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Asian Session − Continued Pressure on European Financial Sector

Mon, Oct 6 2008, 08:08 GMT
by Peter Rosentreich

ACM - Advanced Currency Markets


Market Brief

The Usd continued to gain strength in the Asian session, as escalating problems in the European banking sector unnerved participants. The EurUsd slipped, trading down from 1.3724 to 1.3561, while the UsdJpy slipped from 105.43 to 102.87. Asian equities sold off, with Shanghai down -4.61% and European indexes poised to open lower. Crude prices slid to $91.30bbl, while spot gold fell -0.79%, despite the increase in risk aversion. VIX is still well elevated at 45.14, although the Emergency Economic Stabilization Act was passed broadly in the House of Representatives on Friday and quickly signed by President Bush (Friday, Wall Street closed lower).

The passing of the EESA will help prop up prices of distressed financial assets and begin instilling confidence among banks. However, it will take a while to fully implement and until then the international financial system will stay under stress. Over the weekend, German officials were required to step in to renegotiate a rescue package for one of the country's largest banks and then also declare a full guarantee on all private savings, following Ireland's move last week. Quickly after, Denmark followed with its own guarantee plan and we expect other European countries to follow suit. There has been increasing call for a comprehensive European plan. The way markets shrugged off the last week negative US data, including Friday NFP, which fell -159k, illustrates the markets focus. With the financial sectors turmoil defining trading patterns, including FX, markets will be focused on the unfolding developments, rather than underlying economic fundamentals or traditional correlations (ie oil and Usd). In this current environment, we expect the Usd to continue to gain strength.

Perhaps the only economic events which will give the markets pause will be the BoJ and RBA rate announcements this week. We expect the BoJ to unanimous vote for rates to remain on hold with a great focus on developments in financial markets. In regard to the RBA, we are looking for a 50bp cut. However, with the hastily deteriorating position of the developed economies, the RBA might be forced to ease further to shore up growth.

Snap Shot

Global indexes Current level % Change
Nikkei 225 Index10,473.09-4.25
Hang Seng Index16,965.06-4.05
Shanghai Index2,179.99-4.96
FTSE futures5,005.002.02
CAC futures3,850.50-5.77
SMI Futures6,895.002.04
DJIA futures10,150.00-2.06

World markets Current level % Change
Gold830.75-0.56
Silver11.08-0.55
VIX45.14-0.26
Crude wti90.78-3.3
USD Index81.261.18

Todays calender Estimates Previous Country / GMT
Manufacturing Output (Aug)---0.2%,-1.4UK / 8.30
Industrial Production (Aug)---0.4%,-1.9UK / 8.30


Currency Tech

AUDUSD
R 3: 0.7944
R 2: 0.7818
R 1: 0.7738
CURRENT: 0.7500
S 1: 0.7416
S 2: 0.7379
S 3: 0.7270

EURJPY
R 3: 148.69
R 2. 146.85
R 1: 144.97
CURRENT: 140.32
S 1: 139.92
S 2: 139.15
S 3: 138.24

USDSGD
R 3: 1.4859
R 2: 1.4760
R 1: 1.4698
CURRENT: 1.4606
S 1: 1.4537
S 2: 1.4458
S 3: 1.4374

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

Archive

Advanced Currency Markets, S.A.  | 50 Rue du Rhone CH-1204 Geneva
http://www.ac-markets.com | support@ac-markets.com

Legal disclaimer and risk disclosure

This report has been prepared by AC Markets and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by AC Markets personnel at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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