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Forex Mid-Day Technical Report

Euro Rebounds, Canadian Dollar Surges on Rate Talk

Dollar weakens broadly today and upside surprise in Conference Board consumer confidence is not giving any help to the greenback. The consumer confidence index rose more than expected to from 104.0 to 108.0 in May.

Euro strengthened across the board since European session on couple of factors. ECB Governing Council member Axel Weber said in an interview with the Financial Times Deutschland that the bank is prepared to shift to a restrictive monetary policy if needed to keep inflation in check. Executive Board member Juergen Stark also said ECB on high alert over inflationary dangers in the eurozone and ready to respond as necessary given strong money growth and high capacity utilization. Together with rumors on emerging market central banks' shuffling of reserves from dollar to Euro, the common currency rebounds strongly against dollar and also recaptured earlier loss to the Japanese yen by making new record high in the EUR/JPY.

BoC kept rate unchanged at 4.25% as widely expected. In the press release, BoC made specific mention of the continued high inflation say "both total CPI inflation, at 2.2 per cent, and core inflation, at 2.5 per cent, were above expectations," and would average 2.2% for Q2. Growth is expected to be 3.5% this year, " a full percentage point higher than was estimated in the MPR." With increased risk that future inflation will persist above the 2% target, "some increase in the target for the overnight rate may be required in the near term to bring inflation back to the target.". This is taken to be a step to set the stage for a July hike. USD/CAD falls sharply to new 30 year low of 1.0720 after the news. Markets will turn focus to PPI and GDP data later this week

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Forex Daily Technical Report

Focus on ADP Employment and FOMC Minutes

Markets are still indecisive on the direction of dollar after some roller coaster ride yesterday. Focus is turning to the ADP employment report and FOMC minutes today. The private ADP employment report is expected to indicate 120k job growth. And based on recent data since last year, this private report averaged 20k off NFP and if comes in as expected, will point to around 140k job growths in NFP, which will be a strong rebound from last month's 88k. Fed kept rate unchanged at 5.25% on May 9 and issued a statement which is virtually unchanged from Apr's. Hence, not much surprise is expected from the minutes to be released today. But still, it will be heavily scrutinized by the markets, in particular on the balance between risk of inflation and growth.

Euro failed to hold on to yesterday's gain on hawkish comments from ECB officials yesterday. Strong money growth was mentioned as a concern in various occasions by ECB officials. M3 has defied market's expectation and accelerated persistently, hitting the highest growth rate ever at 10.9% in Mar. Markets again expect the growth to slow slightly to 10.7% in Apr but we won't be surprised if this data surprises again.

Overnight, the Japanese yen was pushed sharply higher after China tripled stamp duties on stocks which also triggered a sell off in the Chinese stock markets today. The impact of 0.3% tax on stocks is minimal but this raises concern that more would be done by the Chinese government. And as the Yen/stock inverse relationship is still in place, yen was boosted higher on carry trade unwinding. But after all, the yen is still in range against dollar and euro only.
Data from Japan sees industrial productions unexpectedly dropped -0.1% in Apr vs consensus of 0.5% rise

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Forex Mid-Day Technical Report

ADP Employment Disappoints, FOMC Minutes Next

Dollar gives up some ground after weaker than expected ADP employment report but is basically still in range against euro and yen. The private employment report from ADP, which is used as a preview to Non-Farm Payroll, showed 97k jobs were added in May, missing expectation of 120k. With a average of around 20k difference, it suggests that the NFP could come in a range around 117k only, which will be below expectation of 130-140k.


However, the dollar is still drawing support from expectation that FOMC minutes to be released later today won't reveal any chance of a rate cut in the near term. As mentioned before, the accompanying statement of May 9 meeting which Fed kept rate unchanged at 5.25% was virtually unchanged from the prior one. That is, FOMC members are still uncertain of the next move based on the risk on both inflation and growth. But still Fed's predominant concern is still on inflation.


Meanwhile, both Euro and Sterling were pressured against dollar. EUR/USD broke this week's low briefly despite hawkish comments from ECB council member Nicholas Garganas said the central bank will probably raise its inflation forecast next month and is keeping options "open" on interest rate increases after June. Money supply growth in the eurozone finally showed signs of slowing for the first time in months. M3 growth dropped from 10.9% yoy to 10.4%, lower expected 10.7%. This might be a sign that monetary targeting is starting to materialize. But still, another hike is certain in June and the current high money growth rates will provide strong case for further tightening. Sterling was pressured partly due to carry trade unwinding and partly due to speculation on M&A related GBP selling

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Fed May 9 minutes show members' economic outlook 'not changed materially'

WASHINGTON (Thomson Financial) - Members of the Federal Reserve's interest rate setting committee considered the possibility of rising inflation to be the greatest threat to the US economy at their most recent meeting and gave no hint of a future interest rate cut, the Federal Reserve said today.


Minutes of the Federal Open Market Committee meeting released this afternoon said committee members considered that the medium-term outlook for growth and inflation "had not changed materially from the previous meeting" on March 21.

"Nearly all" at the meeting thought core inflation was "uncomfortably high" and that there is still "considerable uncertainty" about whether it will come down as they had expected at earlier meetings.

Fed members still thought risks to growth were "weighted to the downside," but had "diminished slightly."

Consumer spending seemed to have "flattened out," hurt by higher gasoline prices.

Also, Fed members thought housing market problems would likely last longer than they previously thought and could still do more damage than they were expecting.

Still, the overall first quarter performance had "probably exaggerated" the amount of weakness in the economy and growth would pick up.

Business investment, in particular, was looking up, with more orders and shipments of capital goods and more upbeat surveys of business conditions.

The Fed members also spent some time talking about the apparent contradiction between slowing growth and a strong labor market.

"Several" pointed out that while the slowdown was dominated by construction, layoffs hadn't matched the slowdown. When they do, that could ease what the Fed calls "resource utilization" pressure on inflation.






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Mixed Data Subdues Sterling

The overall evidence suggests a gradual slowdown in the economy.
The data will remain mixed in the short term with the Bank of England maintaining a tightening bias, but the longer-term Sterling risks will continue to build.

Sterling has been unable to make any significant headway against the Euro, weakening to near 0.68, and dipped to lows near 1.9730 against the dollar before a tentative recovery.

The latest YouGov survey reported that inflation expectations for the next 12 months were steady at 2.5% in May compared with a peak of 2.7% in January. The stabilisation in expectations will help ease inflation fears to some extent. The latest Nationwide house-price survey recorded a 0.5% increase in May with a 10.3% annual increase. The data suggests a slowdown, although regional variations are increasing. Mortgage approvals fell to 107,000 in April from 113,000 the previous month while net consumer lending slowed significantly.

Consumer confidence rose in May, but the CBI reported a slowdown in sales growth while prices rose. A combination of faltering consumer spending and lower house prices would pose substantial risks to the UK currency, although the near-term data is likely to be more mixed

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أسوأ نتائج اقتصادية لأمريكا منذ 5 أعوام والنمو 0.6 في المائة

واشنطن، الولايات المتحدة الأمريكية (CNN)
-- أكدت تقارير رسمية أمريكية أن اقتصاد البلاد يمر حالياً في أسوأ مراحله منذ خمسة أعوام، مع تراجع مؤشرات النمو إلى معدلات قاربت ما كان عليه الحال عقب هجمات 11 سبتمبر/ ايلول.
وأكد التقرير، الذي أعدته وزارة التجارة الأمريكية، والذي يتوقع أن يستدعي الكثير من التعليقات السياسية، أن اقتصاد البلاد كان شبه كسيح طوال الربع الأول من العام 2007، حيث عجز عن تحقيق نمو يتجاوز 0.6 في المائة، وهو رقم أدنى بكثير من نسبة 1.3 في المائة، التي تمثّل أسوء ما كان يتوقه الخبراء.
وأعاد الخبراء هذا التراجع إلى الخسائر الكبيرة التي يعانيها الميزان التجاري الأمريكي، إلى جانب تراجع الإنفاق الاستثماري.
وشبّه الخبير الاقتصادي كين مايلاند، الوضع الحالي للاقتصاد الأمريكي بوضع الغريق، قائلاً: "لا تزال رؤوسنا فوق الماء، بالكاد."
وكان الاقتصاد قد بدأ مسيرة تراجعه في الولايات المتحدة مع الخسائر التي طاولت قطاع العقارات والبناء، مما أدى إلى تقلّص الإنفاق الاستثماري على عدة مستويات، وفقاً لأسوشيتد برس.
غير أن النتائج الحالية لهذا الاقتصاد تعتبر غير مسبوقة بكل المقاييس، إذ أن نسبة النمو للفترة عينها من العام الماضي بلغت 2.5 في المائة، الأمر الذي استدعى في حينه قرع ناقوس الخطر من قبل الخبراء.
وأظهر التقرير تراجعاً في نسب الاستثمار بقطاع البناء بنسبة 15 في المائة خلال الربع الأول من العام الجاري، مع زيادة ملموسة في عجز الميزان التجاري، إلى جانب وصول عدد العاطلين عن العمل الذين سجلوا للحصول على مساعدات مادية إلى 310 آلاف شخص.
وكشف التقرير أن الإنفاق الفردي في الولايات المتحدة ارتفع بمعدل 4.4 في المائة، وهو أمر يساعد على تحريك العجلة الاقتصادية في الأحوال العادية، غير أن معظم تلك النسبة تخصص حالياً لتسديد فاتورة المحروقات، مع وصول سعر غالون البنزين إلى أكثر من ثلاثة دولارات.
كما طرأت زيادة في معدلات التضخم، بلغت 2.2 في المائة، رغم قرار المصرف الاحتياطي الفدرالي الأمريكي إبقاء معدلات الفائدة على 5.25 في المائة.
وكانت النتائج المالية للميزان التجاري الأمريكي في فبراير/شباط الماضي قد أظهرت عجزاً هائلاً للسنة الخامسة على التوالي، قُدر بنحو 763 مليار دولارا في العام 2006، وقد تركز رجحان الكفة لمصلحة الواردات في العلاقات التجارية مع الصين، والتي بلغت معدلات غير مسبوقة في تاريخ العلاقات التبادلية بين دول العالم.
وبلغ العجز في التبادل مع الصين وحدها حد 232 مليار دولارا، بزيادة 15.4 بالمائة عن العام 2005، وهي أكبر نسبة عجز تسجل في التعامل التجاري بين بلدين في التاريخ.
وقد اكتسبت تلك النتائج طابعاً سياسياً، في ظل إصرار إدارة الرئيس الأمريكي جورج بوش على المحافظة على سياسة التجارة الحرة، مقابل إصرار الأكثرية الديمقراطية الجديدة في الكونغرس على تعديل هذه السياسة.
وكشف تقرير وزارة التجارة الأمريكية أن خسائر الميزان التجاري زادت بمعدل 6.5 بالمائة في العام 2006، لترتفع قيمتها الإجمالية إلى نحو 763 مليار دولارا، مقارنة بحوالي 716 ملياراً في العام 2005، الأمر الذي يعني أن الولايات المتحدة استوردت بضائع وخدمات بقيمة 2.20 تريليون دولاراً.

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ساركوزي ينتقد "الارتفاع المصطنع" لليورو

باريس، فرنسا(CNN)

-- جدد الرئيس الفرنسي نيكولا ساركوزي الثلاثاء انتقاده "للارتفاع المصطنع" للعملة الأوروبية مقابل الدولار.

ونقلت أسوشيتد برس عن ساركوزي قوله أمام تجمع للمزارعين في سانبيير لوفيجيه، في مقاطعة السانماريتيم "ينبغي أن نفعل باليورو ما يفعله الصينيون باليوان."

وأضاف "عندما يقال لي أنّ اليورو في أقوى عافية، فإنّ ذلك نسبي عندما ترون أنّ العملة الأوروبية ربحت 35 في المائة مقارنة بالدولار."

وقال إنه طرح هذه المسألة على محافظ البنك الأوروبي جان كلود تريشيه مطالباً بـ "فتح نقاش" حول هذا الموضوع.

وأعرب ساركوزي عن إيمانه باستقلالية البنك الأوروبي، غير أنه دعا بالمقابل إلى وضع العملة في خدمة النمو والوظائف.

وسأل الرئيس الفرنسي المزارعين قائلا "كيف تريدون من قطاع مثل قطاعكم(الزراعة) أن ينجح في البقاء إذا كانت كلّ الأرباح التي يحققها قد أغرقها الارتفاع الاصطناعي لسعر صرف اليورو مقابل الدولار؟ وسأستمر في طرح هذا السؤال."

وكان اليورو قد سجّل قبل أسابيع قليلة أكبر ارتفاع له مقابل الدولار والين منذ إطلاقه عام 1999.

ويعتبر محللون أنّ عودة الاقتصاد الألماني، الذي يعدّ قاطرة الاقتصاد في الاتحاد الأوروبي، إلى سالف قوته يعدّ العامل الأساسي في قوة اليورو.

وكان رئيس وزراء لوكسمبورغ، جان كلود يونكر، أوضح في وقت سابق في تصريح للصحفيين أن ارتفاع اليورو مقابل الدولار يجب ألا يكون عامل قلق للأوروبيين، مضيفاً ان ارتفاعه لن يضر بالتجارة الأوروبية.

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Dollar Volatility Stoked Ahead Of Friday's Employment Report

Though the FX market was overwhelmed by US data this morning, the overall sentiment generated by the wave of numbers was largely unchanged from pre-release conditions. Even the promise of an overriding GDP revision fell short of expectations, leaving conditions primed for another fundamental flood for Friday.

From the charts, it was clear that the morning's indicators wound up considerable expectations even though the action that followed was directionless. From EURUSD, the morning swing higher accelerated in the US session all the way to 1.3475 before loosing its way and reverting to a 40-point range. The British pound was more consistent in taking advantage of the dollar's vulnerable situation. GBPUSD has staved off ranges to push a two wave, 80-point advance to 1.9815. Currently hovering at the same level it closed yesterday's US session, USDCHF traced out a 40-point swing that sustained the choppy conditions that have dominated the pair since the 21st. Finally, USDJPY drew the crowds when spot surged through 121.80 support, though a pullback before 122 kept momentum sidelined.

One serious obstacle to calm markets has passed; with another dead ahead. The trading masses were undoubtedly crowded around their terminals this morning to receive the lengthy list of economic indicators scheduled for release. Inferring from speculation prior to the opening of the flood gates, the GDP revision clearly cornered the market for potential event risk. In its advanced release, the first quarter growth report disappointed the market when it crossed the wires with a 1.3 percent annualized pace of growth - below the 1.8 percent clip expected. As time passed and more data came in, economists lowered their expectations for its second reading. The consensus for today's number was pegged at a lowly 0.8 percent, though the dour outlook for near-term growth likely positioned the unofficial outlook even lower. So, when the GDP number printed a fresh four-year low 0.6 percent annualized pace of growth, traders were somewhat prepared. From a long-term fundamental view the economy's crawling pace, is distressing; and a downturn in any of the major veins of growth (consumer spending for example) could finally usher it into a preliminary recession.

After the GDP number was fully absorbed into dollar price action, traders moved onto the many other releases crossing the wires. Handling the sensitive housing sector, an April Construction Spending report for April and a first quarter House Price Index only confirmed the market's ailment. The inflation number's modest 0.1 percent was notable since it precedes the massive 10.8 percent drop in new home prices last month. Another set of indicators that drew interest, specifically ahead of tomorrow's market-driving NFP report, was the weekly jobless claims and April Help Wanted Index for April. The four-week moving average on first time claims is still very close to its one-year low, though it recently stepped up from the extreme last week. The only true surprise from the whole mix was the Chicago PMI survey for May. Matching a two-year high, the business activity gauge offers a last minute boost to speculation surrounding tomorrow's ISM survey.

Considering tomorrow's calendar, those traders who felt they missed out on big trades this morning will have a second chance at big moves and breakouts. The unusual confluence of the ISM and NFP release could produce an interesting response from the dollar. Similar surprises could spark big breakouts, while offsetting or neutral reads could render the data impotent. While the economic calendar could decide short-term action, there are other issues to keep in mind for the dollar's long-term health. An article from the Financial Times yesterday reported on a piece of legislation that Senate leaders are just finalizing that seeks to reverse the long-standing US policy to avoid currency intervention. While it still has a ways to go and considerable opponents in the president and Treasury secretary, it just provides further evidence of trade strains between the US and the world.

The benchmark US stock indices were comfortably moving into new record territory following yesterday's dramatic, late-day rebound. Though off its intraday high, the Nasdaq Composite was leading the bullish advance with a 0.37 percent climb to 2,602.27. The Dow was trading only 0.09 percent higher at 13,644.95 while the S&P 500 rose 0.07 percent to 1,531.36 by the same time. Scanning the headlines, the outlying market movers once again had their roots in deals. Investors reacted this morning when Wachovia announced it would pay $6.8 billion in stock and cash to buy A.G. Edwards to create the second largest retail broker in the US. Shares of A.G. surged $10.47 to $87.62 on the announcement. In a more symbiotic deal, Apple reported that its TV will stream video from Google's recently acquired Youtube file share site. Shares of Apple rose 1.0 percent to $120.01 on the news.

Despite the dim read on economic expansion from this morning's GDP revision, Treasury traders were still banking on Fed neutrality with just a hint of a possible rate hike later down the road. The benchmark ten-year note was trading 8/32nds off the open at 96-28 as its yield jumped 3 basis points to 4.900 by 15:45 GMT. The longer-dated bond followed suit as it lost 12/32nds to 95-23 while its yield also added 3 basis points to 5.028.

DailyFX

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May Payrolls - Chance of a Rebound

The Non Farm payrolls report is always one of the most important economic releases in the currency market and this Friday's figures for the month of May are no exception. Healthy labor markets remain key to the dollar bullish case. With housing continuing its slow motion meltdown which is now starting to seep into retail sales new jobs will be the primary determinant of fresh consumer demand which in turn will be critical to any future US economic growth.


The EURUSD has continued to range trade between 1.3650 and 1.3400 as markets presently find themselves in a state of equilibrium. The EURUSD is unlikely to move much above or below the current range levels unless one or the other of the two scenarios comes true.

Euro-zone consumer demand picks up markedly allowing the ECB to entertain the possibility of rate hikes beyond 4%


OR

US tilts into a recession forcing the Fed to lower rates despite serious inflationary pressures existent in the system

While the first scenario appears unlikely at this moment as Euro-zone consumer demand is experiencing it own problems with Bloomberg Retail PMI data slipping below the 50 boom/bust line for the first time in three months, the second scenario may gather credibility if the NFP numbers print substantially below forecasts. With US Retail Sales last month printing at -0.2% - the first negative read in 7 months - and with US GDP for Q1 revised to an anemic 0.6%, the labor market remains the last defense against the possible onset of a recession. As housing values have declined, consumers are no longer able to extract mortgage equity to help them finance additional purchases. Therefore, jobs and rising wages become the last source of new revenue for the US consumer. Some analysts have argued that the recent stock market rally will help offset some of the declines in housing keeping the wealth effect in tact. However, the majority of US consumers are only exposed to the equity markets thru their 401K pension plans and therefore any recent gains remain illiquid and inaccessible, greatly limiting their impact on spending. Thus, with more than 70% of the US economy driven by consumer spending, new job growth becomes vital to the health of the US economy



What does this mean for the US Dollar

Generally the impact on the dollar of the NFP report may be muted unless the results are wildly out of line. Expectations for the release vary greatly - from a high of 224K to a low of 45K. The broad consensus is at 135K with the latest derivates auction numbers from CME suggesting a print of 121K. If payrolls register a reading within a few thousand of the 100K mark the EURUSD should see only a minimal impact on price. In that case the news would suggest that the US economy continues to expand at a moderate pace. A print above 175k would most likely provoke a dollar rally, as it would reinforce the idea of another Fed rate hike, especially given the generally hawkish bias of the US monetary authorities. On the other hand a very weak number near the 75K level could spur another test of the all time highs in the EURUSD although that scenario appears to be less likely, unless the dour employment data would be corroborated by similarly weak reading from the upcoming ISM Manufacturing and Services surveys. Overall, the report may produce lots of heat and little light, as trading is most likely to remain contained within the familiar 1.3650-1.3400 range

What is the market expecting for May

Change in Non-Farm Payrolls: 135k Forecast, 88k Previous
Unemployment Rate: 4.5% Forecast, 4.5% Previous
Change in Manufacturing Payrolls: -15k Forecast, -19k Previous
Average Hourly Earnings: 0.3% Forecast, 0.2% Previous
Average Weekly Hours: 33.8 Forecast, 33.8 Previous

The odds are in favor of a better NFP number, but there are arguments supporting both weaker and stronger job growth

Examining the NFP Leading Indicators

Arguments for a Stronger Payrolls Report

• Employment Component of Chicago PMI Increases
• Monster Employment Report Shows Robust Gains
• Jobless Claims Remained at Lowest Since January

Arguments for a Weaker Payrolls Report

• ADP Employment Remains Below 100k for Fourth Month in Row
• Hudson Report Shows Households Less Confident of Future Hiring

An early release of the NFP report leaves us without the benefit of some key leading indicators such as the ISM reports to better gauge for same-month US job growth, increasing uncertainty around the upcoming release. The data we have seen up to now paints a mixed picture for domestic employment figures. On the one hand, a drop in Jobless Claims raises the prospect that unemployment remains low across the economy. The weekly report showed that the number of unemployment claims stayed at their lowest since January for weeks ending May 4th and 11th. To put this into perspective, January saw an addition of 111k jobs on the month's NFP report, but this was later revised to an impressive 162k. The last time the four week moving average of jobless claims was this low was back in February 2006 when non-farm payrolls printed a very hot 300k. The recent Monster Employment and Chicago PMI reports likewise add to the bullish case for NFP's, as the headline index for online job ads rose to 189 points from 186 previous while the employment component of Chicago PMI increased from 50.5 to 57.3. According to company officials, the popular job listings service has shown consistent gains in new job advertisements, registering a 13 percent year-over-year rate in April. Though this overstates employment changes in the broader economy, the 3 point gain in new jobs bodes well for Non Farm Payrolls in May.

Looking at the most recent ADP data, however, job creation in the private sector was worse than economists had predicted. Median estimates showed expectations of a 120k gain, but the headline number remained below 100k for the fourth consecutive month at 97k. It is worthwhile to point out that the ADP survey has been a less-than-ideal predictor for the official US Non Farm Payrolls change, but the result was nonetheless enough to cut forecasts for the upcoming Bureau of Labor Statistics data. Looking to other private employment news sources, the Hudson Employment Index showed slowed hiring projections through the month of May. Employees were the least optimistic of job prospects since January, with only 31.8 percent predicting that their company would be hiring more workers through “the next few months”. Whether this translates into a lower May Payrolls change is yet to be seen, but the trend leaves risks to the downside for the future of US employment gains.


Conclusion

As always with Non Farm Payrolls, it is important to keep an eye on both the headline and revision number. In all likelihood the May numbers should print in the neighborhood of 100K. However the revisions from the month prior may serve as a tipping point. An upward revision would eliminate much of the concern about the recession scenario in H2 of 2007 and would most likely put a bid underneath the greenback. However a downward revision off the already weak 88K print last month would be quite bearish for the dollar and put the EURUSD on a path to retest its recent highs.

DailyFX

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تابع

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اتوقع صعود كل من اليورو و الباوند

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اساسيا حتى صدور اخبار امريكا ايضا صعود

تحياتى

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Dollar Needs Payroll Confirmation

The Friday data will help determine whether greater confidence in the US economy and dollar is justified.

The dollar was unable to make a fresh challenge on 1.3410 against the Euro and weakened to lows around 1.3470 before a recovery back to 1.3450 in choppy trading. The Euro secured further support from buying interest on the crosses with renewed Euro/yen buying. The dollar was holding close to 1.3450 in early Europe on Friday ahead of the US data releases with a slightly firmer bias.

First-quarter US GDP growth was revised down to 0.6% from the original 1.3%. A larger reported drop in inventories and a weaker trade report contributed to the downgrade while consumer spending held firm.

There was a small fall in jobless claims in the latest week while the Chicago PMI manufacturing survey rose strongly to 61.7 in May from 52.9 the previous month. There will be greater optimism that the manufacturing sector is rebounding and the Friday data will be watched closely to assess whether this confidence is justified.

The Chicago PMI prices index was the highest for 10 months while the core GDP deflator was running at 2.2% which will keep the Federal Reserve on inflation alert, especially if there is a firm PCE core inflation figure on Friday. The dollar will gain support if the increase in US yields is sustained, but the impact will be curbed by the fact that Euro-zone yields have also increased over the past week

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Dollar May Have Missed Its Last Chance To Take Out Resistance On A NFP Disappointment

Though there were fully eight independent, upper echelon indicators scheduled for release this morning, the dollar failed to make a break during the data flow. Now with the calendar clearing up for the week ahead, natural market forces will have to push the currency out of limbo without the aid of a momentum-unifying key indicator.

Following the charts, all of the same major levels are still in place. EURUSD saw a burst of activity in the US session that tore the pair from its 10-point, overnight range and put it into a dive to 1.3390. The hopes for a clean break below serious support at 1.34 evaporated when the pair retraced most of its gains. The pound was able to hold its ground against dollar fluctuations this morning as GBPUSD cut a volatile range between 1.9765 and 1.9820. For the carry-attractive pairs, the greenback's gains were a little stickier. USDJPY steadily rose to take out 122, though considerable resistance was eyed in the 122.20/40 zone. Finally, USDCHF was already on its way to making a big double top at 1.2330 and US session action just moved things around from there.

A considerable opportunity was squandered this week. Two consecutive sessions packed with big name economic indicators had raised the bar for potential market action, all while the dollar was positioned at a technical cliff. Today's calendar was the second chance to get things going; and most were banking on a big move after the nonfarm payroll report. However, the gauge let traders down when it printed a stable figure near economists' consensus. According to the Labor Department, 157,000 American's found employment in May –modestly above the 132,000 expected. For policy makers, the steady additions to payrolls and consistently low jobless rate are optimal for stable interest rates. On the other hand, the April revision was once again to the downside, which is the third consecutive month after two years of positive adjustments. Looking back at price action following the NFP numbers through this year, the average move has been relatively tame compared to previous years. If these conditions continue, the monthly employment figure may fall out of favor with short-term traders and be cut from top market mover lists.

Though the NFP data was uneventful, the other consumer-related indicators were putting printing notable changes. Average hourly earnings for the year through May accelerated for the first time in five months when it rose to a 3.8 percent pace. The personal spending and income data for the previous month was a little more exciting. Offering a lagging report to today's earnings data, personal income dropped 0.1 percent in April – the first contraction since August of 2005. In contrast, the growth and inflation supportive personal spending number for the same period actually jumped 0.5 percent. Given the dip in the PCE numbers, spending trends may be secure even if income remains flat. The Fed's favored inflation gauge decelerated on an annual basis through April to a one-year low 2.0 percent pace – notably right in line with the central bank's target. Should the FOMC's expectations for a rebound in growth fall apart, current conditions could allow for a rate cut with little cry of foul for inflation.

Undoubtedly, the NFP release was the center of attention for the day. However, the markets had one last chance at the elusive big break in the ISM manufacturing survey. Like the payroll number, the factory survey has commanded the top market moving spot in the past. Also like NFPs, the ISM gauge has fallen from grace as it bottoms out as factory activity rebounds as businesses look to restock inventories. For May, the national business activity indicator rose to 0.3 points to 55.0 against expectations of a 0.7 percent decline. A one-year high, but altogether another meager change. Looking ahead to next week for guidance on price action, there are few noteworthy economic reports scheduled for release; so the dollar may slowly give up its hard-earned gains as ranges stay in place.

Just as the dollar ultimately disappointed those looking for a pivotal decision in direction, equity markets once again fell short of supplying big follow through for all-time highs. From the benchmark indices, the Nasdaq Composite led the day with a 0.47 percent advance to 2,616.84 by 15:05 GMT. At the same time, the S&P 500 was up 0.3 percent at 1,535.20 while the Dow was added 0.11 percent to 13,643.24. And though the broad market was rather buoyant, many of the day's outliers were actually losers. Brocade Communications Systems' shares dropped 5.3 percent to $8.71 after reporting a 98 percent drop in second quarter net income. To balance things out, large-cap Dell's shares rose 2.7 percent to $27.64 after announcing a small dip in quarterly earnings and a 10 percent cut in the firm's workforce.

Debt traders were pleased with the mix of modestly better growth data and stable inflation numbers that may help to defer the ‘inevitable' rate hike even further. By 15:03 GMT, the ten-year note was trading 11/32nds lower at 96-19 as its yield jumped 5 basis points to 4.935. The thirty-year note was off 14/32nds while its long-term yield added only 3 basis points to 5.040.




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Economic Indicators: Personal Income April - Inflation Is Back Into The Comfort Zone

April's personal income figures came in lower than expected, with personal income falling 0.1%. Spending came in stronger, however, with a huge bounce back in services offsetting declines in outlays for nondurable items. The real surprise was inflation. The core PCE deflator rose just 0.1% in April and is now up just 2.0% year-over-year.

Personal Income Was Surprisingly Weak

• Personal income fell 0.1% in April, with wages and salaries falling a surprisingly large 0.4%
• Wages rose in manufacturing and construction and fell in the other services category
• Taxes and rising gasoline prices took a slightly large bite out of income in April. Real after-tax income fell 0.4% in April

Spending Was Stronger But Inflation Moderated

• Real consumer spending rose 0.2%, which was better than expected and should raise estimates for second quarter growth
• The PCE deflator rose 0.3% in April, largely due to higher energy costs. Excluding food and energy, the core PCE rose just 0.1% and is now up just 2.0% year-to-year
• The overall inflation rate also moderated and is up just 2.2%