Good morning from wonderful Hamburg and welcome to Varengold Daily FX Report. The US and the UK have already prohibited uncovered short selling. Yesterday Australia extended a ban on short selling to covered transactions to cut volatility in the stock market. Could you imagine what the Forex market would be without short selling?
Market review
On Monday the USD fell broadly because the US government rescue plan to ease the global credit crisis raised worries about a countries massive budget deficit. The plan could boost the 2009 US deficit as high as $1.5 trillion said JPMorgan in a note. The stocks and the USD tumbled as emerging details of the $700 bln plan left many market players skeptical that the rescue will work. The idea to give power to the US Treasury department to buy toxic mortgage related debts from financial institutions is very good from the perspective of the market. But the investors wants to know how the government is going to buy these securities, what they will pay and how the reverse auction will work. The EUR/USD rose 2.5 % at 1.4831, this was the biggest one-day gain for the European currency since there inception in January 1999. The GBP benefited also from the USD selling and increased 1.6 % at 1.8615.
The AUD and NZD reached their highest level in three weeks after the commoditie prices escalated. In particular oil prices soared more than 15 % and exceeded $110 a barrel. Both currencies rose on speculation that the worst may be over for commodities, which have tumbled this quarter on a combination of slowing economc growth and a strong USD. On Monday the AUD/USD rose 1.8 % at 0.8483 and the NZD/USD gained 0.7 % at 0.6922.
AUD/JPY
Since the middle of July, the AUD/JPY has been trading in an downward trend channel. After the currency pair touched the low at 81.80, it recoverd extremly and crossed the upper line of the trend channel. This development is a clear trend reversal. If the pair break through the resistance at 90, we will expect a new positive trend channel. Should this not occur, the AUD might trade in a horizontal trading range.
USD/CHF
Since the middle of July, the USD/CHF has been trading in an upward trend channel. However the positive trend was over in the middle of September. The Fibonacci retracements analyse shows main support levels at 1.0875 and 1.0706. In the last trading days the USD crossed the 61.5 % level and stopped the down movement on the next support line. If the pair cross also this level, the next main level will be at 1.0537.
