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Dollar Index Falls to Important Support

The dollar, while unchanged versus the yen, was down on Friday and for the week against other major currencies. Reports of the appointment of Janet Yellen as Federal Reserve Vice Chairman reduced the risk of an early Fed monetary policy tightening; thus, pressuring the greenback. US retail sales unexpectedly rose in February despite severe East Coast snowstorms, suggesting US economic growth is stronger than previously thought. Meanwhile, US consumer confidence unexpectedly declined for a second month in March. Little changed on low volume, US stocks are at important resistance from January highs. The S&P 500 slipped 0.25 to 1,149.99. The yen was pressured by reports that the Bank of Japan is considering expanding quantitative easing measures and Prime Minister Yukio Hatoyama said the government needs “firm measures” to combat the yen's strength. The euro advanced for a third day following reports that Germany and France may be considering a $55 billion rescue plan for Greece. Sterling rose. The Conservative opposition expands lead in the polls, making majority government possible. The Australian dollar gained modestly for a sixth straight day. The Canadian dollar rose to the highest level since July 2008 on Canada's stronger-than-expected employment growth.

After reaching its strong resistance in the 81 area, the US dollar index had fallen for a third consecutive day on Friday. Consolidating gains, the dollar index is currently at support from the uptrend. If the 79-area support is broken, the dollar index will drop further; if not, the dollar index will likely test the 81-area resistance again.

Financial and Economic News and Comments

US & Canada

US retail sales unexpectedly grew 0.3% m/m to $355.5 billion in February, the fourth gain in five months, after a downwardly revised 0.1% m/m increase in January, data from the Commerce Department showed, pointing to sustainable US economic growth. Retail sales excluding autos rose a more-than-anticipated 0.8% m/m to $297.7 billion, following January's downwardly revised 0.5% m/m advance. Retail sales rose 3.9% y/y in February and rose 4.2% y/y less autos.

The Reuters/University of Michigan preliminary consumer sentiment index decreased to 72.5 in March from 73.6 in February, indicating US consumer confidence unexpectedly fell for a second month but improved significantly from March 2009's 57.3 level, according to the latest Thomson Reuters/University of Michigan surveys of consumers. The current economic conditions index declined to 80.8 in March, the lowest level since December, from 81.8 in February. The consumer expectations index fell to 67.2, the lowest level since November, from February's 68.4.

US business inventories were virtually unchanged at $1,310.2 billion in January after a revised 0.3% m/m decline in December, figures from the Commerce Department showed. Business sales increased 0.6% m/m to $1,046.9 billion, following December's upwardly revised 1.0 m/m gain. The inventories/sales ratio declined to 1.25 in January from 1.26 in December, compared with 1.46 in January 2009. Inventories fell 8.6% y/y in January while sales rose 6.8 y/y.

Canada's employment rose a more-than-expected 20,900 in February, the fifth rise in seven months, to 16,945,300, after a 43,000 gain in January, according to figures from Statistics Canada. The unemployment rate declined to 8.2%, a 10-month low, from January's 8.3%. Full-time employment jumped 60,200 to 13,738,800 in February, while part-time positions fell 39,300 to 3,206,500. The participation rate slipped to 67.0 from January's 67.1.

Europe

Eurozone seasonally adjusted industrial production rose a more-than-expected 1.7% m/m in January, an eighth consecutive month-on-month rise and the largest since records began in 1990, after an upwardly revised 0.6% m/m increase (vs. previously reported -1.7% m/m) in December, IP data from Eurostat showed. January IP grew 1.4% y/y wda, the first annual gain since April 2008, following a revised 4.1% y/y December decline.

German wholesale prices increased a modest 0.1% m/m in February, a fourth consecutive month-on-month gain, after a 1.3% m/m advance in January, according to data from the Federal Statistical Office. February wholesale prices rose 2.1% y/y, a third straight year-on-year rise, following a 1.9% y/y January gain.

Asia-Pacific

Japan's seasonally adjusted industrial production grew 2.7% m/m in January (vs. preliminarily reported 2.5% m/m), an 11th straight month-on-month rise and the fastest since May 2009, after a 1.9% m/m increase in December, final January IP data from the Ministry of Economy, Trade and Industry showed, with the IP index increasing to 92.1 from December's 89.7. January IP jumped 18.5% y/y nsa (vs. preliminarily reported 18.2% y/y) following a 5.1% y/y December increase, registering a second consecutive year-on-year advance. The seasonally adjusted capacity utilization index rose 3.9% m/m to 87.6 in January, up for an 11th straight month and matching November 2008's level, after a 1.4% m/m increase in December. January capacity utilization gained 26.1% y/y nsa.

FX Strategy Update

	EUR/USD	USD/JPY	GBP/USD	USD/CHF	USD/CAD	AUD/USD	EUR/JPY
Primary Trend	Positive	Negative	Neutral	Negative	Negative	Positive	Neutral
Secondary Trend	Negative	Neutral	Neutral	Positive	Neutral	Neutral	Neutral
Outlook	Neutral	Positive	Negative	Neutral	Neutral	Neutral	Neutral
Action	Sell	Buy	None	Buy	Buy	None	None
Current	1.3761	90.48	1.5183	1.0580	1.0180	0.9154	124.48
Original Position	1.4628	88.67	N/A	1.0340	1.0256	N/A	N/A
Objective	N/A	N/A	N/A	N/A	N/A	N/A	N/A
Stop	1.4060	87.30	N/A	1.0345	1.0135	N/A	N/A
Support	1.3550 1.3400	88.00 86.00	1.4970 1.4800	1.0500 1.0200	1.0150 1.0000	0.9000 0.8800	120.00 116.00
Resistance	1.3850 1.4050	92.00 94.00	1.5200 1.5500	1.0850 1.1100	1.0400 1.0600	0.9200 0.9350	125.00 130.00

Hans Nilsson
Capital Market Services, L.L.C.
www.cmsfx.com

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