• The dollar and yen fell on Monday as risk appetite improved on more signs the global economy is stabilizing. US stocks rose, driving the S&P 500 index by 26.83 points to 909.71. Indian stock prices surged, following Congress election landslide win, as hopes of more free-market reforms in India improved investor sentiment. US homebuilder confidence rose to an 8-month high in May. The euro recovered after successfully testing the important 1.34 support. Sterling rose on a Rightmove report that UK home prices rose for a fourth straight month. The Canadian and Australian dollars advanced on rising equity markets, higher commodity prices, and an IMF forecast of a global economic recovery in 2010.
  • The USD/JPY rose from its lowest level since March 20 on improved risk sentiment and verbal intervention threats from Japan’s Vice Finance Minister Kazuyuki Sugimoto. “Excessive moves in currencies are undesirable as they would have a negative effect on the Japanese economy,” Sugimoto said, adding that “we’ll continue to monitor currency markets.” The pair found support at the neckline from the head-and-shoulder formation today. If this support is broken, the pair may fall to the 90 area and probably lead to Japanese intervention as it would squeeze Japanese exporters’ profits even more.

Financial and Economic News and Comments

US & Canada

  • The NAHB/Wells Fargo US builder confidence index improved to 16 in May, as forecast, from 14 in April, according to data from the National Association of Home Builders/Wells Fargo, indicating May US homebuilder confidence climbed to the highest level since September 2008 but most homebuilders still viewed conditions as poor with the May reading below 50. The current single-family home sales index increased to 14 in May from 12 in April. The buyer traffic index held steady at 13. The sales expectations index for single-family homes over the next six months rose to 27 from 24.

Europe

  • The eurozone non-seasonally adjusted trade balance unexpectedly posted a €0.4 billion ($539.6 million) surplus in March, the largest surplus since April 2008, after a revised €1.0 billion deficit in February, while the seasonally adjusted trade deficit narrowed to €2.1 billion from February’s €2.9 billion, data from Eurostat showed. Seasonally adjusted exports rose for a second straight month in March, rising 1.4% m/m to €104.98 billion, while imports posted the first month-to-month increase since September 2008, increasing 0.6% m/m to €107.03 billion.

  • UK house prices rose 2.4% m/m to £227,441 ($347,000) in May, the largest rise since February 2008, after a 1.8% m/m advance in April, Rightmove Plc reported. The pace of year-on-year house-price declines eased in May with a 6.2% y/y fall, following April’s 7.3% y/y drop.

Asia-Pacific

  • Japan’s consumer confidence improved more than anticipated in April, with the Japanese consumer confidence index rising to 33.2 from March’s 29.6, data from the Cabinet Office showed. Excluding one-person households, April consumer confidence rose to 32.4 from March’s 28.9.

  • Japan’s nationwide department store sales fell 11.3% y/y in April after a 13.1% y/y fall in March, while Tokyo department store sales dropped 11.9% y/y following March’s 12.9% y/y decrease, the Japan Department Store Association reported.

FX Strategy Update

 

EUR/USDUSD/JPYGBP/USDUSD/CHFUSD/CADAUD/USDEUR/JPY
Primary TrendNeutralNeutralNegativeNeutralNeutralNeutralNeutral
Secondary TrendPositivePositiveNeutralNeutralNegativePositivePositive
OutlookPositiveNegativePositiveNegativeNegativePositivePositive
ActionBuyNoneBuyNoneNoneBuyNone
Current1.356096.231.53421.11381.16290.7637130.46
Start Position1.3149N/A1.4845N/AN/A0.6601N/A
ObjectiveN/AN/AN/AN/AN/AN/AN/A
Stop1.3335N/A1.4935N/AN/A0.7150N/A
Support1.340094.501.50001.10001.15000.7300128.00
1.300091.501.45001.07001.13000.7000125.00
Resistance1.370099.001.53001.13001.20000.7700136.00
1.3900101.001.56001.15001.22000.7900139.00