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USD Supported by Bailout Plan

Mon, Sep 8 2008, 23:34 GMT
by Korman Tam

Forexnews.com

9/8/2008 2:30 PM: EUR/$..1.4097 $/JPY..107.97 GBP/$..1.7524 $/CHF..1.1326 AUD/$..0.8117 $/CAD..1.0685

USD Supported by Bailout Plan

The greenback was bolstered by the US government¡¯s decision to bail out Fannie Mae and Freddie Mac, announced Sunday by US Treasury Secretary Hank Paulson, sending the dollar to its highest level since October 2007 against the euro at 1.4059. Paulson said that ¡°Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe¡±. The intervention comes amid burgeoning fears that the mortgage lenders would default, sending ripples throughout the financial system and exacerbating an already sluggish economy. Traders overseas lauded the bailout, sending the Nikkei index higher by almost 3.4%, the FTSE-100 up by nearly 4% while yields on US Treasuries rose higher as well.

US economic reports due out in the Tuesday session include July pending home sales, seen declining by 1.1% in July from a 5.3% increase in the previous month and July wholesale inventories. Key data highlights for the coming week include July trade balance, August retail sales, PPI, the University of Michigan consumer confidence survey and July business inventories.

 
Euro tumbles

The euro sank to its lowest level in almost a year against the dollar at 1.4055 amid fresh strength in the greenback due to a combination of lingering fears the Eurozone economy may slip into recession and news of the government led bailout of Fannie Mae and Freddie Mac.

The Eurozone economic calendar is light this week, with Germany¡¯s trade balance due out early Tuesday and E-15 July industrial production. Also due out this week will be the ECB monthly economic report, which is likely to reveal a downgraded assessment for the economy while reiterating the current inflationary outlook.

EURUSD will find support at 1.4050, backed by 1.40 and 1.3970. Subsequent floors will emerge at 1.3940, followed by 1.39 and 1.3860. On the topside, gains will target interim resistance at 1.41, followed by 1.4260 and 1.43. Additional gains will target 1.4340, followed by 1.4370 and 1.44.

Published on  Mon, Sep 8 2008, 23:35 GMT