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Asian Session: China and Brazil discuss bypassing the dollar for international trade

Mon, Jun 29 2009, 09:57 GMT
by Peter Rosentreich

ACM - Advanced Currency Markets

Market Brief

The BIS’ annual general meeting this weekend saw the emergence of talks between China and Brazil on how to bypass the dollar for trade between the two countries. The premise for this agreement is to limit the importance of the U.S dollar as the dominant global reserve currency, one analyst saying the substantial debt the U.S had incurred during the crisis that originated on it’s shores would be a “heavy burden on the dollar”. As a consequence the long-term outlook by major financial institutions has shifted – strong dollar in the short/medium term but definite dollar weakness as we pull clear of these current economic woes. Initial talk along these lines spoke of the IMF’s SDR replacing the dollar as a global reserve currency, now it seems the focus has shifted to limiting the dollars importance by favoring more direct swap methods.

Japan industrial production numbers rose for the third straight month as inventory cuts late last year and earlier this year left a void as massive production cuts in the wake of the Lehman brothers meltdown left demand for Japanese products at an all-time low. While many see sentiment improving, the long hard road to recovery has only begun. With elections expected to take place in August further instability in the political system could stunt economic growth further.

Commodities have traded higher in recent sessions as the dollar slides. Gold’s rapid decline from it’s June highs saw it bounce off the $900 support before losing momentum at around $950. As the global economy improves commodities will continue to soar as demand will push prices higher, this said – continued risk aversion could also be a driving force for commodities such as Gold and Silver. Crude is trading just below the $70 handle – ahead of U.S driving season.

Currency Tech

AUDUSD
R 3: 0.8375
R 2: 0.8263
R 1: 0.8120
CURRENT: 0.8018
S 1: 0.7790
S 2: 0.7703
S 3: 0.7630

EURJPY
R 3: 139.20
R 2: 138.33
R 1: 135.35
CURRENT: 133.75
S 1: 131.43
S 2: 129.70
S 3: 126.98

USDSGD
R 3: 1.4800
R 2: 1.4748
R 1: 1.4649
CURRENT: 1.4557
S 1: 1.4515
S 2: 1.4425
S 3: 1.4385

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

Published on  Mon, Jun 29 2009, 10:11 GMT