There can surely be no currency pair which gives a better indication of how the market is assessing the risk trade than AUD/CHF. If China is booming, the world economic prospects seem good and the AUD is rallying. If doom-and-gloom are preoccupying peoples thoughts, then the CHF is rallying.

A quick look at the long-term AUD/CHF chart shows that risk in general has been back in favour since March 2008 but it took a turn in May this year. The 38.2% retracement of the big upmove came in at .8925 and that has proven to be good support thus far. If we break back below there then risk would seem to be off again and we could fall as far as .8150 when the risk trades should find new support. If the .8925 recent low and and now trendline support were to hold firm, then we should be looking to a major rally in all risk trades over the next few months.

Definitely a pair at least worth watching if not trading.

– Japan Q2 Capex (Ex-Software) -1.5% Y/Y Vs Q1 -12.9%
– Japan Q2 Capex (Ex-Software) S/A +6.4% Q/Q Vs Q1 Rev -1.0%
– Japan Q2 Manufacturer Capex -10.5% Y/Y Vs Q1 -31.2%
– Japan Q2 Non-Manufacturer Capex +3.4% Y/Y Vs Q1 +0.4%
– Japan Q2 Non-Fncl Firm Current Profit +83.4% Y/Y Vs Q1 +163.8%

TOKYO (MNI) – The combined capital investment by Japanese
non-financial companies fell 1.7% in the second quarter of 2010 from a
year earlier, the 13th straight quarterly decline, but the pace of
decline decelerated from the 11.5% drop in the first quarter, a
government survey showed on Friday.

In the manufacturing sector, capex fell 10.5% from a year earlier
in the April-June quarter after falling 31.2% in the January-March
quarter and posting the eighth straight y/y drop, the quarterly survey
by the Ministry of Finance showed.

Among the 11 industries in the manufacturing sector, information
and communication electronics equipment makers were the only one that
increased capex, up 27.6% from a year earlier, reversing sharply from
the 26.6% drop in the first quarter.

Meanwhile, business investment by transportation equipment makers
continued to drop, down by 15.5% y/y in Q2, but the pace of decline
decelerated from -51.9% in Q1.

Capex in the non-manufacturing sector rose by 3.4% on the year in
the second quarter, improving from +0.4% in the first quarter. It was
the second consecutive y/y gain.

In the sector, spending on equipment dropped from a year earlier in
three industries, which was more than offset by increases in five other
industries.

Capex by information and communications carriers slumped by 20.9%
y/y in Q2 following the 6.1% drop in Q1, while spending among service
providers rose 27.5% y/y in Q2, up sharply from 27.0% in the previous
quarter.

Business investment excluding spending on software fell 1.5% from a
year before in Q2, with the pace of decline decelerating from -12.9% in
Q1.

On a seasonally-adjusted, quarter-over-quarter basis, capex
excluding spending on software rose 6.4% in April-June after an upwardly
revised 1.0% fall in January-March (previously -2.6%).

The quarterly survey by the Ministry of Finance also showed that
the combined current profits before extraordinary items of non-financial
firms at the parent level rose 83.4% from a year earlier, posting the
third straight y/y rise but slowing from the 163.8% surge in the first
quarter.

The increase was led by petroleum and coal products, and business
oriented machinery.

The ministry surveyed 31,666 companies with capital at or above Y10
million and received replies from 23,385.

The survey is the last piece of data from the demand side used to
compute revisions to gross domestic product for the April-June quarter
due out on Sept. 10. Capex in preliminary GDP data is based solely on
the supply side estimate.

Preliminary data released last month showed that Japan’s economy
expanded a real 0.1% in April-June from the previous quarter (an
annualized 0.4%), a third consecutive q/q rise, due to strong capital
spending and net exports.

When the Cabinet Office released its second preliminary estimate
for January-March, in June this year, real GDP was unrevised at 1.2% q/q
rise (annualized +5.0%) from a preliminary +1.2% q/q (annualized +4.9%)
increase.

Q1 GDP was revised down to a 1.1% q/q rise, or an annualized 4.4%,
when the Q2 data were released last month.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

[TOPICS: M$J$$$,M$A$$$,MAJDS$,MT$$$$]

…and comments go away.No more questions, no more observations, no more feedback.

Keep your comments constructive or take them elsewhere.

Life is too short to referee a kindergarten….

Bloomberg are reporting that Japanese officials are reluctant to engage in FX market intervention because they fear strong opposition from the US authorities.

Japanese corporate capital expenditure fell by 1.7% in Q2 compared with last year, which is less that the 6.5% fall which had generally been forecast.

This suggests that optimism in the corporate sector is better than expected and the strong JPY is having less impact than many thought.

USD/JPY is slightly higher but overall the FX market remains very quiet

No sign of any risk aversion to emerge this morning although the AUD/USD is slightly lower already. I expect most traders will be looking for day-trading opportunities or they will be closing/reducing their positions prior to the NFP later tonight.

The initial lead will come from regional stockmarkets which are expected to rise by around 0.5% on average.

Click on this link and put your best guess forward, presuming of course that it hasn’t already been taken. Two-time winner Iman has already taken the -140k and you’d better be quick or all the good ones will be gone.

The adjustment in pricing is related to the new pricing mechanisms which the major producers have implemented (over the Reuters newswires).

 Obviously this type of price decrease will have some sort of negative impact on currencies like the AUD, CAD and BRL as the year progresses. The AUD/USD has slipped 15 pips, now back below .9100.

 Sure GBP/AUD is in a definite short-term downtrend and it has been since 1.76 but to start selling on the 1.68 handle,when the risk of a retracement rally would seem to be very high, is certainly a risky proposition. The break below the 61.8% retracement level is also a bearish sign and suggests a possible full-retracement to 1.62 but it’s certainly not conclusive.

Personally I’d prefer to try buying dips in line with the uptrend which began in May at 1.62. Neither side of the market would seem to have a particular advantage here so jumping into any trade mid-stream seems a bit reckless to me.

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