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Market Session Snap-Shot

Asian Session − Usd Continues to Surge Higher

Thu, May 8 2008, 07:51 GMT
by Peter Rosentreich

ACM - Advanced Currency Markets

Market Brief

Usd continued its strong rally against the G10 in Asian session, with the exception of the Jpy, as risk aversion supported Usd. Slight cracks in the system seem to be causing concern with risk reduction being the dominante feature overnight . First is the high crude prices which will eventually put pressure on global growth and second was the new SEC plan to increase the disclosures requirements for investment firms. EurUsd slid with no resistance to 1.5286 as market position themselves for the ECB announcement and the expectation that the emphasis will be on the slowing growth pace.

Asian stocks traded lower this morning as higher oil prices alarmed investors about the impact upon consumers and the overall economy, though resource stocks benefited. The bad performance of financials and power generators dragged Tokyo down. Oil prices marked yet another record high after shaking off an early inventory-induced pullback to surge higher in afternoon trading; the Jun '08 contract was up $1.69 to $123.53. Oil futures were steady over $123 a barrel on Thursday, pulling back from a record high as the dollar's rise to a two-month high against the euro offset news of falling U.S. diesel stockpiles. U.S. crude for June was up 2 cents at $123.55 a barrel by 0228 GMT, off the record of $123.93 which was reached earlier. London Brent crude was up 5 cents at $122.37 a barrel. Gold closed lower as the dollar gained versus the major rivals; the most active Jun '08 contract was down $6.50 to $871.20. Jul '08 silver was at $16.695/oz

In New Zealand employment data printed significantly worse then the market had anticipated. Employment declined q/q -1.3 vs. -0.1% exp, largest decline in 19 years which triggered NzdUsd crash from 0.7820 to 0.7710. With data printing on the soft side these day the RBNZ will be under pressure to address the slowing growth and we could start to here signal of a cut as early as q3 2008. This potential rate cutting cycle will keep any NZD upside limited. In contrast, The Australian jobless report beat all expectations as employment rose by 25,400 and this saw AUD rise to .9430 after it had fallen to .9350 earlier in the session on the stronger U.S. currency.

The focus of the European trading day will clearly be the BoE and ECB rate decision. Both are widely expected to hold rates steady at 5.00% and 4.00% respectively. In the UK inflation will trump growth at this MPC meeting. Recent disagreement has amplified between members on near term inflation risk verse those members who believe monetary policy should focus on weakening growth prospects. Interestingly enough while only a very slim number of economists expect a cut from the BoE today, a wide majority are expecting a cut in June. So the obvious question is why not just cut today ? The simple answer is that by acting this way the BoE is signaling to the market that she is still seriously concerned about inflation.

The ECB meet today to set interest rate policy. It is unlikely to lower rates from the 4% where they currently stand as inflation is still their main concern but with continuing indications that the Eurozone economy is seeing slower growth, it’s not a distant hope that rates could be reduced in June. Added to the mix for the Euro fall is an article in the Financial Times saying that both the United States and Europe want to see the Dollar strengthen against the Euro. ECB President Trichet press conference will be monitored closely after the rate announcement for any future rate cutting clues. We beleive its unlikely that Trichet will alter his hawkish tone in spite of the fact that inflation fell to 3.3% from 3.6%. However theses levels are still well above the ECBs comfort zone.

We don’t expect, given our base scenario, that we should see any material change in current FX levels however we could see some minor profit taking due to rapid appreciation of Usd.

Currency Tech

AUDUSD
R 3: 0.9600
R 2: 0.9544
R 1: 0.9510
CURRENT: 0.9397
S 1: 0.9350
S 2: 0.9342
S 3: 0.9272

EURJPY
R 3: 163.88
R 2: 163.10
R 1: 161.29
CURRENT: 159.82
S 1: 159.60
S 2: 158.24
S 3: 156.79

USDSGD
R 3: 1.3940
R 2: 1.3887
R 1: 1.3797
CURRENT: 1.3766
S 1: 1.3683
S 2: 1.3571
S 3: 1.3554

• S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot

Published on  Thu, May 8 2008, 07:58 GMT

Archive

• Asian Session- Dollar Stagnates Meanwhile Euro Awaits
  Published On Fri, May 16 2008, 09:22 GMT
• Asian Session- Dollar Continues to Hold as Asian Currencies Come Under Some Pressure
  Published On Wed, May 14 2008, 09:10 GMT
• Asian Session - Dollar Regains Some Confidence Amid Continued Morosity
  Published On Tue, May 13 2008, 10:03 GMT
• The Dollar is Holding Amid Reappraisals by Central Banks
  Published On Fri, May 9 2008, 10:16 GMT
• Asian Session - Usd Continues to Surge Higher
  Published On Thu, May 8 2008, 07:51 GMT

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