Forex week ending 17 April 2009: A week of consolidation and shifting balances in the forex trading market, with risk aversion easing its stranglehold but risk acceptance not yet palpable. Fundamental data reflects the rate of economic descent easing in the U.S., U.K., and emerging economies, continuing in Japan and parts of Asia, and accelerating in the Eurozone and Australia.

Although March business confidence in Australia improved to −13 and conditions to −17, the February Westpac leading index fell −0.3% m/m, 1Q2009 import prices dropped −2.8% q/q and exports −4.6%. AUD/USD jumped off to a strong start for the week but quickly lost steam, consolidating between 0.7150 and 0.7325, closing at 0.7207.

U.S. March CPI printed −0.1% m/m, −0.4% y/y, with core prices holding at 0.2% m/m, 1.8% y/y. March PPI fell −1.2% m/m, −3.5% y/y, with core holding flat for the month, 3.8% y/y. March retail sales fell −1.1% m/m, −0.9% ex-autos, while April University of Michigan confidence survey improved to 61.9. March industrial production dropped −1.5% m/m, −12.8% y/y, while capacity utilization touched 69.3%, the lowest since the data series began in 1967. April Empire manufacturing improved to −14.65, the Philly Fed survey to −24.4, and February long-term TIC flows printed US$22.0Bn.

Eurozone March CPI printed 0.4% m/m, 0.6% y/y, and 1.5% y/y core. February industrial production fell −2.3% m/m, −18.4% y/y. February trade balance improved to a seasonally-adjusted deficit of €4.0Bn, better than market expectation, with exports to main trading partners down more than 25% y/y, while February construction orders fell −1.8% m/m, −11.8% y/y. EUR/USD could not hold early gains to 1.3400 and fell through its 200-MA on four-hour charts, closing at 1.3025, beneath strong support at 1.3070 and back to pre-U.S. quantitative easing prices, with downside potential building.

In a light U.K. data week, February DCLG house prices are down −12.3% y/y and March RICS house price balance moderated to −73%, while the March BRC retail sales monitor fell −1.2%. GBP/USD traded above support at 1.4650 for the week but could not hold above 1.5000, closing at 1.4782 for a 150-pip gain, while EUR/GBP trended down to close at 0.8809.

The BoC meets Wednesday, 22 April and is expected to leave rates unchanged at 0.5% with a discussion of QE. March CPI printed 0.2% m/m, 1.2% y/y, with core 0.3% m/m and 2.0% y/y. February manufacturing shipments rose 2.2% m/m, 1Q2009 business outlook for future sales improved to −22, and the Bank of Canada senior loan officer survey to 60.3. USD/CAD trended down early but could not break beneath 1.2000, bouncing and closing at 1.2147, while AUD/CAD bounced from resistance at 0.8920, then support at 0.8650, closing at 0.8755.

New Zealand 1Q2009 CPI printed 0.3% q/q, 3.0% y/y, and 0.5% q/q food prices. February retail sales printed 0.2% m/m, ex-autos −0.1%, and the March PMI rose to 40.7. NZD/USD trended down to close at 0.5656, while AUD/NZD rose strongly to close at 1.2734.

Japan’s February tertiary index fell −0.8% m/m, while March consumer confidence rose to 29.6, 28.9 households. USD/JPY fell through 100.00 to ride its 200-MA on four-hour charts, closing at 99.24. EUR/JPY broke beneath 130.60 to close at 129.27, and AUD/JPY traded rangebound between 73.40 and 70.50.