Forex Market Overview

Forex Market Overview 08 July 2008

The Usd weakened in Asian session as risk aversion crept back into the market. EurUsd jumped to 1.5753 before retracing to 1.5700 support while UsdJpy fell from the 107.33 highs to 106.83. Risk appetite declined as a research report arguing that Freddie and Fannie would need additional capital, circulated in the market sending US and Asian stocks down and 2 year yields fell by 8bps. Carry trades also felt the effect of the sentiment shift with EurJpy falling sharply to 167.83 from 168.61 and AudJpy trading down to 101.90. Whether its pressure from the G8 summit which began yesterday (leaders have continuously stressed the need for action on food & energy cost) or reaction to deteriorating global growth but either way crude closed down to $141.64bbl. Gold closed lower; the most active Aug '08 contract down $4.80 to $928.80. Sep '08 silver -45.0 ¢ at $17.920/oz.

Asian markets trading down this morning amid concerns that the credit market losses will widen and inflation will further slowdown the global economic growth. Japan's Inpex Holdings declined driven by weakness in the energy sector. Kookmin Bank, South Korea's largest, tumbled the most in almost four months following a broker downgrade. G8 has stated that the global economy faces uncertainty and downside risks mainly posed by the sharp rise in oil prices. It also made a small indication that they wanted to see the Chinese Yuan appreciate to help reduce global financial imbalances. No statement on FX so far.

Yesterday dreadful manufacturing and industrial output which both fell well below expectations should continue to weigh on the Gbp. And in Asian session BCC Quarterly Economic Survey highlighted slowing economic activity and rising price pressures. We are now seeing significant deterioration in multiple UK sectors (and at a faster pace then anticipated) which will eventually create a significant dilemma for the BoE. According to the British Chamber of Commerce the economy looks very likely to fall into recession as sales of services and manufactured goods fell sharply in the second quarter. The BCC Index fell to its lowest number since 1992 as a serious slowdown in the property market and rising inflation has seen a dramatic decline in confidence.While Nationwide and DCLG housing prices should show additional weakness we are expecting the MPC to hold at 5.00% this week.

12.00gmt - Fed’s Bernanke Speaks (but no Q&A)

Daily Forex Pivot Point
AUDUSD
R 3: 0.9827
R 2: 0.9670
R 1: 0.9640
CURRENT: 0.9526
S 1: 0.9512
S 2: 0.9560
S 3: 0.9590

EURJPY
R 3: 169.46
R 2: 169.15
R 1: 168.63
CURRENT 167.53
S 1: 167.13
S 2: 166.10
S 3: 166.00

USDSGD
R 3: 1.3850
R 2: 1.3827
R 1: 1.3730
CURRENT: 1.3634
S 1: 1.3565
S 2: 1.3506
S 3: 1.3470

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