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Market Session Snap-Shot

Asian Session − Crude Drops Below $130.00

Wed, May 28 2008, 10:47 GMT
by Peter Rosentreich

ACM - Advanced Currency Markets

Market Brief

Usd was slightly weaker in Asian session as a dip in crude prices offset concerns over the US economy. EurUsd rallied off 1.5670 support, climbing to 1.5730 in late session trading. UsdNok followed the same trend looking to test the 5.0000 support as trader position themselves inform for the Norges Bank rate decision today. Overall commodity currencies (especially Aud which was in a very bullish tone) and carry trades held up despite pairing back of risk appetite and energy prices (broke below $130.00bbl).

US markets closed with gains on Tuesday, after the long weekend, with the S&P500 gaining 70bps and the NASDAQ gaining 150bps. The main reason for the rise was a sense of short-term oversold conditions, with crude prices coming off, helping sentiment. Treasuries retreated, after inflation fears and the equities buying led to price declines. New home sales in April were slightly ahead of forecasts, also helping sentiment. Asian markets are lower this morning, as the Nikkei drops 1.5%, the Hang Seng is down 0.3% and the MSCI A-P is lower by 0.8%. Commodity producers led declines, with the fall in crude prices impacting oil producers.

Yesterday Fed’s Yellen commented that the "current level of monetary accommodation is appropriate" and "sufficient to promote a step up in moderate growth this year". This clear comment seems to cement the current belief that the fed is done cutting rates especially given the elevated price of crude and rising price pressures. However, there are a few significant obstacles ahead which could shift the Fed’s neutral bias including the energy prices and changing consumption patterns. The weak consumer confidence which fell more then expect to 57.2 and is reflective of levels witnessed in ‘91 and ‘02 illustrates erosion of current and future expectations.

It is universally expected that the Norges Bank will hold rates steady at 5.50% today. The central bank has been very consistent with its commitment to price stability over the past few months and matched with crude prices the NOK has outperformed. So far inflation has outpaced all expectations while economic activity has only slightly moderated. The markets will be listening for any new hawkish signals from the accompanying statement which might steer interest rate view (additional option of raising rates in 2008) and push UsdNok to test 4.9500 major support.

In the European session markets will be watching German GDP and eurozone current account. The second estimate of GDP will confirm the q1 1.5% increase. However many of the factors which push the figure up are one off and cannot be relied to help next quarter. The market is expecting a slip into deficit after the recent fall in trade balance but markets will discount this figure since trade balance recently fell and the eurozone is still in a stronger position than the UK or US.

Global Indexes	Current Level	% Change
Nikkei 225 Index	13,709.44	-1.32
Hang Seng Index	24,242.45	-0.16
Shanghai Index	3,459.03	2.47
FTSE futures	6,075.00	-0.52
DAX futures	7,005.00	0.34
SMI Futures	7,425.00	0.54
DJIA futures	12,527.00	-0.2

World Markets	Current Level	% Change
Gold	129.14	0.28
Silver	17.49	0.34
VIX	19.64	0.46
Crude wti	129.14	0.22
USD Index	72.22	-0.16

Todays Calender	Estimates	Previous	Country / GMT
Current Account (Mar)	--	+€4.3bn	EZ / 9.00
Norges Bank Interest Rate Announcement	5.50%	5.50%	NO / 13.00
Durable Goods Orders (Apr)	-1.10%	-0.30%	US / 13.30
Core Durable Goods Orders (Apr)	-0.50%	0.90%	US / 13.30

Currency Tech

AUDUSD
R 3: 0.9826
R 2: 0.9723
R 1: 0.9655
CURRENT: 0.9618
S 1: 0.9546
S 2: 0.9511
S 3: 0.9392

EURJPY
R 3: 164.98
R 2: 164.51
R 1: 163.89
CURRENT: 163.59
S 1: 162.26
S 2: 161.60
S 3: 161.27

USDSGD
R 3: 1.3774
R 2: 1.3732
R 1: 1.3669
CURRENT: 1.3622
S 1: 1.3566
S 2: 1.3554
S 3: 1.3470

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

Published on  Wed, May 28 2008, 10:56 GMT