Forex Market Overview

Forex Market Overview 30 July 2008

The Usd was higher in Asian session, as a combination of stronger bank stocks and lower crude prices gave the greenback a broad based boost. The EurUsd slid to 1.5554 from 1.5599, while UsdJpy was able reversed its downward trend in early Asia , rebounding to 108.20 from 107.88. The NzdUsd broke below critical 0.7368 support, trading to session lows of 0.7333, as bad news from the Kiwi financial sector and lower commodity prices weighed on the Nzd. Jpy fueled carry trades were range bound, despite lower volatility, with the EurJpy trading between 213.80 and 214.25. Wall Street rallied strongly, with the Dow up 2.39% and Asian regional indexes are following, with the Hang Seng currently up 2.05%. Lower commodities price across the board help equities, with wti crude trading at $121.81bbl and gold at $916.11oz.

Oil was sold heavily, as worries over slowing demand ahead of today's inventory data and remarks by OPEC president Khelil, cautioning that crude prices could fall to $70bbl-$80bbl (long term) as the greenback goes through a period of strength. There is evidence in trading momentum and a growing sense of optimism that the markets are actively looking for the US economy to stabilize and for the Usd to begin its move towards a period of strength.

In Japan, the Industrial production for June dropped m/m - 2.0% vs.
-1.7% exp. The Japanese government has trimmed its forecast for industrial output, conceded the sector is slowing, as surveys show further signs of weakness up ahead.

In New Zealand, RBNZ Governor Bollard spoke on the subject of inflation targeting. Outside the core subject, the key take away was when he mentioned that he sees 'plenty of room' for rates to drop further. While the RBNZ has already signaled their intention to ease further, Bollard's remarks today are the most unambiguous reference yet that the market will see significantly lower rates. We see a significant period of Nzd weakness and perhaps the main rational for any support seems to be coming from Japanese margin traders, who are extensively long Nzd.

In the European Session, the market will be focused on July's EC Economic Sentiment Indicator. We are expecting this figure to continue the string of negative data from the Eurozone, especially given the sharp fall in industrial confidence and slump in PMI survey.

Daily Forex Pivot Points
AUDUSD
R 3: 0.9637
R 2: 0.9590
R 1: 0.9528
CURRENT: 0.9484
S 1: 0.9451
S 2: 0.9404
S 3: 0.9328

EURJPY
R 3: 171.80
R 2: 171.05
R 1: 169.97
CURRENT: 168.41
S 1: 167.50
S 2: 166.00
S 3: 165.33

USDSGD
R 3: 1.3850
R 2: 1.3827
R 1: 1.3715
CURRENT: 1.3688
S 1: 1.3567
S 2: 1.3500
S 3: 1.3448

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