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Market Session Snap-Shot

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Asian Session − Usd Gains as Questions Fade

Wed, Jun 18 2008, 10:13 GMT
by Peter Rosentreich

ACM - Advanced Currency Markets

Market Brief

Usd was slightly stronger in Asian session as yields moved lower. GbpUsd was able to regain slightly to 1.9511 from Tuesday’s massive sell-off which saw the cable fall sharply from 1.9700 to 1.9472 lows. EurUsd was range bound for much of the Asian session but slipped to 1.5480 from 1.5520 as the trading day progressed. UsdJpy was stuck in a tight range of 107.90 to 108.00 as Japanese data failed to give the market any direction.

US equity markets finished lower on Tuesday, as positive earnings from GS (-1.5%) and Best Buy (-5.3%) weren't enough to lift the market. Only three sectors finished higher, with Energy (+1.7%) and Materials (+0.2%) being the sole real gainers. Financials (-2.9%) were once again the issue, as the GS report, where they beat estimates, did little to raise spirits. Asian markets are higher this morning, with the Nikkei up 0.7%, the Hang Seng up 1.3% and the MSCI A-P up 0.5%. Miners were higher, as commodity prices rose, while investors gained confidence that second half earnings may be stronger than expected. JGBs gained for a second day, as speculation mounts that the BoJ may hold off on raising rates this year.

The strength in the Usd leads us to believe that the effect of yesterday’s articles in major newspapers is beginning to dissipate. However, their argument that a rate hike in the US was premature due to weak underlying fundamentals is still extremely valid. With 3 rate hikes in 2008 already priced into the market we believe this optimistic view is slightly overdone. The Fed meeting and accompanying statement this week will be critical in steering Usd sentiment.

The minutes from the BoJ meetings were released and there were no statements which point to a shift in monetary policy in the near term. We continue expect UsdJpy to reach 110.00 in the mid term. Leading Index and Coincident Index both came in line with expectations.

Expect a quiet day for economic data releases with the lone exception being UK MPC minutes for June. However, there is little evidence that we will see anything enlightening. We doubt the committee will suggest rates need to rise since May minutes, where the MPC members knew of CPI inflation above 3.0%, contained no hint of tightening. We expect ultra-dove David Blanchflower to be the lone dissenter, having historically disregarded all inflation news while focusing on the soft labor market data. In addition the CBI survey should show a continued move upwards as there is little evidence price pressures has already peaked. After yesterday sell off we could see temporary Gbp strength was a rate cut is now not expected until q1 2009.

Currency Tech

AUDUSD
R 3: 0.9648
R 2: 0.7525
R 1: 0.9490
CURRENT: 0.9420
S 1: 0.9304
S 2: 0.9290
S 3: 0.9220

EURJPY
R 3: 170.00
R 2: 169.10
R 1: 167.80
CURRENT: 167.32
S 1: 167.09
S 2: 165.52
S 3: 164.97

USDSGD
R 3: 1.3940
R 2: 1.3887
R 1: 1.3850
CURRENT: 1.3683
S 1: 1.3645
S 2: 1.3580
S 3: 1.3554

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

Published on  Wed, Jun 18 2008, 10:27 GMT