Dollar Continues Freefall, German Jobs Awaited

Dollar selling has been relentless so far as Asia-Pacific traders digest the dovish FOMC statement. The big winner has been the Australian dollar, which touched 1.0947. Japanese data was a mixed bag. The upcoming session features German employment data.

A plunge in Japanese industrial production along with Japanese CPI and employment were brushed aside in Asia-Pacific trading as market watchers continue to digest the FOMC. There was nothing in it to frighten dollar bears and they have responded aggressively.

The key takeaway is that the Fed will continue to do whatever necessary to back the economy. The sentiment is crushing the dollar and helping risk appetite. Another headline boosting sentiment was a hike in the World Banks China 2011 GDP forecast to 9.3%. AUD/USD has rallied to a fresh record high and NZD/USD has rebounded after falling on the dovish RBA decision.

The headline-grabbing number from Japan was a 15.3% monthly drop in industrial production after the disaster in March. A reading of -10.3% was forecast but we warned of a soft number. We thought such a large drop may trigger risk aversion but stocks in Japan are up 1.2% and the lone fx trade remains dollar selling.

Other releases say Japanese national core CPI falling 0.1% (-0.2% exp). The unemployment rate held steady at 4.6% compared to the +4.8% expected. USD/JPY fell following the data and has continued to drift lower, falling 60 pips on the session.

Its a similar story across the board: cable has already gained 100 pips already in the Asia-Pacific session. EUR/USD has climbed 200 pips in the 12 hours since Ashraf reiterated a bullish call on in a video (see below). The pair rose to within 18 pips of the 1.49 target so it may be a good time to book some profits ahead of German employment data.

GERMAN EMPLOYMENT will released at 0355 GMT and the consensus is for a drop to 7.00% from 7.10% in the unemployment rate. The ranks of unemployed are expected to fall by 36K. The risks are certainly skewed to the negative side ahead of this release. EUR/USD has gained 300 pips in the past 24 hours and the hourly RSI is at 76. The pair has gained 700 pips since April 18.

By AB AshrafLaidi.com Staff

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