Forex Trading: Overnight Review And Look At Initial Claims And Retail Sales

TheNew Zealand Reserve Bank kept rates unchanged and although there was mention about the exchange rate the market ignored the comment.  Governor Alan Bollard said that he expected the economy to start growing by the end of the year, but the recovery is expected to be fragile.  He also said that they expect to keep the cash rate at or below the current level until the latter part of 2010, citing that the higher currency created a premature tightening. The PMI Manafacturing was released last night and showed a decline in the index to 42.7 from 43.7 last month.  Export declines were cited for the fall.  This confirms Governor Bollards assessment of the export/currency issue.

Meanwhile, in Australia, the employment statistics were stronger.  The job losses came in a 1.7K versus -30K expectation.   In April, 25.4K jobs were created.  This was revised lower from 27.3K.

In China, spendind on factories, properties and roads surged the most in 5 years. The governements $585 Billion stimulus package countered the export slump.  Urban fixed investement grew by 32.9% in the 5 months to the end of May from a year earlier.  The expectation was for a gain of 31%.  Meanwhile exports fell 26.4% last month as the global growth slowed from a year ago. As long as domestic demand can make up for exports the thought is eventually the global economy will improves, and this will bring exports back in line.

The combination led to a rise in the NZDUSD and AUDUSD on increased demand for the high yielding currencies.  Note however, that the price is coming off the highs.  The NZDUSD tested the  61.8% retracement of the move lower from the 0.6590 high to the 0.6151 low but has since moved back below the level. The 200 hour moving average at the 0.6354 will be eyed as support for the pair if the upside momentum is to continue today.

US Inital Claims are to be released at 8:30. The expectation is for a decline to 615K from 621K. The market is likely looking for some better numbers out of the data to confirm the decline in the NFP report.  Slowing of Initial Claims should lead the way lower, not NFP.  A move into the 500s would be a positive development.  If the number stays in the 600s it would not jive with a slowing of layoffs from the NFP report. Claims have been above 600 K since January 30th week.

The US Retail Sales for May will also be released.  The expectation is for the sales to rebound to +0.5% for the month from a -0.4% decline in April.  The Ex Auto measure is expected to show a smaller increase of 0.2%  (vs -0.5% last month).

The Stocks are up modestly this morning. Bond yields are up this morning with the 10 year up to 3.98% from 3.95% yesterday.

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