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Daily Forex Outlook

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Stocks recover and Dollar Surges on European bailouts

Wed, Oct 1 2008, 01:07 GMT
by Easy Forex Team

Easy Forex

Stocks recover and Dollar Surges on European bailouts

U.S. Dollar Trading (USD) gained heavily today posting one of its biggest one day advances as markets focused on other economies and equities rebounded. US data also supported with weakness in the Case-Schiller Home Prices Index at -16.3% being overlooked and instead concentrated on improvements to Chicago PMI (56.7 vs. 53.5) and CB consumer Confidence (59.8 vs. 54.6). In the U.S. share markets, the NASDAQ was up 98 points (4.97%) and the Dow Jones was up 485 points (4.68%). Crude Oil closed up $4.27 ending the New York session at $100.64 per barrel. Looking ahead, ADP unemployment report seen at -60K in September and the Manufacturing ISM fairly steady at 49.5.

The Euro (EUR) rumors of emergency rate cuts and focus on the European banking sector sent the Euro tumbling. End of Quarter USD demand added to the downside moves. European CPI was confirmed as expected at 3.6% in September and German Unemployment fell -29K vs. -15 K expected in September.  Overall the EUR/USD traded with a low of 1.4008 and a high of 1.4433 before closing the day at 1.4090 in the New York session. Looking ahead, September Eurozone Manufacturing PMI is seen at 45.3 vs. 47.6 previously. Also released German Retail Sales seen +0.5% vs. -1% in August.

The Japanese Yen (JPY) came off considerable as equities reversed course and the USD/JPY jumped over 200 pips. Unemployment was confirmed at 4.1% in August. Quite surprisingly there was no capitulation in the crosses which one would have expected given the stock market crash. Overall the USDJPY traded with a low of 103.50 and a high of 106.52 before closing the day around 106.05 in the New York session. Looking ahead, Q2 Tanken Survey expected at -2 vs. 5 in Q1.

The Sterling (GBP) tracked the Euro lower succumbing to the USD strength as well. Q2 GDP was confirmed at 0.0% and the Current account dropped to -11B vs. -9.7B expected.    Overall the GDP/USD traded with a low of 1.7758 and a high of 1.8119 before closing the day at 1.7790 in the New York session. Looking ahead, September Manufacturing PMI seen slightly lower at 45 vs.45.9 previously.

The Australian Dollar (AUD) broke aggressively to the downside in the US session after staging a recovery off Asian lows going into the European session. Gold fell over $40 an ounce and talk of a possible 1% rate cut next Tuesday sent the AUD spirally lower. AUD/JPY held up quite well given the large turnaround in equities. Retail Sales were quite solid at +0.3% in August. Overall the AUD/USD traded with a low of 0.7859 and a high of 0.8097 before closing the US session at 0.7925.

Gold (XAU) came off the $900 handle and fell quickly to $860 supports as USD strengthened and credit fears eased.  Overall trading with a low of USD$857.20 and high of USD$908.05 before ending the New York session at USD$871 an ounce.

TECHNICAL COMMENTARY

Euro – 1.4110 
Initial support at 1.4008 (Sept 30 low) followed by 1.3974 (Sept 12 low). Initial resistance is now located at 1.4426 (Sept 30 high) at followed by 1.4679 (Sept 29 high).

Yen – 104.35
Initial support is located at 103.50 (Sept 16 low) followed by 102.57 (May 12 low). Initial resistance is now at 106.96 (Sep 29 high) followed by 107.02 (Sept 25 high).

Pound – 1.7835
Initial support at 1.7735 (Sept 16 low) followed by 1.7544 (Sep 12 low). Initial resistance is now at 1.8118 (Sep 30 high) followed by 1.8445 (Sep 29 High).

Australian Dollar – 0.7925
Initial support at 0.7802 (Sept 17 low) followed by the 0.7676 (Aug 17 2007 low). Initial resistance is now at 0.8097 (Sept 30 high) followed by 0.8348 (Sept 29 high).

Gold – 872
Initial support at 867.83 (Sept 29 low) followed by 865 (Sept 25 low). Initial resistance is now at 924.75 (Sep 29 high) followed by 935 (July 25 high).

Published on  Wed, Oct 1 2008, 01:09 GMT