• Dollar Slips after Fed Forecasts Turn Slightly More Hawkish?
• British Pound Resilient Despite Double Dip Recession
• New Zealand Dollar Advances after RBNZ’s Slightly More Dovish Tack
• Japanese Yen Gains Despite Positive Risk Sentiment
• Euro: ECB President Draghi Eases His Inflation Tone
• Canadian Dollar Looking to Capitalize on Break to 7-Month High
• Gold Recovers from Yet Another Early Fall Thanks to the Dollar

Dollar Slips after Fed Forecasts Turn Slightly More Hawkish?

When an asset or a market doesn’t falter on bearish news, it is often a sign of an overall bull market. But, what does it mean when the capital markets and dollar neither rise on bullish developments nor fall on the bearish? Heading into the top event risk of the past trading session – indisputably the Federal Open Market Committee (FOMC) rate decision – the dollar had working its way into a terminal congestion pattern. For the non-technical traders, that is a situation in which the market essentially have to pick a direction; and the inclusion of a major fundamental catalyst in the equation to instigate the move further leverages the expected fallout. And yet, the Dow Jones FXCM Dollar merely trickled outside of its tight range well after the data hit the wires. Even more remarkable against the outcome of the day’s fundamentals, it was a bearish move.

To appreciate why the S&P 500’s (my favored risk barometer) trek back up to the top of its 1395-1360 range as well as the US Dollar index’s stumble below 9900 was so unusual, we need to refer to the event risk over the past session. The Fed festivities came in three waves. First up, we had the rate decision and minutes. Holding the benchmark at the range up to 0.25 percent should surprise no one. However, for a market that has become quite adept at extracting the meaning behind every one of central bank’s punctuation marks, the slightly hawkish shift from the group statement didn’t require special interpretation. In addition to the ‘moderate’ growth outlook, the group dropped the phrase from its previous statement that inflation was “subdued in recent months”, instead saying it picked up somewhat.

Far more objective for the distant rate forecasters, the forecasts were supporting the hawks across the board. The 2012 GDP forecast was upgraded to a range of 2.4-2.9 percent versus the previous 2.2-2.7 percent projection alongside an improved 7.8-8.0 percent jobless rate outlook from 8.2-8.5 percent scope laid out in January. Those took the pressure off more stimulus, but what tips the scales to a slightly more hawkish stance was the upgraded inflation outlook (now 1.9-2.0 percent for the year versus 1.4-1.8 percent previously). Those market participants that simply will not give up their hope for stimulus could seek support in the third round of the Fed event: Chairman Bernanke’s press conference. He said the group remains “prepared to do more”, but it would be quite the stretch to see that as an active dovish position. From the market, the 12-month rate forecast jumped back up to its 9-month high, but neither the dollar nor Treasury yields would follow suit.

British Pound Resilient Despite Double Dip Recession

The British economy is officially in a ‘double dip’ recession. What does that mean? Just like it sounds, the UK has reentered a technical recession (back-to-back quarterly contractions) within a normal economic cycle. We haven’t seen this occur since back in the 1970’s. Taking an objective look at the data, the slump is far more restrained than the 2008 post-crisis recession; but it is still a serious problem for the economy especially against the backdrop of a contentious austerity push. Furthermore, the weak growth reading should undermine the recent hawkish tone of the BoE (as well as the market’s expectations for the group). The notable pull back in 12-month rate expectations supports that notion. Yet, the sterling rose against the dollar and euro. This is a fundamental gap, likely helped by stubborn risk trends, that should cause worry.

New Zealand Dollar Advances after RBNZ’s Slightly More Dovish Tack

Compared to the Fed’s meetings, the Reserve Bank of New Zealand’s rate decisions aren’t given nearly as much attention and analysis. Yet, when we look at the statement that followed the hold on the benchmark at 2.50 percent; there was a notable dovish shift. Against the suggestion that the economy was showing ‘signs of recovery’ the policy authority also commented that inflation would be near the middle of the defined target – appropriate after last week’s CPI reading. More straightforward for the FX world, the statement said the elevated currency could prompt a reassessment of policy. This could refer to a rate cut or intervention. Regardless of which option though, the kiwi advanced after the news.

Japanese Yen Gains Despite Positive Risk Sentiment

Yet another anomaly on an anomalous day was the Japanese yen’s late-session strength. As equities and other risk-sensitive assets climbed after the disappointing data of the past session, the safe haven / funding currency would still advance. That will no doubt be a serious concern for the Bank of Japan who are actively trying to devalue their currency. It is already hard enough to push the yen down when risk aversion sweeps over the market, but to see it rise when sentiment trends fall suggests an overall losing battle. That reality may further encourage the central bank to move on a boost to stimulus at Friday’s meeting. Economists see a 5-10 trillion yen increase as highly likely.

Euro: ECB President Draghi Eases His Inflation Tone

The focus of the past session was certainly on the UK economy and US monetary policy regime, but the Euro had its own interesting developments. Where three weeks ago, ECB President Draghi was voicing a more hawkish take on the future; we saw the central bank leader curb his inflation worries and call for a ‘growth compact’ yesterday. There goes any competitive rate hopes. Further complication would come via the Greek central bank governor’s suggestion that an exit from the Euro is a distinct possibility if austerity was abandoned after the election.

Canadian Dollar Looking to Capitalize on Break to 7-Month High

There are a lot of fundamentally confused drives amongst the majors and various capital markets this past trading session, but the Canadian dollar’s strength doesn’t stray too far into the unusual. An upgraded growth forecast for the US (its largest trade partner) is a boon. The US may be backing off its funding support, but that doesn’t hurt Canadian investment appeal. Further, Aussie and Kiwi rates are looking lower.

Gold Recovers from Yet Another Early Fall Thanks to the Dollar

With the greenback sliding, gold is given a distinct advantage. The metal needs that booster. Otherwise, we would have to look at the lower probabilities of further stimulus from the Fed and the expensive, alternative-store of wealth in the dollar would look less and less attractive. Short-term risk trends could very well settle out and expose underlying shifts. If that is the case, gold is in trouble.

For Real Time Forex News, visit: http://www.dailyfx.com/real_time_news/

**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar

ECONOMIC DATA

Next 24 Hours

GMT	Currency	Release	Survey	Previous	Comments
0:00	AUD	Conference Board Leading Index (FEB)		1.1%	RBA to hold next meeting on May 1
1:00	AUD	DEWR Internet Skilled Vacancies MoM (MAR)		-0.2%
4:30	JPY	All Industry Activity Index (MoM) (FEB)	-0.2%	-1.0%	General economic conditions to weigh on BoJ rate decision on Apr 27
8:00	EUR	Italian Business Confidence (APR)	92.1	92.1	Austerity measures continue to cloud business climate in Italy
8:30	GBP	BBA Loans for House Purchase (MAR)	34000	33103
9:00	EUR	Eurozone Business Climate Indicator (APR)	-0.3	-0.3	Comes after Monday’s PMI data showing ongoing weakness in Eurozone manufacturing and service sectors
9:00	EUR	Eurozone Consumer Confidence (APR F)	-19.8.	-19.8
9:00	EUR	Eurozone Economic Confidence (APR)	94.2	94.4
9:00	EUR	Eurozone Indust. Confidence (APR)	-7	-7.2
9:00	EUR	Eurozone Services Confidence (APR)	-0.5	-0.3
10:00	GBP	CBI Reported Sales (APR)	-4	0
12:00	EUR	German Consumer Price Index (MoM) (APR P)	0.1%	0.3%	German inflation expected to ease further despite low unemployment and generally robust domestic economic conditions
12:00	EUR	German Consumer Price Index (YoY) (APR P)	2.0%	2.1%
12:00	EUR	German CPI - EU Harmonised (MoM) (APR P)	0.1%	0.4%
12:00	EUR	German CPI - EU Harmonised (YoY) (APR P)	2.2%	2.3%
12:30	USD	Chicago Fed Nat Activity Index (MAR)		-0.09
12:30	USD	Initial Jobless Claims (41020)	375K	386K	US labor-market recovery showing signs of stalling in recent weeks, with weekly jobless claims on the rise
12:30	USD	Continuing Claims (41013)	3289K	3297K
13:45	USD	Bloomberg Consumer Comfort (41021)		-31.4
14:00	USD	Pending Home Sales MoM (MAR)	1.0%	-0.5%	Comes after unexpected decline in existing home sales in March
14:00	USD	Pending Home Sales YoY (MAR)	7.3%	13.9%
15:00	USD	Kansas City Fed Manf. Activity (APR)	7	9
16:00	EUR	French Jobseekers - Net Change (MAR)	2.8K	6.2K	French unemployment at 12-year high, with no immediate drop in sight
16:00	EUR	French Total Jobseekers (MAR)	2870.0K	2867.9K
23:01	GBP	GfK Consumer Confidence Survey (APR)	-30	-31	German sentiment gauges generally seeing improvement
23:30	JPY	Jobless Rate (MAR)	4.5%	4.5%	Some improvement expected in consumer spending and industrial production, but with inflation far below the 1-percent target, may not be enough to hold off BoJ from increasing asset purchases on Apr. 27
23:30	JPY	Job-To-Applicant Ratio (MAR)	0.76	0.75
23:30	JPY	Overall Household Spending (YoY) (MAR)	4.1%	2.3%
23:30	JPY	Natl CPI YoY (MAR)	0.4%	0.3%
23:30	JPY	Natl CPI Ex-Fresh Food YoY (MAR)	0.1%	0.1%
23:30	JPY	Natl CPI Ex Food, Energy YoY (MAR)	-0.5%	-0.6%
23:30	JPY	Tokyo CPI YoY (APR)	-0.1%	-0.1%
23:30	JPY	Tokyo CPI Ex-Fresh Food YoY (APR)	-0.3%	-0.3%
23:30	JPY	Tokyo CPI Ex Food, Energy YoY (APR)	-0.9%	-1.0%
23:50	JPY	Industrial Production (MoM) (MAR P)	2.3%	-1.6%
23:50	JPY	Industrial Production YOY% (MAR P)	15.6%	1.5%
23:50	JPY	Retail Trade YoY (MAR)	10.0%	3.4%
23:50	JPY	Retail Trade MoM SA (MAR)	-0.5%	2.0%
23:50	JPY	Large Retailers' Sales (MAR)	7.2%	0.2%

GMT	Currency	Upcoming Events & Speeches
1:00	NZD	Finance Minister English Gives Pre-Budget Speech
7:00	EUR	ECB’s Draghi, EU’s Barnier Speak in Frankfurt
9:00	EUR	EU’s Van Rompuy Speaks in Brussels
16:15	EUR	EU’s Barroso Speaks in Brussels
18:40	EUR	French Presidential Candidates Sarkozy, Hollande Speak

SUPPORT AND RESISTANCE LEVELS

To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal

To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table

CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT

Currency	USD/MXN	USD/TRY	USD/ZAR	USD/HKD	USD/SGD		Currency	USD/SEK	USD/DKK	USD/NOK
Resist 2	16.5000	2.0000	9.2080	7.8165	1.3650		Resist 2	7.5800	5.6625	6.1150
Resist 1	14.3200	1.9000	8.5800	7.8075	1.3250		Resist 1	6.5175	5.3100	5.7075
Spot	13.1917	1.7882	7.8403	7.7616	1.2521		Spot	6.7493	5.6699	5.7637
Support 1	12.5000	1.6500	6.5575	7.7490	1.2000		Support 1	6.0800	5.1050	5.3040
Support 2	11.5200	1.5725	6.4295	7.7450	1.1800		Support 2	5.8085	4.9115	4.9410

INTRA-DAY PROBABILITY BANDS 18:00 GMT

\Currency	EUR/USD	GBP/USD	USD/JPY	USD/CHF	USD/CAD	AUD/USD	NZD/USD	EUR/JPY	GBP/JPY
Resist. 3	1.3261	1.6162	82.33	0.9267	0.9990	1.0479	0.8277	108.30	132.21
Resist. 2	1.3226	1.6129	82.12	0.9241	0.9970	1.0450	0.8252	107.95	131.81
Resist. 1	1.3190	1.6096	81.91	0.9215	0.9949	1.0420	0.8228	107.61	131.42
Spot	1.3120	1.6030	81.49	0.9164	0.9908	1.0362	0.8179	106.91	130.63
Support 1	1.3050	1.5964	81.07	0.9113	0.9867	1.0304	0.8130	106.21	129.84
Support 2	1.3014	1.5931	80.86	0.9087	0.9846	1.0274	0.8106	105.87	129.44
Support 3	1.2979	1.5898	80.65	0.9061	0.9826	1.0245	0.8081	105.52	129.04

v

--- Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com