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Puurrfect Hils, I would expect nothing less of you. You must be the envy of all your female friends!

Nice bounce off the Weekly Pivot on Cable Hils!

EUR/JPY got very close to resistance from December's high just now.
Also coincides with a 50% fib retracement jobbie off the 149 to 167+ rise

Looking at the EUR/JPY this morning, seems to have worked itself into a triangle or wedge thing or summat. Trying to make my mind up whether it's a long or a short, can't say I'm anything like sure, but I think it might be poised for an assault on the res referred to by chocolate (above post) so I'm going to go for a long with a target of 158.50 :)

Well, that's that theory stuffed, dropped out of the bottom of the triangle rather than shooting out the top, back to the drawing board :(

Managed to dig myself out of a hole by adding again further down, not really sure what's next, either with FX or the DOW, which means I don't know a lot!

EUR/JPY bounced off a FIB level during the last 20 mins or so and also pushed its nose (albeit briefly) above falling resistance. Perhaps 158.50 is still on the cards during the session?

I would be interested to know what spread you are getting on the Yen crosses.


Thanks in advance.

John, 4 pips on EUR/JPY with IG Index

Hi everybody,

Looks like we have a good Eur/Yen trade setting up. Check out the 4hr timeframe.

March Non Farm PayrollConsensus Estimate 50K to 70K Loss in Payroll Jobs Release time: April 4, 2008 8:30 AM EST!

The February jobs report came in remarkably weaker than expected by dropping another 63,000, causing the Fed to aggressively cut the federal funds rate by 75 basis points. Februarys decline in payroll jobs, the largest such decrease since a colossal 212,000 fall in March 2003, was notably worse than the consensus projection for a 25,000 rebound and mar ked a third consecutive month of decline.

Exacerbating the situation, not only did February come in weak, but the prior two months were also revised down. The initial January estimate of a 17,000 drop was revised down 5,000, while December was revised down 41,000 from the previous estimate of an 82,000 increase. For Janu ary and December combined, the net revision was down 46,000, indicative of a very clear downward path. February also marked a full year of payroll survey weakness in the goods-producing sectors, with both construction and manufacturing entering its 21st consecutive monthly decline.

Several key factors are thought to have influenced the February NFP report. They include:

*
Government payroll expected to add just 15K to March payrolls
*
Private service providing payrolls expected to edge just -5K lower, from -12K in February and a 100K average in Q4
*
Unemployment rate expected to rebound to 4.9% following Decembers 5% high

For week ending March 29, 2008, the Department of Labor reported that the advance figure for seasonally adjusted initial claims was 407,000, an increase of 38,000 from the previous weeks revised figure of 369,000. They also reported a four-week moving average of 374,500, a n increase of 15,750 from the previous weeks revised average of 358,750.

The back-to-back payroll declines that started 2008 is disturbing for the economy as the weaker growth has become more broad-based and trend like. Payrolls have shown weaker growth for four months from a 140K gain in October. Unemployment is rising from the March low of 4.4% but fell to 4.8% in February after reaching 5% in December. Employment trends lag the economy as final demandin excess of labor productivityfeeds in to labor demand. Earnings growth is fading and stands at 3.7% compared to the 4.3% yoy high of late 2006. The loosening labor market is being watched for signs of unravelingwhich many analysts will say has arrived in the payroll data.

What is the non-farm payroll report?

Of all the world monthly economic reports, the monthly US NFP report is the most highly anticipated and has the most dramatic impact on the currency market.

The report, which is released on the first Friday of each month and states the previous months numbers, provides detailed industry data on employment, hours and earnings of workers on nonfarm payrolls. These numbers are the best way to gauge the current state of the US market as well as the direction that the economy is heading.

Whats more, the employment numbers provided by the report are used by the Fed to shape their interest rate policies. The health of the US economy and interest rates translate to the strength or weakness of the US dollar.

SINGAPORE (Dow Jones)--Whatever the U.S. March jobs report produces Friday, it is likely to set the tone for how the U.S. dollar trades in the second quarter of this year.

Economists are looking for a third monthly fall in non-farm payrolls, though there are some reasons to think the data won't print as badly as is now forecast.

A Dow Jones Newswires poll pegs jobs to fall 50,000 after a decline of 63,000 in February, with the jobless rate expected to rise to 5.0% from 4.8%.

The data are likely to lay out more clearly to investors what the outlook is for the U.S. economy, particularly how strong (or not) consumer sentiment will be.

As we all know, the consumer is the lynchpin of the economy. If the jobs market falls into a hole, that's going to put the skids on consumption in a big way.

Currency traders will therefore be looking at the payrolls data very closely indeed, for clues on the fortunes of the greenback going forward.

A number in line with expectations would reinforce the view the economy continues to slow. That would probably not be good news for the U.S. dollar.

If the payrolls fall is larger than expected, we'll get a lot of names rushing around and shouting the "R" word, with futures markets moving to price in more aggressive Federal Reserve interest rate cuts than is currently the case. That would further erode the dollar's appeal.

But if the number isn't as bad as forecast, look for some unwinding of dollar shorts on the view the U.S. slowdown won't be as long or as deep as feared, and that rates won't have to be sliced so heavily from here.

So are we going to be looking behind door A, B or C?

The data are notoriously volatile and thus hard to predict. Getting that caveat out of the way, though, there are a few reasons to hope the data won't be as horrible as some might believe.

This column has spoken before of the increasing importance of the services sector to the U.S. economy.

So we can take some heart from the March Institute for Supply Management's non-manufacturing composite index, which is slowly crawling toward growth territory.

The index came in at 49.6 from 49.3 in February and 44.6 in January; it was higher than the 48.7 the market expected.

It's still below that old boom-or-bust threshold of 50, but within the overall data, the business activity index rose to 52.2 while the employment index was steady at 46.90, and the new orders index hit 50.2.

Some of the more spongy indicators have been reassuring, too.

Monster Worldwide's online-employment index rose 2 points in March to 167 with jobs in the arts, entertainment and recreation sectors surging.

Meanwhile the Challenger layoffs survey (which tracks news reports and public announcements of companies' job cut plans), showed the index falling 26% in March from February, though the index was still 9.4% higher than a year ago.

Some would point as well to the figures from payrolls giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers. They reported an 8,000 increase in private sector jobs in March, whereas a 7,000 fall had been expected.

It must be acknowledged though that ADP has a pretty choppy record in terms of correctly calling the overall payrolls data.

Pessimists of course would point to the weekly unemployment claims data Thursday, which showed claims surged to the highest level since 2005.

Initial claims for jobless benefits jumped by 38,000 to 407,000, after seasonal adjustments, though the more important and less volatile four-week average rose a less concerning 15,750 to 374,500. Wall Street had expected a 4,000-claim increase.

While this suggests things are deteriorating further, the data may have been skewed by technical difficulties calculating the figures, particularly seasonal issues arising from the timing of the Easter holiday.

The chance thus is that the payrolls data will indeed be weak, but not as weak as markets now expect.

That could leave some room for a dollar rebound heading into the weekend.

Cable seems to be trading into a pennant, bounded by the recent highs from 14th March (falling plum coloured line) and the recent lows from 20th February (rising blue coloured line).



edit: It's another 45 4 hour periods (ie 180 trading hours) till the bounding lines converge. There's therefore every possibility that cable will trade within the pennant until the MPC decision on Thursday.

NEW YORK (Dow Jones)--The optimism currency markets flashed this week that a U.S. recession was behind us won't support the dollar against the euro next week.

When the European Central Bank closes its rate-setting meeting Thursday, it will keep interest rates steady again, analysts said, and that will keep the dollar under pressure.

The greenback managed to hold back euro advances this week on testimony by Federal Reserve Chairman Ben Bernanke to Congress on Wednesday that the second half of the year should see growth, despite the possibility of recession. Along with the release of some disappointing data in the euro zone, the interest rate differential seemed to narrow, giving the dollar some hope. Lower interest rates in the U.S. since the Fed embarked on aggressive rate cuts have cut the yield of the dollar, making it less attractive compared to its rivals.

But, as the dust settles, the fact remains the U.S. economy is in the dumps and the euro zone is focused on inflation, even if it's starting to feel the pinch. There'll be no change in that interest rate gap just yet, analysts said.

That means "the U.S. recession isn't old news," said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Conn. And the shadow of a U.S. recession makes it difficult to build a story for a dollar bottom, he added.

However, with no major data releases ahead, currency movements are unlikely to have any clear direction throughout the week. Traders are unwilling to bet on the dollar's appreciation, but equally nervous about whether the ECB will allow the euro to advance much further. The combination is keeping the dollar volatile as markets figure out how long the U.S. will feel this downturn.

"In the short term, the dollar's going to be quite choppy against the euro and yen ... there's still a lot of uncertainty," said Adarsh Sinha, foreign exchange analyst at Barclays Capital in London.

The jumpiness could send the euro higher next week, and it may break its historical high against the dollar of $1.5905, strategists said.

Friday afternoon in New York, the euro was at $1.5712 from $1.5669 late Thursday, while the dollar was at Y102.03 from Y102.34. The euro was at Y160.23 from Y160.35, according to EBS. The U.K. pound was at $1.9935 from $1.9940 late Thursday, and the dollar was at CHF1.0082 from CHF1.0101.

Caution has led Lehman Brothers analysts to sell the euro against the dollar. "(The) ECB language could shift its hawkish rhetoric at any time," they warn.

There is a chance that ECB President Jean Claude Trichet will step up the rhetoric on the euro's moves on foreign exchange markets at the close of the rate-setting meeting - but it's slim. Simply, there's not much might to back up those words if the ECB isn't willing to cut interest rates - and it's not yet, due to its single mandate of controlling inflation.

Until the euro zone's rates come down, the dollar will remain in flux, said analysts, even if Bernanke's testimony hinted to some that monetary policy from here out will ease.

Indeed, after the third consecutive drop in U.S. payrolls Friday, financial markets didn't seem to believe Bernanke as much. Expectations for a 50 basis-point rate cut by the June 24-25 Federal Open Market Committee meeting gained steam, with the July contract pricing in about a 74% chance from about a 46% chance at Thursday's settlement.

Speaking about the expected volatility in foreign exchange markets, Gilmore said, traders don't have "the capacity to stay in a position," notably hedge funds.

"People are not willing to take large hits on a position, so risk management is much tighter, so they don't stay in something much longer," he said.

The broad outlook isn't much different for the dollar against the yen.

The dollar will likely trade lower to Y100 from its intraday high Friday of Y102.70.

Taisuke Tanaka of Lehman Brothers in Tokyo noted there is "little prospect of a sustained upward trend" for the dollar versus the yen, as seen in the latest week, "until a U.S. economic recovery kicks in, allowing the Fed to raise rates."

Risk aversion is just too high, analysts said.

The Demise of the Euro
Avi Tiomkin 04.21.08, 12:00 AM ET



Tensions between inflation-obsessed Germany and growth-hungry Latin countries will spell its end.

It is only a matter of time, probably less than three years, until the euro experiment meets its end. The financial crisis in the U.S. is hastening the process, as investors flee the dollar, pushing the euro to a price of $1.59. But it will not stay high for long. Countries like Spain and Italy will withdraw and return to their old currencies. Once that happens, get ready for the return of the deutsche mark and the French franc.

What will undo the euro: the mounting tension between the inflation-obsessed German bloc (including Austria, Luxembourg and the Netherlands) and the Latin bloc of France, Italy and Spain. The Germans, saddled with memories of the hyperinflation that brought the Nazi Party into power, remain singularly focused on fiscal and monetary discipline. Despite core inflation in the euro zone of only 2.4% and a slowing global economy, the Germans insist that the European Central Bank maintain a tight monetary policy. In direct opposition to Germany, the Latin bloc, joined by Ireland, wants the ECB to lower interest rates.

Spain's worsening real estate slump dramatically illustrates the problem faced by the Latin bloc. For years Spanish home building and buying outstripped that of Germany, Italy and France combined. Now that the boom has turned to bust, the Spanish central bank cannot lower interest rates. Nor can the treasury devalue the currency. Bound to the euro, Spain can only complain to the ECB, while watching its economy circle the drain.

European heads of state and the European business press are making their discontent public in stark language. "We cannot continue to cope with the autism of some bankers who do not understand that the priority is not fighting inflation, which is nonexistent, but fighting for more growth," declared French President Nicolas Sarkozy last year. In October, in response to German Finance Minister Peer Steinbrueck's comment that he "loves a strong euro," leading Italian business newspaper Il Sole ran a headline labeling the remark "a declaration of war." "Italy has lost the ability to grow," the Italian finance minister, himself one of the founding members of the ECB, admitted recently.

The euro has long had detractors, who question the viability of political and monetary union in Europe. Haunted by World War II, the generation of leaders that included Helmut Kohl and Franis Mitterrand was willing to give up sovereign powers and national interests to create a common currency. But with no shared language, customs, culture or political system, the euro zone has never existed except as a construct in the minds of bureaucrats and politicians.

Now, as the divisions increase, insiders are beginning to take a dim view of the prospects for continued monetary union. "We believe the euro will not survive in the long run in the absence of some kind of political support," the president of BusinessEurope, a pan-European business association, stated in early March.

Along with the steep selloff that will precede the disintegration of the high-flying euro, other markets will be shaken. Look for much higher interest rates for prospective euro deserters like Spain and Italy as spreads for benchmark German bonds widen.

What should investors do? Gradually start to hoard dollars and short the euro. Another strategy is to sell investments in Italy and Spain and buy German fixed-income assets.

The political situation in Europe is likely to accelerate the euro's demise. Now that the Spanish elections are over, politicians there no longer feel the need to remain silent about mounting economic woes. If, as Italian polls predict, Silvio Berlusconi becomes that country's prime minister, the man who criticized the euro as "a disaster" would join a common front ready to take action by the time Sarkozy's France assumes the European Union presidency this summer.

The tight-money Germans will not push to preserve the euro. A poll released at the end of 2007 by Dresdner Bank (other-otc: DRSDY.PK - news - people ) showed that 62% of Germans support reinstating the deutsche mark as the country's currency. It appears that their wish will come true.

Look like some good Spanish Property bargains for you soon Hils!

I'd rather wait till I can see the whites of their eyes, JT. That'll be a few years yet.

:o)

I don't know if it's just coincidence but, since Avi Tiomkin's article was published at the end of last week, everything I read seems to be about Spain.

There was an article in Saturday's Torygraph, and today there have been comments from BBVA and Bank of Spain which both say that everything's sh@gged.

( TF ) 04/07 14:36
BBVA cuts Spain 2008 GDP growth forecast to 1.9 pct vs previous 2.6 pct


- MADRID (Thomson Financial) - Banco Bilbao Vizcaya Argentaria SA.'s analysts have cut their forecast for Spain's 2008 GDP growth rate to around 1.9 percent from a previous forecast last autumn of 2.6 percent.

In the bank's April 2008 study of the Spanish economic situation, BBVA said it is forecasting a GDP growth rate of between 1.7 percent and 2.2 percent growth in 2008 and between 0.8 percent and 2.0 percent in 2009.

'We expect Spain's growth rate to reach a low in the first half of 2009 before the recovery begins,' BBVA's chief economist Jose Luis Escriva said during a conference to present the study.

Escriva said both international and domestic factors had led to a sharper slowdown in Spain than was initially expected, though added that the bank's growth forecasts have an 'unusually high margin of uncertainty.'

External factors weighing on Spain's economy include higher risk premiums, lower global growth, the appreciation of the Euro to the dollar, high oil and raw material prices and a 'delay' in European Central Bank interest rates.

Within Spain, a harder-than-expected fall in residential housing sector investment has added further uncertainty to growth prospects.

Investment in Spain's housing sector will fall by 7.5 percent from a year earlier and by 14.5 percent in 2009, BBVA said.

The bank also raised its forecasts for Spain's unemployment rate in 2008 to 9.5 percent and in 2009 to 11.0 percent.

Spain's GDP grew 3.5 percent in 2007, while Spain's unemployment rate stood at 8.60 percent in the fourth quarter of 2007.

I also read something over the weekend from DBk, saying major European Banks were dumping their Spanish MBS at something approaching 40% of face value because they know the value is going to fall a lot further in the months ahead, and they want what they can get now. I have a friend buying some property in Spain, and I have been telling him to wait, but the pressure from 'she who must be obeyed' seems too great! Still time is on our side Hils (I think!). JT