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The Currency Futures Report

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Sterling 'Plummets' on Lenders Need for Cash

Tue, Jun 3 2008, 10:56 GMT
by Bob Kozak

Alaron

British Pound (BPM8):

The BP opened lower at 1.9580 after the U.K.'s largest mortgage lender, Bradford & Bingley Plc stated that it will need to sell stock at a discount to raise cash. The U.K. housing market continues to deteriorate as mortgage payments in arrears increases.Prices held above the 50% fib retracement level and bounced bounced to a mid-day Hi of 1.9659, before trailing lower towards the close of 1.9635, down 153 tics. The close below the 9-day MA changes the s/t trend to 'negative' w/ turning momentum indicators. Short-covering at the 50% fib ret..level of 1.9568 may be tested on further financial concerns. Remaining longs need to tighten 'stops' or buy 'puts' to reduce exposure. A lower open may find Support at 1.9554 and 1.9472, while an open above 1.9655 should find Resistance at 1.9737 and 1.9838.

Dollar Index (DXM8):

The DX opened higher at 73.08 and rose to our initial Resistance level of 73.20 as a better than expected ISM Mfg. Index of 49.6 showed a +1.0 increase. Inflationary pressures rose from the Prices Paid section, which rose to 87.0 from April's 84.5. Prices retraced to a mid-day low at our initial Support level of 72.78 and bounced towards the close to end the day at 72.99, up 4 tics. The s/t trend remains 'positive' w/ neutral momentum indicators. Further credit woes may weigh on prices. Longs should tighten 'stops' or buy 'puts' to reduce exposure. A lower open may find Support at 72.79 and 73.59, while an open above 73.00 should find Resistance at 73.20 and 73.41.

Canadian Dollar (CDM8):

The CD opened lower at 1.0040 and retraced against the stronger DX to a mid-day Lo at our 50% fib retracement level of .9968, before bouncing towards the close to end the day at .9981, down 70 tics. The s/t trend remains 'negative' w/ neutral momentum indicators.We will see if short-covering and bargain hunting can turn the CD around after the latest round of profit-taking. Traders will note the Factory Orders and oil/metals prices as a key for direction. A lower open may find Support at .9943 and .9904, while an open above 1.0006 should find Resistance at 1.0045 and 1.0108.

Euro Currency (ECM8):

The EC opened lower at 1.5506 and slid to a morning Lo of 1.5476, before rebounding to a mid-day Hi of 1.5580 on 'hawkish' comments from ECB President Trichet at the Euro Zone finance ministers meeting in Frankfort. As inflationary pressures continue, Trichet told attendees it was "no time for complacency'. The ECB will likely keep rate 'unchanged' at 4.00% in Thursday's ECB rate meeting. Prices retraced towards the close and ended the session at 1.5532, down 14 tics. The s/t trend remains 'negative' w/ neutral momentum indicators. The rate meeting on Thursday may find traders adjusting positions, despite the 'on hold' jaw-boning by Trichet. Longs should tighten 'stops' or buy 'puts' to reduce exposure. A higher open should find Resistance at 1.5583 and 1.5633, while an open below 1.5529 may find Support at 1.5479 and 1.5425.

Japanese Yen (JYM8):

The JY opened higher at .9550 as carry-traders reversed positions, taking profit/risk off the table after European equity markets 'sold-off' on further financial concerns. Prices slid to a morning Lo of .9530, before short-covering and bargain-hunting sent prices to a mid-day Hi of .9620. The JY trailed lower towards the close to end the session at .9586, up 95 tics. The s/t trend remains 'negative' w/ neutral momentum indicators. Weaker equity markets could see further short-covering from carry-traders, sending prices higher. A higher open should find Resistance at .9562 and .9538, while an open below .9519 may find Support at .9543 and .9500.

Published on  Tue, Jun 3 2008, 10:57 GMT