USD was weaker in Asian sessions as traders returned from Easter to question the greenback's euphoria of last week. Eurusd rose to 1.5573 and UsdJpy fell to 100.08. The Usd inability to rally, especially given the positive existing home sales which rebounded yesterday by 2.9% to 5,030,000 in Feb, is a harbinger of near term Usd weakness. Signs of global slowdown should offer some support to the USD, particularly as market have priced in a probability that other central banks might ease their rates in teh short term. This global easing cycle had been predicted at the start of 2008. However we still see further economic weakness and the possibility of real interest rate going negative in the US which would be a heavy burden for the dollar to bear. In the short term the Usd will be vulnerable to any poor data or news. While many of the strategists are calling for Usd strength we expected the market to challenge one more time the 1.58-1.60 lvls before the trend shifts to a prolonged move downwards for reasons mentioned above. On Friday Acting BoJ Governor Shirakawa said that the handling of the recent global financial market turmoil was his top priority. He also mentioned that he had no predetermined monetary policy. The markets are currently pricing in a 15bp cut over the next 12 months. There could be more pricing in of rate cuts should officials agree on a coordinated response at the G7 gathering on April 12-13.
The European markets should be subdued due to a lack of data as markets participants wait for US and CA releases. In Canada we are expecting a rebound in Retail Sales which should keep the Cad in positive territory. Nonetheless the over all feeingl is that the softer commodity prices and exposure to the US economy will keep the currency on the defensive. In the US consumer confidence will garner the markets attention. Speculation and positioning suggests that the market expects a fair low figure.
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