Daily Report: Dollar Higher on GM Bankruptcy Talk, Yen Shrugs off Poor Tankan

After brief retreat, the greenback is regaining momentum today on talk of bankruptcy of GM and Chrysler. There are rumors that US President Obama believes a quick, negotiated bankruptcy is the most possible way for GM to restructure. Meanwhile, Obama is also prepared to let Chrysler go bankrupt if it fails to form an alliance with Fiat SpA. On the other hand, the Japanese is mildly higher despite worse than expected quarterly Tankan survey released from Japan earlier today. Australian dollar softens after poorer than expected retail sales report. Kiwi is also pressured by as RBNZ Governor Bollard expressed concerns for recent gains in long term interest rates. But after all, most pairs are staying in tight range and will look forward to some key economic data later today, including UK manufacturing PMI, Eurozone unemployment and US ISM manufacturing and ADP employment for inspirations.
Japan's Tankan big manufacturing index dived to -58 (consensus: -55) in 1Q09, the lowest level since the survey began in 1974, from -24 a quarter ago. Economy has entered recession since mid-08 in Japan and record decline in exports negatively affected confidence of manufacturers as they have been forced to reduce production and cut cost. Tankan capex also plunged -6.6% in 1Q09, compared with market expectation of -12% and -0.2% in the last quarter in 2008.
In Australia, retail sales slid -2% mom in February (consensus: -0.5%) following gains of +0.5% in January and +3.8% in December as the positive impact of the Government's cash handout dissipated. Turnover in department stores plunged -9.8% mom household good retailing dropped -3.8% as rising unemployment constrained spending.
Looking ahead, Switzerland's SVME PMI might have improved to 33 in March after dropping to record of 32.6 in February. The SNB's aggressive QE policies should have offered some support to the manufacturing sector as well as the nation's economy. In the UK, manufacturing PMI probably rose to 35 in March from 34.7 a month ago. However, it will be too early to say manufacturing activities have troughed as other indicators remained weak, e.g. the CBI's manufacturing orders sank to 17-year low in March. Final reading for Germany's manufacturing PMI should be confirmed at 32.4 in March while that for the Eurozone is expected to have slightly revised up to 35 from 34.7. Unemployment rate in the Eurozone should have risen for the 7th consecutive month to 8.3% in February from 8.2% in January.
Later in US session, ADP employment survey is anticipated to show -660K decline in number of jobs in March after dropping -697K jobs in the previous month. Challenger's employment survey would also indicate high level of firing announcements in March following a 158% yoy increase to 186 350 in the previous month. Housing data in the US probably showed some signs of improvement in February. Construction spending would have contracted -2% in February, compared with -3.3% in January. Moreover, pending home sales probably remained unchanged in February on monthly basis, after plunging -7.7% in January. ISM manufacturing index is forecast to have edged modestly higher to 36 in March from 35.8 a month ago.
Looking at the dollar index, as mentioned before, an intraday top is in place at 86.13 after hitting 50% retracement of 89.62 to 82.63 at 86.12. Some more consolidation cannot be ruled out but after all , rise from 82.63 is still expected to resume sooner or later. Break of 86.13 will target 61.8% retracement of 89.62 to 82.63 at 86.94 and possibly a retest of 89.62 high. Also, note that with key support zone of 81/82 intact (61.8% retracement of 77.69 to 89.62 at 82.24 and 38.2% retracement of 70.70 to 89.62 at 82.39 as well as long term rising trend line support at 81.48) long term up trend from 70.70 is still in progress and is in favor to resume.