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European and US summary

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The US subprime worries prompted investors to unwind carry trades

Fri, Aug 10 2007, 00:50 GMT
by Yan Xu

Forexnews.com

 8/9/2007 03:45 pm: EUR/$..1.3676 $/JPY..118.28 GBP/$..2.0235 $/CHF..1.1968 AUD/$..0.8501 $/CAD..1.0562

Yen Rallied after BNP Froze Funds

The yen rose sharply BNP Paribas, France’s biggest bank, froze three investment funds worth 1.6 billion euros, raising concern the US subprime mortgage sector woes is spreading worldwide. The ECB today injected 94.8 billion euros into the region’s banking market to meet the sudden liquidity demand. The US subprime worries prompted investors to unwind carry trades, driving the yen higher against high-yielding currencies.

The euro slumped from 165 to 161.55 versus the yen, while the sterling slid from 244 to test the 239 level. The yen strengthened from 119.75 to as low as 118.20 versus the dollar.

As a safe haven currency, the dollar also benefited from anti-risk trades. The euro fell off the 1.38 handle and was supported by the 1.3650 level versus the dollar. The sterling dipped from 2.04 to as low as 2.0212.

Besides, UK trade deficit narrowed from 6.29 billion to 6.2 billion in June, better than the forecast of 6.5 billion.

USDJPY encounters interim resistance at 118.50, backed by 118.80 and 119. Subsequent ceilings will emerge at 119.30, followed by 119.50 and 119.80. On the downside, support begins at 118 and 117.80, followed by 117.50. Additional floors are eyed at 117.30, backed by 117 and 116.80.

GBPUSD encounters interim resistance at 2.0250, backed by 2.0280 and 2.0300. Subsequent ceilings will emerge at 2.0330, followed by 2.0350 and 2.0400. On the downside, support begins at 2.0200, followed by 2.0180 and 2.0150. Additional floors are eyed at 2.0120, backed by 2.0100 and 2.0050.

EURUSD will face interim resistance at 1.37, followed by 1.3730 and 1.3750. Additional ceilings will emerge at 1.3780, backed by 1.38. Support starts at 1.3680, backed by 1.3650, 1.3630 and 1.36. Subsequent floors are eyed at 1.3580.

Job Report Boosted AUD

The Australia dollar gained 30 pips to 0.8661 after a report showed Australia unemployment remained at a low rate of 4.3%, beating the estimate of 4.4%. Full-time employment increased by 21.7k in July, versus a 34.3k decline prior.

However, the aussie gave back its gains as investors started to exit carry trades amid US subprime worries. The currency dropped more than 100 pips to test the 0.85 level against the dollar.

Published on  Fri, Aug 10 2007, 00:49 GMT