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Daily Forex Outlook

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US stocks extend slump, USD extends rally

Fri, Nov 21 2008, 02:26 GMT
by Easy Forex Team

Easy Forex

US stocks extend slump, USD extends rally

• U.S. Dollar Trading (USD) strengthened on the back of rising risk aversion as stocks came under severe selling pressure. New 11 ½ year lows on the S&P were seen as concerns about the looming recession weighed. Weekly Jobless Claims jumped to 542K vs. 505K expected. Also released Philadelphia Fed in November seen at -39.3 vs. -35 expected. Adding to USD strength was the large slump in Oil below the critical $50 a barrel support. In U.S. share markets, the NASDAQ was down 70 points (-5.07%) and the Dow Jones was down 444 points (-5.56%). Crude Oil closed down -$4.45 ending the New York session at $49.65 per barrel.

• The Euro (EUR) held to a tight range as traders concentrated on other currencies that offered more action. 1.2500 has proven a key level that the Euro has gravitated around. Large falls in Oil and stocks finally forced the pair lower into the US close. Overall the EUR/USD traded with a low of 1.2475 and a high of 1.2812 before closing the day at 1.2480 in the New York session. Looking ahead, November Germany PMI Services is expected to fall to 47.5 vs. 48.3.

• The Japanese Yen (JPY) strengthened against the USD/JPY as the US stocks hit multi year lows and risk aversion continued to dominate trading. AUD/JPY and GBP/JPY weakened over 5% and remained of a very weak footing going into Asia. Traders are still wary of any Bank of Japan Yen selling to stem the rapid rise. Overall the USDJPY traded with a low of 95.59 and a high of 97.09 before closing the day around 95.80 in the New York session. Looking Ahead, BOJ rate Decision widely expected to remain on hold.

• The Sterling (GBP) Extended losses below 1.50 as Oil dropped below $50 a barrel. The market is still extremely bearish on the UK economy which combined with fresh stock weakness undermined the already fragile support. October Retails Sales beat expectations at -0.1% vs. -0.9% forecast.  Overall the GDP/USD traded with a low of 1.4716 and a high of 1.4993 before closing the day at 1.4770 in the New York session.

• The Australian Dollar (AUD) came under severe pressure after the Key level that was twice supported by the Reserve Bank of Australia at .6350 broke. The Pair quickly fell to lows of 0.6200 and as commodities slid the AUD continued to be pummeled. As US stocks Crashed the near perfect storm took AUD another leg lower under 0.6100 and close to the year lows at .6010. AUD/JPY was a major catalyst in the move lower as it broke key support at 60 Yen. Overall the AUD/USD traded with a low of 0.6077 and a high of 0.6415 before closing the US session at 0.6100.

• Gold (XAU) struggled for direction as safe haven buying of the precious metal was countered by falling commodities. Overall trading with a low of USD$735.30 and high of USD$752.80 before ending the New York session at USD$746 an ounce.
  

TECHNICAL COMMENTARY

• Euro – 1.2445

Initial support at 1.2435 (Nov 20 low) followed by 1.2389 (Nov 13 low). Initial resistance is now located at 1.2564 (Nov 20 high) at followed by 1.2814 (Nov 19 high)

• Yen – 94.00

Initial support is located at 93.62 (Nov 20 low) followed by 93.2 (Nov 12 low). Initial resistance is now at 96.23 (Nov 20 high) followed by 97.55 (Nov 17 high).

• Pound – 1.4750

Initial support at 1.4713 (Nov 20 low) followed by 1.4647 (Nov 17 low). Initial resistance is now at 1.4994 (Nov 20 high) followed by 1.5249 (Nov 19 high).

• Australian Dollar – 0.6110

Initial support at 0.6077 (Nov 19 low) followed by the 0.6009 (Oct 27 low). Initial resistance is now at 0.6416 (Nov 20 high) followed by 0.6596 (Nov 14 high).

• Gold – 737

Initial support at 725.40 (Nov 14 low) followed by 700 (Nov 13 low). Initial resistance is now at 762 (Nov 19 high) followed by 768.21 (Nov 10 high).

Published on  Fri, Nov 21 2008, 02:30 GMT