The Forex Market Overview

The Forex Market Overview 9 July 2008

The Usd was weaker in Asian session as news that Iran had tested 9 surface to surface missiles spooked the market. Eurusd trade up from 1.5660 to 1.5728 while UsdJpy slipped from 107.50 to 107.02. Risk sentiment had already been on shaky ground after the Lehman report on Fannie and Freddie and with rising tensions in the region the missile test (actually facts were a little vague) had traders quick to respond. Crude prices rallied back above the $137.00bll mark. Reassurance from Fed Chairman Ben Bernanke that the central bank will keep assisting financial markets in these turbulent times also helped both the Dollar and equities . In Mr. Bernankes prepared remarks yesterday stating that ``The Federal Reserve is strongly committed'' to financial stability and is ``considering several options, including extending the duration of our facilities for primary dealers beyond year-end,'' did help relieve some pressure.

US Stocks were sharply higher Tuesday, led by banks and transports as oil and natural gas prices retreated. The major indexes finished around their best levels for the session. Asian markets are trading higher this morning on the strength of Wall Street's finish overnight. The Shanghai stocks rose as investors plunge on bargain buying amid the steep recent losses and also on speculation that the Chinese government might need to provide support to the market. USD slipped in Asia after it was reported that Iran had test fired nine long and medium range missiles which could possibly strike as far as Israel. Gold closed lower, pressured by a strong dollar and falling crude prices ; the most active Aug '08 contract down $5.50 to $923.30. Sep '08 silver +3.5 ¢ at $17.955/oz.

In Japan machinery orders for May came in much better than expected at 10.4% vs. 5.5% exp while Core orders also strengthened, rising 5.1% vs. 3.4% exp. However while the BoJ expectations (and ours) has continued economic deterioration well entrenched, with markets trading on risk we could see short periods of Jpy strength (but we see those as opportunity to build short Jpy positions).

In Australia consumer sentiment fell -6.7% which was much weaker the Junes -2.0% reading. The number is at its lowest level since 1992 and doesn’t bode well for speculators expecting the RBA to continue higher (and maintain its neutral stance). AudUsd trade down from 0.9549 to 0.9480 on the disappointing data. We will be watching for a sell off in the commodities caused by the global slowdowns and mounting evidence that the RBA will need to shift towards a growth bias before we begin to look for opportunities to sell Aud.

In the UK consumer confidence in June dropped to 61 its lowest since the survey was launched in 2004. In addition the expectations index on the labor market & economy also fell to a new low of 64. Just more evidence that the BoE will need to address the growth side of the story sooner then later.

In European session today, markets will be watching Eurozone GDP (q1 final release) and UK external trade. Euro-zone GDP in Q1will give us a better suggestion of the composition of growth by income while markets will be watching for price change on import prices rather then change in deficit.

Daily Forex Pivot Points
AUDUSD
R 3: 0.9670
R 2: 0.9642
R 1: 0.9565
CURRENT: 0.9501
S 1: 0.9477
S 2: 0.9460
S 3: 0.9409

EURJPY
R 3: 169.45
R 2: 169.15
R 1: 168.62
CURRENT: 168.62
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: 1.3635
S 1: 1.3565
S 2: 1.3506
S 3: 1.3470

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