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FX Daily Update

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Euro and Pound Show Signs of Strength…

Tue, Dec 9 2008, 16:21 GMT
by Lena Manousarides

FXstreet.com Independent Analyst Team

Monday came and gone and markets managed to finish the day on positive territory. DOW JONES gained more than 300 points and NIKEI finished slightly up. The market sentiment was more positive after US government suggested a new stimulus plan for the automakers and traders welcomed the news by buying futures all across the board.

EUR/USD found a temporary resistance at 1.2960 late last night and since then the pair retraced back below 1.29. The very fact that the move did not find any followers towards 1.30 shows that every rally finds good sellers! A clear break of 1.28 which is now good support may eventually open the door for further losses towards 1.2750.However, let’s see how the euro bulls react after the US market open and if they will give it another go for 1.30!

Today the economic calendar had some news from Euro zone and UK, which were once again bad news for both economies and even though the ZEW data did not come out as bad as expected, euro still fell in the aftermath as numbers contracted once again which sawed Euro area suffering from global crisis. The UK data were once again very disappointing and pound got the worse of it by dropping more than 100 points!

The question is if the markets are ready to sustain yesterday’s gains or will “surrender” them in the name of risk aversion. Today we had more reports that came out of Sony, saying that the big corporation will let off more than 16.000 people worldwide and also the statistics showed that US companies will continue the layoffs for some time. The economic recession is getting deeper by the day and markets are aware that “a good day in stocks” can be easily reverse in a matter of a few minutes.

New York futures so far are slightly down, what with the negative news and all and traders are waiting to see what will happen with the “new” stimulus plan for the automakers. The trouble is, that all the efforts we see from new President and FED to tackle the economic slump, are failing to restore traders confidence and that is due to continuous negative economic events.

Also, another important event today, saw the Canadian dollar being a “victim” of the latest economic crisis, after Bank of Canada cut rates more than expected taking rates down to 1.50%. Traders did not expect that and sold the Canadian dollar against the buck. USD/CAD broke important resistance of 1.2630 immediately after the news and climbed towards 1.28.The pair found resistance at 1.2760 and retraced from those levels. If the move can build the gains, then we may have another try for double top at 1.30.

So, for today let’s see how the euro trades against the buck and if yesterdays charts are right to think that the single currency may have more gains in the coming days. Another positive daily close could indicate that dollar may be under pressure for now …

Published on  Tue, Dec 9 2008, 16:23 GMT