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Daily Forex Outlook

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Focus on weakening Economic Fundamentals sends stocks crashing

Fri, Oct 3 2008, 03:25 GMT
by Easy Forex Team

Easy Forex

Focus on weakening Economic Fundamentals sends stocks crashing

U.S. Dollar Trading (USD) the boost received from the Senate passing the Bailout bill was short lived with the market sending stocks spiraling lower as focus turned back to the larger economy as a whole. Weekly Jobless Claims increased to 497K from 493K previously. Also weak, August Factory Orders falling -4% vs. -3% forecast. Concerns of a global slowdown sent commodities lower and helped buoy the USD to year highs. In the U.S. share markets, the NASDAQ was down -92 points (-4.48%) and the Dow Jones was down 348 points (-3.22%). Crude Oil closed down -$4.56 ending the New York session at $93.97 per barrel. Looking ahead, Non Farm Payrolls are seen -100K vs. -84K previously. The Unemployment rate in September is expected to remain at 6.1%. Also released September Non Manufacturing ISM forecast at 50 vs. 50.6 previously.

The Euro (EUR) broke below year lows as Trichet released some dovish comments on the direction of future European Interest rates which the ECB held at 4.25%. Also broken last night was the long term trend line at 1.3925. Large losses in Oil also weighed. Overall the EUR/USD traded with a low of 1.3747 and a high of 1.4040 before closing the day at 1.3800 in the New York session. Looking ahead, Retail Sales in August are expected at 0.1% vs. -0.4% previously. Also release the Eurozone PMI services seen at 48.2.  

The Japanese Yen (JPY) strengthened across the board and also against the surging USD as risk aversion spiked higher in the Asian and US sessions. The EUR/JPY was the biggest hit as it weakened considerable breaking below key support at 147. Overall the USDJPY traded with a low of 105.10 and a high of 106.29 before closing the day around 105.80 in the New York session.

The Sterling (GBP) weakened against the USD but losses were not as bad as the Euro.  UK data was weak but near expectations at -1.7%. UK Construction PMI fell further to 38.8 and is at a very low level well below the 50 contractionary level.  Overall the GDP/USD traded with a low of 1.7552 and a high of 1.7729 before closing the day at 1.7640 in the New York session. Looking ahead, September PMI Services seen slightly lower at 48 vs. 49.2.

The Australian Dollar (AUD) took the full brunt of the USD strength last night. Weakening Global Growth outlook and softening commodities combined with risk aversion to send the Aussie to new year lows below .7800. AUD/JPY also suffered considerable. Overall the AUD/USD traded with a low of 0.7698 and a high of 0.7945 before closing the US session at 0.7740.

Gold (XAU) Gold also tracked lower against the USD as large falls in Oil took its toll. Increased risk aversion failed to translate into safe-haven buying.. Overall trading with a low of USD$831.20 and high of USD$874.10 before ending the New York session at USD$837 an ounce.

TECHNICAL COMMENTARY

Euro – 1.3785 
Initial support at 1.3748 (Oct 2 low) followed by 1.3663 (Sept 07 low). Initial resistance is now located at 1.4032 (Oct 2 high) at followed by 1.4174 (Oct 1 high).

Yen – 105.20
Initial support is located at 103.50 (Sept 30 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 – 1.7625
Initial support at 1.7544 (Sept 12 low) followed by 1.7447 (Sep 11 low). Initial resistance is now at 1.8118 (Sep 30 high) followed by 1.8445 (Sep 29 High).

Australian Dollar – 0.7725
Initial support at 0.7715 (Oct 2 low) followed by the 0.7676 (Sept 17 2007 low). Initial resistance is now at 0.7944 (Oct 2 high) followed by 0.8097 (Sept 30 high).

Gold – 871
Initial support at 825 (Sep 19 low) followed by 772 (Sep 16 low). Initial resistance is now at 893.69 (Sep 29 high) followed by 914.9 (Sept 30 high).

Published on  Fri, Oct 3 2008, 03:28 GMT