Forex Market Overview

Forex Market Overview 04 August 2008

The Usd was broadly unchanged for Friday's close in the Asian session. The EurUsd closed at 1.5560 and is now trading at 1.5580, while the UsdJpy closed at 107.60 and is now trading at 107.80. The Jpy fueled carry trades gained slightly, with EurJpy easing up towards 168.00 and the AudJpy strengthened to 100.50. Emerging Asia was slightly stronger, with the UsdSgd falling to the 1.3690 support. The commodities are seeing a broad rally, with crude wti up 0.76% to $126.06bll and gold up 0.37% to $914.35oz (also giving the commodity bloc ccy a small bounce). Regional Asian equity markets are following Wall Street weak close across the board, with Shanghai's down -1.00%. European stock futures are pointing to a negative open lead by the FTSE down -1.17%. Ominous start to the week, where most analysis are calling for continued Usd gains.

A big week for Central Banks (and currency markets), with the Fed, RBA, BoE and ECB deciding on rates. In this event studded lineup, perhaps the most anticipated event will be the ECB accompanying statement and Trichet's subsequent comments. We have seen recent economic data in the Eurozone hit a soft patch, while commodities have sold off. The market is gambling on that in the near future the ECB will change its hawkish tune, which will push the EurUsd even lower. In addition, with increasing probability that Central Banks in the developed countries will now have room to stave out economic collapse with inflation expectations declining, the dollar seems to be in the driver's seat. Note: CFTC positioning data for the week up to July 29 points to an adjustment out of USD short positions against the G10, with only the Aud holding a significant net long position against the greenback.

In the European session, the Eurozone producer price inflation will have the markets attention. We are expecting another surge in prices across the region (currently at it highest level in 25 years). While we expect the ECB to stay hawkish, with the economy stagnating and food and energy prices softening, the interest rates will not rise again.

Daily Forex Pivot Point
AUDUSD
R 3: 0.9528
R 2: 0.9476
R 1: 0.9419
CURRENT: 0.9306
S 1: 0.9286
S 2: 0.9276
S 3: 0.9206

EURJPY
R 3: 169.73
R 2: 169.19
R 1: 168.31
CURRENT: 167.70
S 1: 166.98
S 2: 166.01
S 3: 165.33

USDSGD
R 3: 1.3850
R 2: 1.3827
R 1: 1.3728
CURRENT: 1.3721
S 1: 1.3651
S 2: 1.3606
S 3: 1.3567