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Forex − Sterling and Euro dropped sharply against Dollar and Yen

Tue, Sep 2 2008, 09:23 GMT
by Peter Rosentreich

ACM - Advanced Currency Markets

Forex News and Events:

The Dollar hit an eight-month high against a basket of major currencies early Today, getting a boost from a sharp drop in Oil prices on expectations that Hurricane Gustav's damage to US energy facilities may be less than feared.

Sterling and the Euro fell further after European Union leaders agreed on Monday to postpone talks on a new EU-Russia partnership until Moscow withdraws its troops to pre-conflict positions in Georgia, traders said. The tensions with Russia have compounded a slide in European currencies as the spreading global economic slowdown has prompted investors to unwind bets that major economies would withstand the US downturn and global credit crunch.

Latest comment by Britain's finance minister that economic challenges are the greatest in 60 years sparked a sell-off in Sterling, driving it to a two-year low against the Dollar and a all-time low against the Euro.

The Australian Dollar rose briefly after the RBA cut its benchmark interest rate by 25bp to 7% on Tuesday, as widely expected. It was the first easing in seven years for the Australian Central Bank as it attempts to offset a globally driven tightening in financial conditions.

Yesterday Market swings were exaggerated as U.S. financial markets were closed on Monday for the Labor Day holiday. EurUsd dipped 0.63% to 1.4557. UsdJpy was 0.29% lower at 108.03 after hitting 107.62 intraday low. GbpUsd dropped 1.68% to 1.7908 having touched 1.7850 Monday low. UsdChf was 0.06% higher at 1.1020. EurGbp rose 1.07% to 0.8163 after posting 0.8163 12-years high. AudUsd fell 0.89% to 0.8469, and hit a fresh one-year low of 0.8397 this morning. The Yen climbed broadly as the slide in Sterling and Euro have prompted market players to unwind carry trades, in which the low-yielding Yen is used to fund purchases of higher-yielding currencies. EurJpy hit a five-month low of 157.11, while GbpJpy sank 2.39% to 193.46 after hitting 192.65 a 5-month low.

Today's Key Issues (time in GMT):

04:30 AUD September RBA cash rate 7% vs 7.25%
05:45 CHF August CPI -0.1% vs -0.4% (mom)
05:45 CHF August CPI 3.1% vs 3.1% (yoy)
05:45 CHF Q2 GDP 0.2% vs 0.3% (qoq)
05:45 CHF Q2 GDP 2.4% vs 3% (yoy)
09:00 EUR July Euro-zone Producer prices 1.3% vs 0.9% (mom)
09:00 EUR July Euro-zone Producer prices 9.1% vs 8% (yoy)
14:00 USD July Construction spending -0.4% vs -0.4%
14:00 USD August ISM Manufacturing PMI 50 vs 50
23:00 USD weekly ABC CCI -49 vs -50

The Risk Today:

EurUsd Market dropped as low as 1.4557 on Monday, new initial support. Further weakness will put the focus on strong support 1.4366 22nd January low. On the upside, only a return over 1.5000 and 1.5500 will release actual pressure and put key initial resistance 1.6000 into focus. Still a break up there would open the way to Trendline resistance 1.6200.

GbpUsd Cable dropped to 1.7850 low yesterday, new initial support. Yesterday sharp move broke 1.7936 19th April high. Strong support holds 1.7251 3rd April low. On the upside, initial resistance holds 1.8795 last 2-weeks high. Former support 1.9363 holds also strong resistance. Key level holds 2.0100 resistance.

UsdJpy Last 6-weeks recovery pushed the market up to 110.67 high 3-weeks ago. Further advance would open the way toward 111.92 early January high. On the downside, last week return below 108.59 and 108.14 supports placed market near the 6-month lower trendline support. Further pressure toward 107.50 level and may open the way toward 105 pivot, 102.73 support and 100 pivot point. Initial support holds 107.62 yesterday low.

UsdChf Dollar rose higher against Chf and hit 1.1094 high early this morning. Initial resistance holds 1.1107 13th February high. Strong resistance holds 1.1593 December 2007 high. On the downside, initial support holds 1.0863. Only renewed weakness below 1.0500 and 1.0375 would retest the 1.0000 pivot point and may open the way toward 0.9637 17th March low.

Resistance and Support:

Published on  Tue, Sep 2 2008, 09:28 GMT