Rethink Foreign Exchange

Dollar consolidation The revised University of Michigan consumer confidence index edged lower to 62.5 for April from a provisional 63.2 which will maintain fears over the outlook for consumer spending. An important element in the survey was an increase in the inflation expectations component to 4.8% from 4.3% the previous month. This is particularly significant as the Federal Reserve will need to monitor inflation trends closely. The rise in inflation expectations will certainly intensify

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Last week’s currency trading review The Dollar was again volatile last week, beginning the week softly before gathering steam as speculation grows around the notion the Fed is nearing the end of cutting rates. Fed officials avoided the topic of monetary policy through the week and focused more on the need for transparency in the financial system to allow the crisis to be fixed. New Home Sales decreased to 526k, down from the forecasted 580k. Durable Goods Orders came in slightly above the

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The signs that the dollar may have reached the bottom add up. However, we are waiting suspensefully for the U.S. GDP figures for the second quarter and the FOMC interest rate decision, which are to be announced this coming Wednesday, to get a clearer picture and confirmation. Until then, like today, some light upwards movements of the USD seem to be the likeliest scenario. Intraday Market Outlook for Day Traders EUR / USD Currently trading at 1.5658, the EUR / USD is struggling to recover some

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The US dollar fell to a 5-day low of 64.23 against the Pakistan rupee in early trading on Monday, before reversing direction by about 12:35 am ET. The pair climbed to 64.57 by about 3:45 am ET, compared to Friday’s closing value of 64.50. As of now, the pair is worth 64.43.

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Before we give the resurgence of the dollar too much credit let’s perform a reality check. As of Friday’s close at 1.5605 the euro had fallen slightly more than four big figures, or 2.5% against the dollar in just four days. The record high for the euro of 1.6020 came this past Tuesday. But since February the euro has risen 9.0% against the US currency. For the past five weeks the euro has been trading between 1.5500 and 1.5900 with one dip below and two attempts at the top; 1.5605 is just 100

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———————————————————— INTRA-DAY USD/JPY OUTLOOK :                 104.60 Updating time :28 Apr 2008 05:58 GMT Dlr’s retreat fm Asian morning high of 104.83 suggests recent ‘erratic’ upmove has formed a temp. top there n sideways trading is envisaged, reckon 104.25/30 wud contain weakness n bring rebound but abv said res is needed to extend gain twd 105.00. Buy on dips with stop as

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In this issue: The Velocity Of Money Is the Money Supply Growing or Not? P=MV A Slowdown in Velocity If You Are in a Hole, Stop Digging And More Write-offs to Come South Africa, La Jolla, Toronto and Maine The late and great Milton Friedman told us that inflation is always and everywhere a monetary phenomenon. But there is an asterisk to his equation that we need to examine, namely, the velocity of money. Sometimes a fast-growing money supply is not as inflationary as you might think. Then we

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Although CPI excl. fresh food in March was in line with expectations, increasing core inflation and the preliminary April CPI figures for Tokyo both indicate that inflation in Japan is increasing faster than expected. Hence we have increased our inflation forecast.

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All eyes this week on Fed guidance at Wednesday’s FOMC rate announcement. Japan on holiday for much of the week. MAJOR HEADLINES – PREVIOUS SESSION US Final Apr. University of Michigan Confidence out at 62.6 vs. 63.2 expected Japan Mar. Retail Trade rose 0.5% vs. 0.7% expected THEMES TO WATCH – UPCOMING SESSION Key Risk Events (All times in GMT) Germany May GfK Consumer Confidence (0610) EuroZone ECB’s Trichet and others to speak (0700) Germany Apr. CPI (no time given) New Zealand Mar. Trade

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EURUSD- Following a brief break and hold above the 1.5896/1.5913 area, its Mar 31’08/April 10’08 highs on Tuesday and its subsequent failure at that area, EUR sold off hard for a thirdday in a row on Friday closing at 1.5626.This move now leaves the pair below its triangle pattern(daily chart) and with price action still pointing lower, risk remains for a push towards the 1.5510 level, marking its Mar 24’08 and then its .382 Fib Ret/April 03’08 at 1.5390/42.The daily and weekly RSI are

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