX Strategy Update

 

EUR/USD

USD/JPY

GBP/USD

USD/CHF

USD/CAD

AUD/USD

EUR/JPY

 

Primary Trend

Positive

Negative

Neutral

Negative

Negative

Positive

Neutral

Secondary Trend

Negative

Positive

Negative

Positive

Negative

Neutral

Negative

Outlook

Negative

Positive

Neutral

Positive

Neutral

Neutral

Neutral

Action

Sell

Buy

None

Buy

None

None

None

Current

1.3493

93.16

1.5378

1.0655

1.0036

0.9329

125.72

Original Position

1.4628

88.67

N/A

1.0340

N/A

N/A

N/A

Objective

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Stop

1.4060

87.30

N/A

1.0345

N/A

N/A 

N/A

Support

1.3250

1.2900

91.50

90.00

1.5000

1.4800

1.0500

1.0200

1.0000

0.9800

0.9000

0.8800

124.00

120.00

Resistance

1.3550

1.3800

94.50

96.50

1.5550

1.5850

1.0850

1.1100

1.0250

1.0450

0.9350

0.9600

128.00

130.00