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U of M Rises but USD/JPY Falls - Why?

Last updated 4/17/2009 10:25 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

University of Michigan Survey of consumer sentiment printed much better than expected at 61.9 versus 57.3 the month prior. This was the second consecutive monthly improvement and the best reading since September of 2008.

The U of M survey is yet another data point this week that suggests the longest recession since World War II may be easing.  The survey hit a 30 year low in November of 2008 printing at 55.3 and today’s climb back above the 60 level indicates that consumer sentiment may be stabilizing.

The improved attitude has yet to translate into better Retail Sales as consumer spending remains moribund, however if labor market conditions do not deteriorate further consumption  will no doubt pick up as we move towards the summer.

For now the U of M  data simply allows the bulls to control the status quo as the risk trade remains alive and equities stay green. In  FX the reaction has been decidedly more muted with USD/JPY trading near the lows of today’s  session.  The massive rally in risk appetite has lifted the pair by more than 1000 points over the past two months and the 100.00 level remains formidable resistance. With so much good news already factored into the price the pair may be vulnerable to some profit taking.

However, unless  US economic data turns sour once again, more specifically from our point of view unless weekly jobless claims rise above 700K, any correction in risk appetite is likely to be relatively mild. For now, the “revival of growth” story lives on  and it is the bulls game to lose. Under these conditions we continue to favor AUD/USD and NZD/USD& nbsp; whose economies are the most levered to  global economic rebound.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.