Mixed Fundamentals Confusing Forex Markets: Will New Chinese Data Clarify Their Growth?

Includes: CYB, FXA, FXE, UDN, UUP
by: Ralph Shell

After weeks when the U.S. first time Unemployment Claims numbers were reduced, the trend today was reversed. The expected unemployment claims number was 355K, down from 367K last week, but this week's number, 380K was a surprise. The euro, already on a rally versus the USD, quickly extended this rally up to 1.3176, flushing stops along the way.

Some then noticed this is a spring break week for many schools, and in some states bus drivers and cafeteria workers are strangely entitled to apply for unemployment when off this week. This merely shows it does not take much to get these highly leveraged markets moving.

The U.S. Trade Balance was also announced at the same time. This showed the U.S. Trade balance was a negative $46.0B, less than the previous month, and less by $5.9B than expected. This drop, the largest since May 2009, was caused by a 26% drop in imports from China.

A couple of fundamental shortfalls was all that was needed to get Bernanke's alter ego on the Fed, Janet Yellen, to confirm that the Fed's loose money and low interest rate is totally appropriate, and should perhaps be expanded.

There is no mention, of course, that U.S. job creation is hampered by the highest corporate tax rate in the world at 39.2%. With the average global corporate tax rate about 25%, is it any wonder jobs are moving off shore? Despite this, the current administration is calling for the imposition of an additional $250B of new taxes on U.S. business.

Earlier today there was constructive news coming from Australia. The employment change came in, up 44K better than the expected 6.4K. This resulted in a reduction of the unemployment rate to 5.2%. A rally from 1.0297, to the top side of 1.0430 has resulted, and has cleared the 20 day SMA.

Weather the A$ can hold the advance may depend on data coming from China tonight. Among the important Chinese numbers we get is the GDP q/y, expected to be a positive 8.4%, as well as some minor reports. Should the numbers fail to confirm China is headed toward a soft landing, the A$ may be vulnerable to a sell-off, coming after recent gains.

Mixed Fundamentals Confusing Forex Markets-Will New Chinese Data Provide Insite?
(Click to enlarge)

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.