US Dollar, Japanese Yen End on Mixed Note - Price Action May Be Quiet on Friday Due to Market Holiday

The US dollar and Japanese yen ended Thursday on a mixed note, as a market-wide increase in risk appetite only worked to the benefit of the commodity dollars and assets like stocks, with the DJIA ending the day up 3.14 percent at its highs. US economic data, however, was broadly disappointing. While the US trade deficit did narrow to $25.965 billion in February from $36.204 billion, it was due primarily to the continued contraction in imports, which fell 5.1 percent during the month and signals waning domestic demand. Exports rose 1.6 percent during the same period, thanks to an 11.6 percent increase in consumer goods shipments and an 8.5 percent rise in automotive shipments.

Meanwhile, the US import price index rose 0.5 percent in March, which was the first increase in eight months as petroleum costs jumped 10.5 percent during the survey period. However, most other components of the index remained negative and excluding these volatile petroleum costs, import prices were down 0.7 percent and the overall annualized rate reached a fresh record low of -14.9 percent.

Next, initial jobless claims fell by 20,000 during the week ending April 4 to 654,000, but remain dangerously close to the record highs of 674,000 reached last week. Likewise, continuing claims jumped by 95,000 during the week ending March 28 to another record high of 5,840,000, suggesting that the ascent of the US unemployment rate is unlikely to abate anytime soon, which is exactly what the Federal Open Market Committee (FOMC) indicated in the release of the March meeting minutes yesterday.

Finally, the International Council of Shopping Centers (ICSC) reported that chain store sales tumbled a greater-than-expected 2.1 percent in March from a year ago, which denoted the sixth straight month of contraction. A breakdown of the index shows that department store sales (which include luxury good sales) led the decline, while only drug store and wholesale club sales excluding fuel registered increases, suggesting that the only purchases that consumers are making are for necessities, rather than for discretionary items.

Looking ahead to Friday, many markets will be closed for the Good Friday holiday which should lead to lower liquidity in the forex markets. There are two scenarios that we're likely to see: either very quiet, range-bound price action or extremely choppy price action. Traders should keep this in mind, especially if they are maintaining tight stops on open positions.