Forex Investment and Currency Trading

China

• GDP growth on a year-on-year basis fell to 6.1% in the first quarter, its lowest level since the fourth quarter of 1999. Growth had been 6.8% in the fourth quarter. The important caveat is that it appears that on a quarter-to-quarter seasonally adjusted basis, growth rebounded strongly (5-7%) from the fourth quarter – when it was thought to be close to zero.
• Growth in urban fixed asset investment jumped to a cumulative 28.6% in the first three months of the year from 26.5% in January-February – which would imply growth of 32.9% in March (all on a year-on-year basis). The essential caveat, however, is that these are all in nominal terms.
• Consumer prices fell 1.2% in the year to March following a drop of 1.6% in February. The breakdown between food and non-food items is not yet available. Producer prices fell 6.0% in March, a larger drop than expected. As recently as August, producer price inflation had been as high as 10.1%.

National Bureau of Statistics spokesman said that “the overall national economy showed positive changes, with better performance than expected. However, he also noted that difficulties in the export sector are hurting corporate profits, government revenue, and job creation. Perhaps the noteworthy comment was the estimate that domestic consumption accounted for 4.3% of the 6.1% increase in GDP, while investment contributed just 2.0%; the external sector subtracted 0.2%. (NB: these figures don’t distinguish between private and public.)

Also reported today – though the comment appears to have been made yesterday – was that Prime Minister Wen Jiabao warned against ‘blind optimism’ about the economy.

 U.S

The good news this morning in the U.S.  is the abrupt 44k drop in initial jobless claims.  This series tends to put in a blow-off top right at the turn in the real economy.  A plummet from 654k to  610k is another “crocus.”   Also, the Philly FED’s Diffusion Index of General Conditions was less negative at -24.4 up from -40 in February. Monday we get Leading Indicators.  The LEI has been falling at a faster rate than the Coincident Indicators (CEI) since 2006:Q1.  A narrowing of that spread would be a “green shoot.”  A narrowing of the CEI to Lagging (LAG) would be a “green shoot.”  
 
The best indicator of the current state of play in currency markets is the EURJPY. We need a breakout higher in EURJPY for the “risk preferring” equity and EM trades to continue to make money.   With USDJPY sitting on its 200-day moving average we are looking for a verdict on this soon.  A pullback in USDJPY to 97.40ish might be constructive.   A weekly close in EURJPY below 130l really points toward a correction, however.   A roll-over in this could extend as far as 118 and still point higher in the big picture!  Straight up from here, though and the double-bottom is still in play, (target 148).