• The dollar rose against the yen but declined versus the Canadian dollar on Thursday. US initial jobless claims fell and their 4-week average declined for a third straight week, signaling the recession is ending. The Chicago manufacturing PMI rose more than expected, increasing risk appetite; however, news on Chrysler's filing for bankruptcy reduced optimism. The Dow failed to hold on to earlier gains and fell 18 points to 8,168. Sterling was little changed following a less-than-expected decline in UK house prices. The euro reversed earlier gains on rising unemployment increasing speculation the European Central Bank will adopt quantitative easing measures. The Canadian dollar rose on speculation an economic recovery is nearing after Canada's GDP fell the least in 4 months. The loonie was also supported by strong price gains for raw materials. Unable to stay above the 0.73 resistance, the AUD/USD pared overnight gains.

  • The USD/JPY rose for a second day and broke the short-run downtrend. There is important resistance in the 99 area. If this is broken, the uptrend will resume. However, if the resistance holds, the USD/JPY may develop a head-and-shoulder formation with bearish short-term implications. There is support in the 97 area.

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Financial and Economic News and Comments

US & Canada

  • US personal income declined a more-than-expected 0.3% m/m in March after a 0.2% m/m slide in February, while personal spending was down a more-than-expected 0.2% m/m following February's upwardly revised 0.4% m/m increase, data from the US Department showed. Personal income increased 0.3% y/y while personal spending decreased 0.9% y/y. Disposable personal income was unchanged m/m in March but rose 3.0% y/y. The overall PCE deflator was unchanged m/m in March and increased 0.6% y/y. The core PCE deflator, which excludes food and energy, increased 0.2% m/m in March and rose 1.8% y/y. After adjusting for inflation, real consumption declined 0.2% m/m in March, but revisions to January/February added 0.4% m/m. Real consumption fell 1.5% y/y.

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  • US initial jobless claims declined 14,000 to a less-than-expected 631,000 in the week ending April 25, from the prior week's upwardly revised 645,000, according to data from the Labor Department. The 4-week average of new jobless claims fell for a third consecutive week, declining 10,750 to 637,250, a 2-month low. Continuing jobless claims in the week ending April 18 rose 133,000 to a more-than-expected 6,271,000, the highest level since records began in 1967, from the preceding week's upwardly revised 6,138,000. The insured unemployment rate increased to 4.7%, a 26-year high, from 4.6%.

  • The Q1 2009 US employment cost index was up a less-than-expected 0.3% q/q, the smallest gain on record, after an upwardly revised 0.6% q/q increase in Q4 2008. Costs rose 2.1% y/y, following the previous quarter's 2.6% y/y advance.

  • US business activity contracted at a slower rate in April, with the Chicago PMI increasing more than anticipated to 40.1, the highest level since September, from March's 31.4, the Institute for Supply Management-Chicago Inc. reported. The new orders index improved to 42.1 in April from 30.9 in March and the production index increased to 38.1 from 32.7.

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  • Canada's economy contracted for a seventh consecutive month in February, declining 0.1% m/m, as forecast, after a 0.7% m/m contraction in January, GDP data from Statistics Canada showed. The economy shrank 2.3% y/y.

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  • Canada's raw materials price climbed a much more-than-expected 12.1% m/m in March after a downwardly revised 1.6% m/m gain in February, while March industrial product price increased a less-than-expected 0.3% m/m, following February's upwardly revised 0.5% m/m increase, according to data released by Statistics Canada.

Europe

  • The eurozone unemployment rate rose more than expected to 8.9% in March, the highest since November 2005, from an upwardly revised 8.7% in February, according to data from Eurostat. Inflation held at 0.6% y/y in April, the lowest since records began 1996, a separate report by Eurostat showed.

  • Germany's unemployment rose for a sixth consecutive month in April, increasing a seasonally adjusted 58,000, less than expected, to 3.46 million, according to data from the Federal Statistical Office. The seasonally adjusted unemployment rate rose to 8.3% from 8.1%.

  • UK house prices declined a less-than-expected 0.4% m/m in April to an average price of £151,861 after rebounding 0.9% m/m in March, data from the Nationwide Building Society showed. House prices fell a lessthan- expected 15.0% y/y, following March's 15.7% y/y drop.

Asia-Pacific

  • The Bank of Japan maintained its benchmark interest rate at 0.10%, as forecast, in a unanimous decision.

  • The Japanese manufacturing PMI improved to 41.4 in April from 33.8 in March, indicating manufacturing conditions in Japan contracted at a slower pace, a Nomura/JMMA report showed.

  • Japan's industrial production unexpectedly increased 1.6% m/m in March, the first gain in six months, after a 9.4% m/m decline in February, according to preliminary March data from the Ministry of Economy, Trade and Industry. Industrial production decreased a less-than-expected 34.2% y/y, following February's 38.4% y/y drop.

  • Japanese housing starts declined for a fourth straight month, falling a less-than-expected 20.7% y/y in March, while construction orders fell for a fifth consecutive month, dropping 37.8% y/y to 1.5863 trillion yen ($16 billion), according to data from the Ministry of Land, Infrastructure and Transport.

  • Australia's leading economic index increased 0.2% in February after a 0.6% decline in January, the Conference Board reported. The coincident was up to 0.4%.

FX Strategy Update

@import url(http://www.cmsfx.com/resources/css/fxstrategy.css);

EUR/USD USD/JPY GBP/USD USD/CHF USD/CAD AUD/USD EUR/JPY
Primary Trend Negative Negative Negative Positive Positive Negative Negative
Secondary Trend Neutral Neutral Neutral Neutral Neutral Positive Positive
Outlook Neutral Neutral Positive Neutral Neutral Positive Positive
Action Buy Buy Buy None None Buy None
Current 1.3226 98.56 1.4779 1.1407 1.1940 0.7251 130.37
Start Position 1.3149 96.42 1.4845 N/A N/A 0.6601 N/A
Objective N/A N/A N/A N/A N/A N/A N/A
Stop 1.2840 93.40 1.4450 N/A N/A 0.6950 N/A
Support 1.3000 97.00 1.4450 1.1100 1.1800 0.7000 125.00
1.2500 95.00 1.4000 1.0700 1.1500 0.6800 120.00
Resistance 1.3500 99.00 1.5000 1.1700 1.2200 0.7300 131.00
1.3700 101.00 1.5500 1.2000 1.2700 0.7600 136.00