Asian Session: Markets mull U.S Automakers plea for help, could we see the rescue package derailing?

Market Brief

Markets were quiet this morning as lack of any substantial developments on Capitol Hill yesterday gave no impetus for market moves. The USDJPY is slightly up this morning as the Yen consolidates last week’s moves – trading a relatively tight range of, 96.33 – 97.12. The picture is much the same for the EURUSD, uncertainty reigning in the markets giving little potential for important moves during the Asian session. However, the dollar rallied violently around 19:00 CET, as the DOW dropped 80 points on continued uncertainty and fear. The Aussie was also very quiet this session, the currency that has constantly been under pressure as of late on domestic fears of a widespread recession.

The TARP (Troubled Asset Relief Program) has been under scrutiny lately as the “Big Three” in the U.S ask for a $25Bn chunk of the $700Bn package destined to stabilize the financial markets. Treasury Secretary Paulson stated clearly that the TARP was destined to the financial markets which have suffered the ill effects of toxic mortgage derivatives and not a remedy for all of the nation’s economic woes. Democrats and the respective Automakers’ chiefs retorted by saying that if the U.S auto-market were allowed to fail, it could only worsen the state of the economy – an industry that employs millions of people across the country. The auto-industry on a whole is feeling the hard hand of recession, Asian autos no exception to the rule.

The interesting remarks from the Japanese Vice Finance Minister for International affairs – Naoyuki Shinohara in Sydney this morning gave a good understanding of the continued efforts by the Japanese government to minimize the effects of FX price action on the economy. His remarks bore a satirical tone as he said the US currency had no worthy replacement in it’s role amidst the global economy, saying the U.S should increase it’s savings and reduce it’s trade deficit to give it much needed “stability”. These remarks come as no surprise as we know how much of the Japanese economy relies on export, continued unwinding of the Yen-Carry trade adding to a strong Yen – empirically detrimental to the Nippon economy. The string of pessimistic economic indicators out yesterday in the U.S was yet another blow to widespread confidence – Housing starts down to 780K in Oct, the lowest since inception of the indicator in 1959.

Commodities are steadfast, holding their ground – Gold hovering around the $740/oz level while crude continues to trade around $54/bbl, many analysts saying a $40/bbl a realistic target as demand falters.

Currency Tech

AUDUSD
R 3: 0.7065
R 2: 0.7015
R 1: 0.6758
CURRENT: 0.6453
S 1: 0.6390
S 2: 0.6339
S 3: 0.6009

EURJPY
R 3: 128.44
R 2: 125.48
R 1:; 123.11
CURRENT: 121.81
S 1: 119.10
S 2: 120.00
S 3: 115.00

USDSGD
R 3: 1.5680
R 2: 1.5411
R 1: 1.5304
CURRENT: 1.5273
S 1: 1.5099
S 2: 1.5000
S 3: 1.4921

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