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Wakeup Call on Forex Markets

Crude Oil Making New, Fresh Highs

Tue, May 6 2008, 06:48 GMT
by David Karsbøl

Saxo Bank


The USD is weakening after very weak US Vehicle Sales. Watch out for E-Z PPI today and Rate Decisions from BoE and ECB tomorrow.


Overnight News Bullets

  • US Domestic Vehicle Sales (Apr) out at 10.6M vs. 11.4M expected.

  • NO PMI sa (Apr) out at 54.4 vs. 52.3 expected.

  • NO Unemployment Rate (Apr) out at 1.6% as expected.

  • E-Z Sentix Investor Confidence (May) out at 3.5 vs. 3.9 expected.

  • US ISM Nonmanufacturing Composite (Apr) out at 52.0 vs. 49.1 expected.

  • Bernanke spoke yesterday, acknowleding the weakness in housing and a severe increase in mortgage delinquencies.

  • AU Trade Balance (Mar) out at -2736M vs. -2900M expected.

  • AU RBA Cash Target out at 7.25% (unchanged) as expected.


Markets

  • FX: USD and JPY weakening a bit. EUR stronger. Carry Trades strengthening a tad.

  • Fixed income: Still ranging, but still a lot of volatility in JGB’s.

  • Stocks: Very tight ranges, mostly down in the US. Nikkei up by 2%.

  • Commodities: Crude making new, record highs, now trading just below 120. Very strong come-back. Precious metals edging higher, supported by USD weakness.


O/N Data Heat map:

Data heat map


Calendar

Today's Highlights:

Time (GMT) Region Release Consensus
05:45SZ CPI MoM/YoY (Apr) 0.9%/2.4%
07:45 – 08:00 E-Z A streak of E-Z PMI Services
08:30UK PMI Services (Apr) 51.7
09:00E-Z PPI MoM/YoY (Mar) 0.7%/5.6%
12:30CA Building Permits MoM (Mar) 1.20%
14:00CA Ivey PMI (Apr) 54
21:00US ABC Consumer Confidence -41
23:01UK Nationwide Consumer Confidence (Apr) 74
23:30AU AiG Performance of Construction Confidence (Apr) 48.4 (prior)


This and Next Week’s Highlights:

Date Region Release
May-07UK Industrial Production, Manufacturing Production
May-07E-Z Retail Sales
May-07GE Factory Orders
May-07US MBA Mortgage Applications, Nonfarm Productivity, Unit Labor Costs, Pending Home Sales, DOE/API Inventories
May-07NZ Unemployment Rate
May-08AU Employment Change, Unemployment Rate
May-08SZ Unemployment Rate
May-08GE Trade Balance, Current Account
May-08SE Industrial Production, Industrial Orders
May-08NO Industrial Production
May-08GE Industrial Production
May-08UK BOE announces Rates
May-08E-Z ECB announces Rates
May-08CA Housing Starts
May-08US Initial Jobless Claims, Continuing Claims, Wholesale Inventories, EIA Nat gas storage change


What's going on?

  • Having announced a Q1 loss of 11-5B francs, UBS has also stated that it would cut as many as 2,600 jobs, or 12% of the securities unit with total potential cuts amounting to 8,000 jobs, underpinning the troubles faced by the European bank with the highest losses from the subprime losses.

  • U.S. Total Vehicle Sales have hit the lowest level since July 1998, as high fuel prices continue to take a toll on demand for high energy consuming pickup trucks and sport-utility vehicles.

  • In his speech to Columbia University in New York, Fed Chairman Bernanke said high delinquency and foreclosure rates have hurt the broader economy, highlighting the spillover effects on the housing and financial sectors.

  • The crude oil has touched another record high at $120.36 a barrel on speculation of growing demand during the peak summer driving season in the U.S. Next big levels to watch become $122.50 on the upside and $117.00 on the downside.


FX

Break-Out Trade in GBPUSD

fx graph

Fx trading strategies

FX Trading Strategies

Pair Supp. Resis. Comments
GBPUSD 1.961.98With lack of liquidity yesterday due to UK and Japan closed, trading was very spiky. Strong US figures might still have some follow-through. We have placed an order to sell at 1.9723 offer, targeting 1.9670. Stop if bid at 1.9734.

Published on  Tue, May 6 2008, 06:56 GMT

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