Daily Forex Technicals

The Usd was weaker in the Asian session, as the final US Treasury auction concluded without incident sparking risk appetite. The EurUsd traded up to 1.4022 from 1.3907, while the UsdJpy traded between 98.90 and 96.26.

The GbpUsd regained its bullish momentum trading back above 1.6050. The final auction of $26bn 7yr notes ended the week where $101bn of new supply hit the streets. The auction was inline with expectations, with indirect bidder’s percentage and bid-cover ratios similar to past results.

The uneventful auction combined with higher demand for US durable good (at 1.9%) was celebrated by traders. Equity markets in Asia are largely in positive territory, following Wall Street's strong finish yesterday. With US Treasury yields rising (10yr above 3.50%) and with the greenback continually under pressure, there is a sense that global investors want a higher risk premium to hold USD denominated assets.

It's important to mention that the rising yield at the long end is now pushing mortgage rates higher and threatening to trample on US' fragile “green shots”. In other news, the media is reporting that GM is planning to file for bankruptcy on June 1st (widely expected). Overall traders are now clearly focused on credit markets, which are showing renewed signs of strains and FX traders should be ready for a sudden and rapid bout of deleveraging if tensions persist.

In Japan, Key CPI and industrial production data both surprised to the upside. The National headline CPI fell by only 0.1%y/y, a figure that might help ease deflation fears . However, the BoJ is well aware that the country is not in the clear just yet . Industrial production managed a 5.2%m/m expansion, pushing the y/y figure to -31.2%y/y, slightly better than expectations. The unemployment rate, however, increased to 5 .0 % from 4.8% previously, the highest level in over 5 1/2 years. And as the government has expressed along side recent economic upgrades, without a recovery in the labor markets the downside risk to the economic is still a reality.

Today, US preliminary Q1 GDP, Chicago PMI and the University of Michigan confidence index come out and as the markets are watching for more proof of green shots, these will be critical.

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US DOLLAR SINKS TO 2009 LOW AGAINST EURO

The US dollar on Friday slumped to its lowest level versus the euro this year with the currency losing its safe-haven status amid increasing signs of economic recovery, traders said.
In London trade, the European single currency spiked to $1.4106 - the highest point since December 31 - compared with $1.3943 late in New York on Thursday.
Against the Japanese currency, the dollar fell to Y96.34 from Y96.77 late on Thursday.
Markets are looking ahead to US economic growth data due Friday, with analysts expecting gross domestic product to have fallen 5.5 per cent in the first quarter rather than an initial estimate of 6.1 per cent.
Data on Thursday showed an unexpectedly strong 1.9 per cent increase in US durable goods new orders in April and new US unemployment claims fell to 623,000 in the past week, a better reading than forecast by most analysts.
The data "didn't dent hopes of an economic recovery in the second half of the year," said analysts at NAB Capital.
Earlier on Friday, dealers digested news that prices in the eurozone stagnated in May over one year for the first time since records began.
The Eurostat estimate put 12-month inflation in the eurozone - numbering 16 nations since this year - at 0.0 per cent in May, the lowest point since 1996.
IHS Global Insight analyst Howard Archer said the data coupled with the prospect of prices falling in the coming months on an annual basis may cause the European Central Bank (ECB) to cut interest rates to new lows.
"The ECB has ample scope to keep interest rates down at 1.00 per cent for an extended period and to even cut them further should there be any faltering in the current mounting signs that the rate of eurozone economic contraction is slowing substantially," said Archer.
The yen meanwhile firmed against the dollar and euro on Friday after better-than-expected Japanese industrial data fanned hopes for an economic recovery, traders said.
Japan's industrial output in April jumped 5.2 per cent from the previous month. It beat market expectations for an increase of around 3.3 per cent, sparking hopes of a recovery.
In London trade on Friday, the euro was changing hands at $1.4106 against $1.3943 late on Thursday, at Y134.92 ($135.00), 0.8723 pounds and 1.5146 Swiss francs.
The dollar stood at Y96.34 and 1.0814 Swiss francs.
The pound was at $1.6058.
On the London Bullion Market, the price of gold benefited from a weak greenback, rallying to $974.39 an ounce from $957.75 an ounce late on Thursday. link...

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FINMA warns that Crown Forex may be not the only Swiss Forex broker to fall

As it was extensively reported in the past few weeks Crown Forex is being liquidated and today a Swiss court had declared it bankrupt, as expected. Crown Forex's assets will be liquidated after the company's appeal against an earlier ruling was rejected. FINMA then went ahead and warned that more Forex brokers could follow given the new Swiss regulations. While these regulations are not as stringent on the technical side (no Anti-Hedging or Anti-Pricing yet) they still require almost 5 times more Net Capital than the NFA requires, making it extremely difficult for some Forex brokers to comply. Currently there are only 5 approved Swiss Forex brokers, but there are still several more. link...

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Dollar Climbs vs. Yen as Wall Street Rises

Higher-yielding currencies such as the Australian dollar and Norwegian crown also gained, benefiting from a generally upbeat tone in financial markets.

"There's a slight uptick in risk appetite despite the weak data and that's why we have seen...dollar/yen gain a little bit," said Matt Kassel, director of FX trading at ING Capital Markets in New York.

Both the dollar and the yen typically rise when investors turn risk averse and slip when risk appetite rises. But dealers said the dollar was gaining at the expense of the yen on Thursday after weakening against the Japanese currency earlier this week.

The euro [EUR-TN 1.4127 0.0184 (+1.32%) ], which tends to prosper as investors turn more optimistic, rose against the yen and was up slightly against the dollar.

In midday New York trading, the euro was around $1.3605, recovering from session lows at $1.3526. The euro has risen about 5 percent against the dollar since April 20, when it hit a roughly one-month low. link....

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WORLD FOREX: Strong Japan Output Data Lift Yen Vs Dlr, Euro

Data from Japan's trade ministry showing that industrial production rose 5.2% on month in April - the biggest gain since March 1953 - led Asian hedge funds and other short-term investors to buy the yen, dealers said.

The data added to hopes that Japan's export-reliant economy has left behind the worst of its recession, although other data issued in the day indicated that its domestic demand is deteriorating.

The dollar fell briefly to Y96.25, down more than two-thirds of a yen from late New York Thursday, before recovering to around Y96.50.

The euro also slid to Y134.47 from Y135.19 overnight on selling by some Japanese institutional investors, dealers said. The European currency later pared some gains on short-covering by speculators, they said.

But the outlook for the yen looks unclear because the currency markets still lack any clear sense of direction, said Motonari Ogawa, a director at Barclays Bank in Tokyo. Currency traders' focus is changing around so often, so quickly - from stock markets to U.S. yields to economic data - that it's too risky to make long-term directional bets, he said.

"The base range for dollar/yen is from Y95 to Y98," he said. Many players are trading based on technical charts, so "if the dollar breaks below or above that range, they'll follow in the same direction," he said. link....

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Malvinder bows out of Ranbaxy

New Delhi, May 24: Malvinder Singh today stepped down as the chairman and CEO of Ranbaxy Laboratories, ending his family’s long association with the country’s largest drug company.

Chief operating officer Atul Sobti is the new CEO and managing director, while non-executive director Tsutomu Une has been elected as the chairman of the board, Ranbaxy said in a statement today.

The change in management was decided at the company’s board meeting today. The decision is likely to be approved at the company’s annual general meeting on Friday at Mohali.

Analysts see the change of guard as signs of increasing control being exerted by Daiichi Sankyo, the Japanese pharma major that holds a majority 64 per cent stake in Ranbaxy. Daiichi said the decision was an “agreement” between the two sides. In Ranbaxy’s 10-member board, six are from the Japanese company.

On his decision to exit, Singh said, “In business, you always look forward. You don’t drag along. I am carrying on and will go on a holiday.”

Gurgaon-based Ranbaxy was founded by Malvinder’s grandfather Bhai Mohan in 1961. Bhai Mohan was succeeded by his son Parvinder who transformed Ranbaxy into India’s first pharma multinational. Malvinder joined Ranbaxy about 10 years ago and became the CEO and MD in 2006.

In June last year, Singh and his brother Shivinder sold their entire 35 per cent stake to Daiichi for Rs 10,000 crore. The Japanese firm invested another Rs 10,000 crore to raise its stake to about 64 per cent.

“It was a difficult decision to separate from Ranbaxy,” said Singh, “But it was the right time for me to do so. I leave with complete confidence that the initial transition phase that followed Daiichi Sankyo’s acquisition of a majority shareholding interest in Ranbaxy has been completed successfully; and that the company’s excellent team of management colleagues are well-positioned to take full advantage of the company’s growth opportunities.”

According to Ranbaxy’s 2008 annual report, Singh is entitled to a severance package of 24 months of his salary, which works out to around Rs 45 crore. In normal circumstances, he would have retired in 2013.

Takashi Shoda, a director of Ranbaxy and the CEO of Daiichi Sankyo, said, “We appreciate the efforts of the Singh family, which helped grow Ranbaxy from a small, local Indian company to a large multinational it has become today. We especially acknowledge the contributions of Singh. His strategic vision and passion for the pharmaceutical industry will be missed in Ranbaxy’s operations.”

The analysts said Singh could now pursue aggressive growth plans in the financial services company (Religare Enterprises) and the healthcare company (Fortis Healthcare), which he owns with Shivinder.

The two brothers are also considering diversification. link...

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Rupee down 22 paise against USD in early trade

The Indian rupee depreciated 22 paise against the US dollar in early trade on Monday, snapping its six-session upward journey, on expectations of fresh capital outflow by foreign funds as domestic bourses may open in the negative zone, in line with other Asian markets.
At the Interbank Foreign Exchange (Forex) market, the local unit, which had gained nearly 4.9 per cent during the last week, turned weak and fell 22 paise to 47.32 a dollar.
On Friday, the domestic currency had ended 27 paise higher at 47.10/12 against the greenback.
Forex dealers said the benchmark Sensex is likely to open on a weak note in line with other Asian markets, which are down up to 1.5 per cent, leading to capital outflow by foreign funds.
Month-end dollar demand also put pressure on the rupee, they added. link...

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Forex and Dow Jones recommended levels

Today"s support: - 1.3950 and 1.3910(main), where correction is possible. Break would give 1.3891, where correction also may be. Then follows 1.3857. Break of the latter would result in 1.3812. If a strong impulse, we would see 1.3770. Continuation will give 1.3735.

Today"s resistance: - 1.4075 and 1.4104(main). Break would give 1.4130, where a correction is possible. Then goes 1.4147. Break of the latter would result in 1.4172. If a strong impulse, we"d see 1.4198. Continuation will give 1.4218.

USD/JPY

Today"s support: - 94.02 and 93.54(main). Break would bring 93.37, where correction is possible. Then 93.12, where a correction may also happen. Break of the latter will give 92.81. If a strong impulse, we would see 92.65. Continuation would give 92.36.

Today"s resistance: - 94.56, 94.95 and 95.43(main), where a correction may happen. Break would bring 95.67, where also a correction may be. Then 95.90. If a strong impulse, we would see 96.30. Continuation will give 96.64.

DOW JONES INDEX

Today"s support: - 8251.87, 8223.70 and 8190.00(main), where a delay and correction may happen. Break of the latter will give 8174.11, where correction also can be. Then follows 8143.32. Be there a strong impulse, we would see 8121.10. Continuation will bring 8097.20.

Today"s resistance: - 8325.36, 8368.70 and 8413.60(main), where a delay and correction may happen. Break would bring 8438.60, where a correction may happen. Then follows 8474.25, where a delay and correction could also be. Be there a strong impulse, we"d see 8507.77. Continuation would bring 8528.40. link...

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Two Technology Offerings Find Favor on Wall Street

SAN FRANCISCO — The dry spell in initial public offerings for venture-backed technology companies may be over. This week, two of those companies went public: OpenTable, the online restaurant reservation service, and SolarWinds, which makes network management software.Investors gave both of them warm receptions. Shares of OpenTable, which began trading Thursday on Nasdaq, were originally priced at $20 and jumped 60 percent to close at $31.89. Shares of SolarWinds, which began trading Wednesday on the New York Stock Exchange, closed Thursday at $13.79, 10 percent above their offering price of $12.50.

The offerings could unclog the “moldy I.P.O. pipeline,” where some companies have been languishing for more than a year, said Scott Sweet, senior managing partner at I.P.O. Boutique, a research and advisory firm.

Despite the strong investor demand for OpenTable, which sells reservation software to restaurants and runs a Web site for diners, Mr. Sweet said that its high offering price reminded him of the dot-com bubble, particularly considering the toll that the recession was taking on the restaurant industry. “Once sanity prevails, it will likely trade down hard,” he said. SolarWinds, which has sold its business software to 80,000 customers, is growing faster and has more diverse sources of revenue, he said.

Some venture capitalists, burned by nine months with no public offerings, which provide the bulk of their investment returns, are cautious about declaring that the markets are ready to embrace small technology companies.

Just six venture-backed start-ups went public last year, the fewest since 1977 and down from 86 in 2007, according to the National Venture Capital Association. The last such company to go public was Rackspace Hosting in August. Shares of that company are down 6 percent since then.

“Some people may say this is great, but I think two I.P.O.’s is just not enough to feel like anything has changed,” said Mike Kwatinetz, a general partner at Azure Capital Partners. “We don’t want this to distract us from the fact that there’s been a radical change” that needs to be reversed, he said.

That change started after the dot-com bubble burst. Regulators set new banking and accounting guidelines that made it harder for small companies to go public, Mr. Kwatinetz said, and big investment banks bought the small banks that used to take start-ups public. Today, banks and institutional investors are less willing to spend time researching such small companies, he said.

Even if it becomes easier for small technology companies to go public, he said, “the new normal” will probably be an average of 50 venture-backed public offerings a year, down from 125 in the prebubble days and 260 at the height of the bubble. link....

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Dame Clara Furse hands over London Stock Exchange baton

Dame Clara Furse stepped down as chief executive of the London Stock Exchange yesterday, insisting that she had no regrets at snubbing takeover bids valuing the business at far more than its present worth.

Dame Clara fought off five takeover approaches during her eight years in the post, including one from Nasdaq in 2006, which valued LSE shares at £12.43. That compares with last night’s closing price of 698p, down 2p.

However, Dame Clara pointed out that the LSE’s share price hit £20 immediately before and after the Nasdaq offer, which would have represented poor value at the time.

She added: “I think the decisions that we made were well explained and very well received at the time. It is important to remember what happened to our share price.And please remember that the bid we received from Macquarie [the Australian investment bank, in 2005] was eight times leveraged and the one from Nasdaq nearly seven times leveraged — imagine where we’d be today if we’d accepted either of those bids.”

Dame Clara said that her main regret on leaving the LSE was that she had failed to persuade the Government to reduce stamp duty on share-dealing. The levy increases the cost of capital for companies and, for many of them, means that borrowing aggressively is still a cheaper option than issuing equity.

She added: “Debt-based investment, from a tax perspective, is still attractive. That would be my main regret.”

Dame Clara was speaking as the LSE reported a full-year pre-tax loss of £250.8 million, compared with profits a year earlier of £227 million, after writing down £473 million from the value of Borsa Italiana, the owner of the Milan Stock Exchange, which the LSE bought in October 2007.

Despite the writedown, Doug Webb, LSE’s chief financial officer, insisted that the intrinsic value of Borsa Italiana was “comfortably more” than the £1.3 billion at which it had been valued at the time of the deal.

Mr Webb said: “This writedown reflects the general deterioration in markets following the credit crisis. This has no impact on cashflow; nor does it have any impact on our ability to pay dividends.”

Dame Clara said: “We look on the merger with Borsa Italiana as a great success. What you can see in [these results] is the impact of the diversification of that transaction.”

Xavier Rolet, who yesterday succeeded Dame Clara as chief executive, was tight-lipped about his plans for the LSE, but emphasised that he did not see himself changing its culture significantly.

The Frenchman said: “Culture isn’t for a single person to influence. Having been here for two months has confirmed what I knew about the exchange. There has been no surprise and no discovery process.”

Mr Rolet shrugged off concern that the LSE is losing market share to rival platforms, such as Turquoise, Chi-X Europe and Bats Trading. He said: “We are in a competitive environment and we will compete, it keeps us focused. That said, there are many other elements that drive competitive performance, including technological issues, fees, the whole regulatory arena.”

Asked whether he expected to be in the job as long as Dame Clara had been, Mr Rolet said that this would depend on a number of stakeholders, including Chris Gibson-Smith, the LSE’s chairman, and its customers and shareholders.

He added: “I realise that this job is a challenge, but I hope to surprise everyone in the coming years.”

Mr Webb said that the LSE’s new trading platform Baikal — named after the world’s deepest lake, in tribute to the pool of liquidity that it will provide — would be launched at the end of June.

The facility, which Mr Webb said had cost “a small number of millions” to develop, is seen as a direct response to the likes of Chi-X Europe.

Gurjit Kambo, of Numis Securities, the stockbroker, said: “Potential regulation is expected to be positive for exchanges, but we believe the LSE’s limited exposure to derivatives and clearing, outside of Italy, leaves it less well positioned relative to other more diversified exchanges. Given the recent strong rally in the share price, we would be inclined to take profits.” link....

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Japan's GDP shrinks at fastest pace since 1955

TOKYO -- Japan's economy contracted at the fastest pace since 1955 as exports plunged and companies slashed production.

Japan's real gross domestic product, or the total value of the country's goods and services, shrank at an annual pace of 15.2 per cent in the January-March period, the government said Wednesday.

The result represents the steepest decline since Japan began compiling GDP statistics more than five decades ago. It also marks the fourth straight quarter of decline after the GDP fell a revised 14.4 per cent in the October-December period.

Economists polled by The Associated Press had expected an average 15.8 per cent drop.

On a quarterly basis, GDP fell four per cent from the previous three-month period, according to the Cabinet Office's preliminary data.

Japan's first quarter results were markedly worse than other major economies, outpacing the euro zone's 2.5 per cent quarterly decline and a 1.6 per cent contraction in the United States.

The world's second biggest economy had relied heavily on the rest of the world to buy its cars and gadgets to drive economic growth. Like its Asian neighbours, it has been pummelled by the unprecedented collapse in global demand triggered last year by the U.S. financial crisis.

Japan's exports plummeted a record 26 per cent in the first quarter from the fourth quarter, the government said.

In response, major exporters such as Toyota Motor Corp. and Sony Corp. have moved quickly to adjust by reducing shifts, suspending factory lines and announcing thousands of job cuts over the past few months. Japan's jobless rate jumped to 4.8 per cent in March, marking the highest level in more than four years.

Capital expenditure -- business investment in factories and equipment -- fell 10.4 per cent from the previous quarter, while consumer spending slipped 1.1 per cent.

Unlike previous downturns, consumption has weakened much more than income, said Richard Jerram, chief economist at Macquarie Securities in Tokyo.

"The savings rate has gone up and that has worsened the severity of the recession," he said. "That is something which is novel about the last six months. It seems that the public has basically panicked about job security to an extent that hasn't happened in previous cycles."

Recent signs, however, suggest that the worst may have passed.

The decline in exports is slowing, and with companies aggressively trimming inventories, factories are beginning to boost production. Economists say that efforts by both the public and private sectors are also starting to pay off.

The government is trying to spark a turnaround with massive public spending. Its newest $150 billion stimulus package includes incentives for consumers to buy environmentally friendly appliances and cars, as well as help for the unemployed and small businesses.

"We think January-March will be recognized as marking the bottom in the economy for the time being," said Masayuki Kichikawa, chief economist for Bank of America-Merrill Lynch in Tokyo, in a recent report.

For the last fiscal period through March 31, Japan's GDP contracted by a record 3.5 per cent from the previous year, the Cabinet Office said. It expects the economy to shrink 3.3 per cent this fiscal year. link...

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Bank of Israel says no change to forex purchases

The Bank of Israel said on Thursday it had not changed its policy of buying foreign currency on a daily basis.

'The Bank of Israel continues as usual to buy dollars,' the central bank said in a once-sentence statement.

On Wednesday, the shekel soared to a nearly four-month high of 4.01 per dollar. Dealers cited a Citigroup report that the Bank of Israel was discussing a strategy to end daily forex purchases.

The shekel stood at 4.01 per dollar at 0925 GMT. The dollar had briefly dropped to 3.98 shekels earlier.

In March 2008, the Bank of Israel began purchasing $25 million a day of foreign currency and raised it to $100 million a day last July.

(Reporting by Steven Scheer and Tova Cohen; Editing by Victoria Main) Keywords: ISRAEL SHEKEL/CENBANK link...

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