USA Financial System Problems

Forex market believe the worst of the problems in the US financial system are not yet over

News and Events:

The Dollar fell near a record low against the Euro as investors believe the worst of the problems in the US financial system are not yet over. While the Dollar has recovered somewhat after better results than expected from big financial institutions such as Citigroup, JPMorgan Chase and Bank of America, investors are awaiting more earnings reports this week.

With the economy suffering as the credit crisis hits the housing market and banks, expectations for the Federal Reserve to raise interest rates before the end of the year to curb inflation pressures are fading quickly, hurting the dollar.

The market's focus remains on a rescue plan for troubled US mortgage finance giants Fannie Mae and Freddie Mac. On Monday, US Treasury Secretary Henry Paulson said in an interview with CNBC that confidence in US capital markets and the US economy was the most important thing to support a strong Dollar.

The Euro may gain against the Yen as Japanese Investors ship more funds into higher-yielding currencies for better returns, with traders watching whether the single currency tops Monday's record high and reaches the 169.92 level. The ForexGen's provided services are all restricted and regulated by the international banking and financial regulatory standards. All our provided activities are supported by creativeness and modernization. Ambitious & motivated employees are working simultaneously to protect the customer's confidentiality. ForexGen is continuously providing the market's most competitive conditions.

ForexGen complies with the trade commissions in the USA, EU and Australia. Being registered by the commercial authorities in 18+ countries, we adhere to the United Nations Commission on International Trade Law (UNCITRAL).

Profile regulatory information:

ForexGen is complying with all applicable international laws and all financial regulations and procedures governing its industry in order to sustain the security standards in the financial services world.

USA Financial And Housing Sectors

Dollar stays weak near record lows on concerns about health of financial and housing sectors.

News and Events:

The Dollar rose from a near record low against the Euro on Monday after the United States announced an emergency plan to restore confidence in mortgage finance companies Fannie Mae and Freddie Mac. The plan helped calm market concerns about the health of the US financial and housing sectors, since the two companies fund half of all US mortgages.

Billionaire investor George Soros told Reuters on Monday that government debt accumulation coupled with a U.S. recession leaves the Dollar vulnerable. Analysts said the Dollar's recovery would depend on whether the U.S. initiatives were enough to calm investors' concerns about the financial health of Fannie Mae and Freddie Mac.

Investors will also be watching to see how the latest developments affect Fed Chairman Ben Bernanke's views on monetary policy and the economic outlook when he testifies before the Senate Banking Committee on Tuesday. Money markets have scaled back their expectations for monetary policy tightening from the Fed and now don't expect it to start hiking until the final months of the year.

The Forex Market Overview

The Forex Market Overview 10 July 2008

The Usd was stable in Asian session as a lack of real news provided no real impetus for a directional move. EurUsd traded in a 1.5700 - 1.5750 range while UsdJpy slipped from 107.50 to 106.90. Strong Jpy buying spilled over into select carry trades with GbpJpy the hardest hit dropping from 212.30 to 211.40 while AudJpy was able to rally back from early selling to 102.70. Oil was trading at $136.50 barrel after rising above $138 after a sharp fall in U.S. stocks. Gold closed with strong gains, amid geopolitical tensions thus increasing the metals attractiveness as a safe-haven instrument; the most active Aug '08 contract up $5.30 to $928.60. Sep '08 silver +22.0 ¢ at $18.175/oz.

Wall Street fell over 2% as rumours abound that investment banks still have large write-downs to declare. Merrill Lynch fell over 9% after Fitch Ratings indicated that it may cut the banks debt rating. Merrill's along with other U.S. banks report earnings next week. Asian markets are mostly trading mixed this morning in a directionless session. Lenders lost ground in Australia on worries about the US financial sector, but financials came off early lows in volatile trading in Japan and Korea as the markets reversed early declines. European stocks are coming under significant selling pressure, but so far ,US index futures are still in the positive.

With the Aud looking a little vulnerable ( due to deteriorating fundamentals) today’s better then expected employment figure 29.5k vs. 25k exp (prior -19.7k) help give the currency some support.

The highlight of this data devoid day will be the BoE's interest rate announcement. It is universally expected that the MPC will hold rates at 5.00% due to worrying inflationary pressures. Economic activity in the recent month has shown clear deterioration. In addition, negative data from the housing market, industrial sector that has probably fallen into a recession and a consumer spending ready to decelerate significantly. But the BoE members at this point are still leaning to the inflation side of the story which means a strong chance of a technical recession in the UK. With economic indicators well in the region which historically the BoE would be cutting rates, we believe its just a matter of time before rates come down.

Ex Fed President William Poole in a conference yesterday stated he believes that the government-sponsored mortgage companies, Fannie Mae and Freddie Mac, are insolvent. Interesting questions maybe asked of Fed Chairman Bernanke and Treasury Secretary Paulson when they testify on the health of the financial system later today.

17.45gmt - ECB's Trichet speaks
19.30gmt - Fed's Yellen speaks

Daily Forex Pivot Points
AUDUSD
R 3: 0.9670
R 2: 0.9642
R 1: 0.9618
CURRENT: 0.9590
S 1: 0.9545
S 2: 0.9477
S 3: 0.9459

EURJPY
R 3: 169.46
R 2: 169.14
R 1: 168.90
CURRENT: 168.54
S 1: 167.83
S 2: 167.13
S 3: 166.10

USDSGD
R 3: 1.3850
R 2: 1.3827
R 1: 1.3730
CURRENT: 1.3606
S 1: 1.3565
S 2: 1.3505
S 3: 1.3470

The ForexGen's provided services are all restricted and regulated by the international banking and financial regulatory standards. All our provided activities are supported by creativeness and modernization. Ambitious & motivated employees are working simultaneously to protect the customer's confidentiality. ForexGen is continuously providing the market's most competitive conditions.

ForexGen complies with the trade commissions in the USA, EU and Australia. Being registered by the commercial authorities in 18+ countries, we adhere to the United Nations Commission on International Trade Law (UNCITRAL).

Profile regulatory information:

ForexGen is complying with all applicable international laws and all financial regulations and procedures governing its industry in order to sustain the security standards in the financial services world.