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Forex − Dollar and Yen surged broadly on Monday

Tue, Oct 7 2008, 10:28 GMT
by Peter Rosentreich

ACM - Advanced Currency Markets

Forex News and Events:

The Dollar scaled a fresh 13-month peak versus the euro on Monday, while the Yen surged broadly as investors dumped risky assets amid anxiety over the lack of a coordinated global response to the credit crisis.

Traders drove the EurUsd below 1.3500, on a pessimist view after this weekend decision by leaders of Europe's four biggest economies against a coordinated bailout plan. In addition, European governments were forced to rescue large banks and protect ordinary depositors.

The strong and latest risk aversion, which saw heavy selling of stocks globally, put the Yen on track for its largest one-day gain versus the Dollar since the Asian crisis in 1998 and its strongest day against the Euro since the launch in 1999. Both the Dollar and the Yen rallied sharply against higher-yielding currencies such as the Australian and New Zealand dollars as investors are closing riskier trades.

EurUsd dropped 2% to 1.3520 after posting 1.3443, its lowest since late August 2007. EurJpy dived to 135.04, a 3-year low. It was last down 5.41% to 137.30. UsdJpy sank to a 4-1/2-month low of 100.23. It was last trading down 3.6% at 101.55. UsdChf rose 1.65% to 1.1473. GbpUsd dive 1.63% to 1.7431 after having posted 1.7336 low.

European banks have been hit hard by the fallout from a crisis that began in the United States when the housing market collapsed and bad mortgage debts multiplied. More European governments offered bank deposit guarantees as regulators from Washington to Seoul scrambled to contain the deepest global financial crisis in 80 years. The moves in Europe were in stark contrast to the situation in the United States, where Congress finally passed the government's $700 billion bank rescue plan last Friday. Analysts said the flexibility that the bailout provides the US economy would help support the Dollar. But the sharp drop in stocks on Wall Street, which pushed the Dow Jones industrial average to close below 10,000 for the first time in four years, pressured the Dollar against the Yen.

Other large moves: AudJpy plunged to a 4-year low of 70.31 before ending at 73.28, -10.15%. As Well AudUsd lost 6.81% to 0.7216, having posted 0.6991 low ahead of RBA aggressive 100pips interest rate cut this morning. NzdJpy tumbled as low as 52.66, a 6-year low, and NzdUsd dived 4.41% to 0.6323.

Today's Key Issues (time in GMT):

00:00 HKD Hong Kong holiday
02:30 AUD RBA cash rate 6% (expected 6.5%) vs 7%
03:58 JPY BoJ rate decision 0.5% vs 0.5%
05:00 JPY August Coincident indicator -2.8 vs 0.9
05:00 JPY August Leading indicator -2.1 vs 0.6
07:00 GBP September Halifax house prices -1.8% vs -1.8% (mom)
07:00 GBP September Halifax house prices -12.5% vs -10.9%
08:30 GBP August Industrial output -0.2% vs -0.4% (mom)
08:30 GBP August Industrial output -2% vs -1.9% (yoy)
08:30 GBP August Manufacturing output -0.2% vs -0.2% (mom)
08:30 GBP August Manufacturing output -1.6% vs -1.4% (yoy)
10:00 EUR August Germany Industrial Orders -0.1% vs 1.7% (mom)
13:30 EUR ECB’s Trichet speaks at World Policy Conference, Evian
15:00 USD Fed’s Stern speaks on the financial shock, Chicago
17:15 USD Fed’s Bernanke speaks on the economic outlook, Washington
19:00 USD August Consumer Credit 5.2b vs 4.6b

The Risk Today:

EurUsd Yesterday strong pressure hit strong support 1.3666 December 2004 high and broke below 1.3500. Further weakness will focus on 1.3056 support (retracement of 0.8231 – 1.6039 advance). Initial support holds 1.3443 Monday low. On the upside, only a return over 1.4000 and 1.5000 will release actual pressure and may put key initial resistance 1.6000 into focus. Still a break up there would open the way to Trendline resistance 1.6200. Initial resistance holds 1.4002 former trendline support.

GbpUsd Friday 25th September 1.8669 high marked the end of the mid-September uptrend. Yesterday weak sentiment pushed markets as low as 1.7336, now initial support. 11th September low and support 1.7447 and 1.7422 (50% retracement of 1.3682 – 2.1161 advance) have been cleared. Further downtrend may test strong support 1.7251 3rd April low. On the upside, initial resistance holds 1.8669 Friday 25th September high ahead of 1.8795 21st August high strong resistance.

UsdJpy After last week market consolidation 103.50 - 108, Market broke low support Monday down to 100.23 low. This recent pressure below 103.50 initial support may open the way to 101.45 support (61.8% retracement of 95.75 – 110.67 advance), as 100 pivot point. Recovery over 105 pivot point will put focus again on 108 and 110.67 15th August high.

UsdChf Market posted 1.1489 high yesterday, clearing 1.1418 11th September high. Further advance may open the way to 1.1596 December high and strong resistance. On the downside, only weakness below 1.0692, 22nd September low, would undermine the current trend and open the way down to 1.0500 and 1.0375. Such a move may also test the 1.0013 15th July low in front of 0.9637 17th March low.

Resistance and Support:

Published on  Tue, Oct 7 2008, 10:33 GMT