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FX Weekly

Fx Weekly

Fri, Oct 23 2009, 15:55 GMT
by Alpari (US) Analyst team

Alpari (US), LLC

Market Focus

•Dow breaches 10,000 on the back of better than expected earnings
•Gold and Oil surge higher with Gold touching 1,070 per troy ounce
•USD broadly lower vs. most pairs but manages to post a small gain against the JPY as the pair rebounds from the 88 level

The dollar continued its move lower against its major rivals on the back of stronger than expected earnings from those who finished reporting last week. On the tech side, Google reported $5.94 billion in revenue. This is 7% surge in revenues compared with Q3 of last year. Intel’s revenue headed higher as well, jumping to $9.4 billion and in the process battering Wall’s Streets expectations on the chip maker. JP Morgan led the initial charge in the banking sector, beatings analyst’s expectations by 40 cents a share, reporting a rise in net income of 82 cents a share. Fixed income and the underwriting areas within the bank performed exceptionally well. However, one should also take note that the bank added nearly $2 billion to its credit reserves. Credit reserves are used to cover losses in the loan area and this increase in reserves points to an elevated level of credit costs within the lending and card services space. Two other banks, Bank of America and Citigroup, suffered setbacks in the retail space as well, lending credence to the idea that the last leg of the recovery will take place in the retail sector as the consumer grows more confident about the prospects of steady growth prospects within the U.S economy.

Earnings were solid for the most part and that was reflected as an overall negative for the USD in the FX space with the Dow covering a major level in 10,000. The USD was mostly down against its major rivals for the week, suffering setbacks amid the backdrop of a falling dollar index, rising gold, and higher oil prices. Gold made another record high, holding $1070 for a moment before being sent lower. Oil made fresh highs as well, hovering around $78/barrel and gaining more than 60% since mid march. Oil prices may move higher still in the wake of this weak dollar environment and heavy demand from emerging markets, most notable China who posted less than expected falls in exports and imports. The only positive dollar move was in USDJPY, with the pair forming solid support around the 89 area and posting a decent gain of 1.32%. These gains in USDJPY and dollar weakness against EUR, GBP, and CHF sent their Yen crosses through the roof. Long positions in EURJPY, GBPJPY, and CHFJPY would’ve netted gains of 4.5%, 2.59%, and 2.53%. Not a bad week if you’re on the right side of those trades if you ask me.

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Published on  Fri, Oct 23 2009, 16:02 GMT