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FX daily Commentary

Shock and Awe for Markets All Around the World!

Fri, Oct 10 2008, 09:34 GMT
by Lena Manousarides

FXGreece

Comment : Lena Manousarides [ lena@fxgreece.gr ]

There is the old saying that “actions speak louder than words” and that is what we can say about the situation which we experience at the moment. The current trading climate all around the world is chaotic and traders are wondering what the next minute will bring. The fear and uncertainty is at high levels once again and the fact that everyone is panicking helps to the high volatility that we see in currencies.

Sterling is the looser of the week with GBP/USD breaking important psychological level of 1.70 and dropping down to 1.6780 in mere moments. The pair found support at that level and rebounded but with the current atmosphere that goes on now, the move might not be finish just yet. Traders are pricing in more cuts from BOE due to the fact that current economic conditions are deteriorating and there is talk amongst traders that UK has been hit worse than other European economies form the recent crisis.

DOW JONES broke 9000 easily yesterday and still trades in the red and the same goes for NIKEI which dropped again more than 700 points even after the new liquidity injection that BOJ did to calm the markets.

Today the economic calendar is empty, with only important release the trade
balance from US. The number is expected better for the dollar however traders might choose to ignore this as they have bigger issues to deal with. Let’s not forget that tonight we have the beginning of the G7 meeting, where 7 of the most influential countries are meeting to discuss the current situation and to try and find a way out of this mess. Market participants will monitor closely the event and it will be crucial to see the reaction after the end of the meeting on Sunday open. It is vital to try and remain without any positions during this weekend as the risk is quite high and there is great uncertainty of what might happen. In the last few Sunday openings we had massive gaps in currencies and especially carry trades and this week we expect the same.

In an environment like that is very difficult to make good judgment calls or to analyze the current moves in the markets. The only way to survive is to either stay aside until the “storm” passes or to follow the fall and go with it. However, who can say honestly that is willing to sell in such low levels or buy at a time that everything goes south?

The question in everyone’s minds is when will this be over? Well from what we hear and read daily in the economic news and from what we see in the daily and monthly charts, it seems like the crisis is far from over but we speculate that the world leaders won’t let it collapse and we might see soon the first signs that there is “light in the tunnel” after all…

Published on  Fri, Oct 10 2008, 09:35 GMT