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Asian Session − FX Markets Seaching for Clues

Mon, Jul 7 2008, 09:07 GMT
by Peter Rosentreich

ACM - Advanced Currency Markets

Market Brief

Usd is stronger against every major currency in the Asian session as speculation grows that the G8 meeting will focus on record high oil prices. EurUsd continued to decline from Thursdays sell-off, sliding to 1.5623 (on rumors that German bonds were to be redeemed rather then re-invested) while UsdJpy traded to 107.52 (7 day high). GbpUsd dropped from 1.9820 to 1.9722 as the market began to once again question the stability of the UK underlying economy. Carry trades gained on renewed Jpy selling and declining risk aversion, pushing EurJpy to 168.07 and AudJpy 103.12. The tight correlation between oil & Usd has lessened slightly in recent day with wti stable around the 143.50bll level while the Usd has taken a bullish tone. After the long weekend in the States, investors have been able to take stock and decide how to react to the Trichet statement that followed the ECB raising rates and the U.S. payroll numbers last Thursday.

Trading was still subdued despite the Usd strength with investors looking for more clues on the U.S. economic situation and to see if the Federal Reserve will be in a position to raise interest rates any time soon. Many will look towards comments from Fed officials over the coming days and in particular to Chairman Bernanke who may give some support to the Dollar during the week ahead.

Asian markets mostly trading higher this morning. Bargain hunters have taken the Nikkei from a 0.5% morning loss to a 1.0% afternoon gain as the market hopes to break its streak of 12 consecutive declines. Banks and exporters were popular choices. But, volumes were thin since the US was closed 4-Jul and could therefore not provide any direction. Chinese banks and airlines led Hong Kong and Shanghai up, but banks led a fall in Sydney over concerns about global credit markets. Also, miners and metals fell in Sydney.

BoJ Governor Shirakawa spoke saying said that global inflationary risks were growing and Japan's economy was slowing due to high energy and commodity prices. A very familiar script and preparing the market for the BoJs growth forecast downgrade expected this week.

A light calendar today will have the markets focused on the UKs Industrial production. The abrupt decline in the output balance of the June CIPS/RBS report on manufacturing suggests that output will soon be collapsing. We have already seen the Gbp come under significant selling pressure and expected the GbpUsd to continued to trade down (in choppy trading) to the 1.9300 mid term.

Currency Tech

AUDUSD
R 3: 0.9829
R 2: 0.9700
R 1: 0.9670
CURRENT: 0.9576
S 1: 0.9580
S 2: 0.9535
S 3: 0.9514

EURJPY
R 3: 170.00
R 2: 169.45
R 1: 169.15
CURRENT: 167.99
S 1: 167.13
S 2: 166.10
S 3: 166.00

USDSGD
R 3: 1.3850
R 2: 1.3827
R 1: 1.3730
CURRENT: 1.3647
S 1: 1.3565
S 2: 1.3505
S 3: 1.3470

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

Published on  Mon, Jul 7 2008, 09:18 GMT