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Asian Session − Paulson to the Resue

Mon, Jul 14 2008, 09:59 GMT
by Peter Rosentreich

ACM - Advanced Currency Markets

Market Brief

The Usd continued to come under significant selling pressure in Asian session as the bearish dollar sentiment carried over the weekend. EurUsd gapped at the open, quickly trading to 1.5971, however Gbp/Usd which rallied at the open was unable to sustain the upwards momentum and traded lower from 1.9914 to 1.9823. Commodity currencies traded basically sideways with Aud/Usd jumping between 0.9670 to 0.9711 and Usd/Cad moving slightly upward from 1.0070 to 1.0118. Jpy fueled carry trades performed slightly better as the Jpy had a weak tone. Aud/Jpy traded up to 103.21 and Try/Jpy moved to 87.624.

In a massive move to restore the markets confidence in Fannie and Freddie Trsy Sec. Paulson said that the US Federal government would buy or finance almost half of the $12 trillion of U.S mortgage market. Specifically, Pauslon stated, he would ask the Fed to increase credit lines extended to GSEs, seek Congressional approval to buy equity in the GSE's and expand the Feds role in defining the regulatory structure for the GSEs (specifically their future capital requirements). While the markets are still digesting the statement, a change of policy towards clear “bailout” by the government should help the equity market, risk appetite andUsd intraday

The BoJ began is two day monetary policy meeting today and are expect to hold rates at 0.50%.

New Zealand reported a dismal retail sales figure (m/m) at -1.2% vs. -0.1% exp. but grew Ex Autos 0.7% vs. 0.5% exp (likely lifted by food price inflation). Clearly higher energy cost, deteriorating economic expectations and weak labor market has wrecked consumer confidence and this downward trend doesn’t seem to be ending near term. Today’s poor growth figure will now place the emphasis on tomorrow CPI figure as a key factor to when the RBNZ begins cutting rates. Should the figure come in softer than the q/q 1.4% expected reading, we could see a decline unwinding of long NZD positions.

In a light calendar day markets will be watching UK Junes producer prices. It will be interesting to see if the decline in business activity has halted producer’s ability to pass on their increased costs. We don’t think so however, especially given the fact that energy has continued to move up and sustained these elevated levels for an extended period of time. Most likely, producers price increases are being pass to the consumer which the MPC won’t be happy about.

Currency Tech

AUDUSD
R 3: 0.9923
R 2: 0.9792
R 1: 0.9718
CURRENT: 0.9678
S 1: 0.9597
S 2: 0.9546
S 3: 0.9477

EURJPY
R 3: 171.88
R 2: 170.00
R 1: 169.63
CURRENT: 169.28
S 2: 167.83
S 2: 167.13
S 3: 166.09

USDSGD
R 3: 1.3850
R 2: 1.3827
R 1: 1.3729
CURRENT: 1.3554
S 1: 1.3553
S 2: 1.3506
S 3: 1.3470

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

Published on  Mon, Jul 14 2008, 10:07 GMT