Forex Market Overview

Forex Market Overview 07 August 2008

The Usd was vaguely weaker during the Asian Session, as participants seem to be content with their positions ahead of the critical BoE & ECB rate announcement today. The EurUsd traded higher to 1.5451 from 1.5401, while the UsdJpy traded up to 109.90 (7-month highs), on rumors of option barriers triggered on the break of 108.55. With no surprise, the Jpy fueled carry traded continued to see strong gains as the EurJpy climbed to an August. high at 169.43 and the “King of Carry”, the TryJpy, peaked at 94.45. The commodity bloc found some relief in Asian trading, with the AudUsd climbing from 0.9080 to 0.9120, while NzdUsd reversed earlier gains slipping from 0.7218 to 0.7175. We are seeing some pullback in EM appetite, with the UsdMxn looking to retest the 10.00 resistance and the EurPln continued to rally off 3.200 support to 3.2433. Wti crude is slightly frimer at $118.89bll, as well as gold at $884.15oz. Wall Street closed up and regional Asian stock markets are mixed, with Nikkei leading the losers down -0.93%. European stock futures are pointing to a mixed open.

The BoE & ECB rate announcement will dominate the European session.

In the UK, the BoE is expected to hold rates at 5.00%. Since the MPC is unlikely to issue a accompanying statement, market reaction will be limited. Recentley the market has witnessed a string of gloomy economic data not seen since the last recession. However, the tone of the last meeting minutes suggest that rates are more likely to go up to combat rising inflation than to fall….but that was before this last more economic deterioration and financial turmoil. We are expecting Besley to call for a hike and might find some support, given that the Inflation Report will be released this month. But with this commodity prices easing and a slight dropping in public’s inflation expectations, the BoE might be getting some relief. But right now, showing a “stiff upper lip” in spite of deteriorating fundamentals might be enough to anchor inflation expectations.

On the continent, the ECB is widely expected to hold rates at 4.00%. We doubt, given the clear signs of economic deterioration and headline inflation expected to fall with easing commodity prices, that a move upward would be prudent. Trichet will have to stick with the usual hawkish rhetoric. There is significant risk that this month’s statement will put greater emphasis on the slowing growth story (again helped by declining commodity prices), which the market will perceive as dovish and as the reconsideration of the “no bais” mindset.Throughout our partnership with the industrial leaders, we are capable of delivering incomparable quality of online currency trading service.
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Forex Market Overview

Forex Market Overview 23 July 2008

The Usd consolidated gains in the Asian session as hawkish comments from US officials and oil falling sharply helped boost the Usd. The EurUsd stayed in a tight range from 1.5775 to 1.5798, while the UsdJpy saw choppy trading between 107.16 to 107.38. The NzdUsd slipped to 0.7750, as traders speculate on an earlier than expected rate cut. The AudUsd also lost ground, despite the higher then expected inflation reading. The US equity market shrugged off poor earnings to close up and Asian equities are following. Commodities still are soft with gold down -1.65% to 945.68oz and wti crude at 127.74, as the declining global growth story gains traction and damped demand of inflation hedges.

It was Fed’s Plosser ultra hawkish comment that added momentum to the Usd buying frenzy yesterday (part of a recent trend of hawkish comments from Fisher, Hoenig, Stern & Lacker but divergent from Bernanke’s stated views). Stating "We will need to reverse course - the exact timing depends on how the economy evolves, but I anticipate the reversal will need to be started sooner rather than later. And I believe it will likely need to begin before either the labor market or the financial markets have completely turned around." The comment “before either the labor market or financial market has completely turned around” was unprecedented, since the Fed has never raised rates while payrolls shown a negative trend. As we stated yesterday in our Asian session, we had expected rhetoric from policy makers to affect FX sentiment in the ultra short term and expect the aggressive Usd buying to reverse intraday.

Australian CPI released today rose quicker than the market had expected by 1.5% q/q vs. 1.2% exp (lifting y/y to 4.5% vs. 4.2% exp). However, the RBA preferred measure rose by q2 1.2% q/q, which was unchanged from previous reading. We expect the RBA to be on hold for the remainder of the year, as moderating growth should help ease inflationary pressures.

The highlight of the European session will be the UK MPC minutes for July. There are mounting signs that the MPC might have slightly shifted towards a growth focus. June’s minutes showed that members had discussed further tightening and, since then, all measures of inflation have increased (ppi, cpi and inflation expectations). However, much of this deterioration was expected. What has been unexpected was the rate of moderation in the real economy and the genuine risk the UK might slip into a recession. We expect Blanchflower to have voted for a cut (as always), but the market might get a surprise from Kate Barker, a good proxy for general sentiment. With the Gbp trading at 1.9900 on yield differentials, any real or perceived shift could lead to a considerable sell-off.

14.00gmt - Fed's Mishkin speaks
16.15gmt - Fed's Kohn speaks

Daily Forex Pivot Points
AUDUSD
R 3: 0.9895
R 2: 0.9850
R 1: 0.9818
CURRENT: 0.9673
S 1: 0.9675
S 2: 0.9665
S 3: 0.9597

EURJPY
R 3: 171.07
R 2: 170.00
R 1: 169.92
CURRENT: 169.78
S 1: 168.25
S 2: 166.00
S 3: 165.33

USDSGD
R 3: 1.3717
R 2: 1.3660
R 1: 1.3597
CURRENT: 1.3606
S 1: 1.3452
S 2: 1.3395
S 3: 1.3300

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).

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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.

The Forex Market Overview

The Forex Market Overview 15 July 2008

The Usd was broadly weaker in Asian sessions causing traders to brace themselves for a data heavy day as risk aversion moved back into the market. EurUsd after a short retreat, trended upwards from 1.5882 to 1.5954 while AudUsd broke easily thru 0.9737 intraday resistance heading to 0.9772 new highs. UsdJpy slipped to 105.70 as concerns over credit market losses damped risk appetite. As expected, Jpy funded carry trades were also sold off. Worries in credit markets are currently weighing on equity markets with Shanghai’s down 3.43% and DAX falling 1.77% at the open (US futures are lower across the board). Precious metals continue to surge forward with gold trading to 973.78 and silver 19.13. And given the current state of uncertainty VIX has climbed to 28.48 and 1month implied Vols have followed.

In a unanimous vote the BoJ held rates at 0.50% as expected. In addition, their half year update revised growth downwards while raising the CPI forecast. Perhaps the key take away, was the unique wording surrounding inflation which stated "in the case that downside risk to the economy eases, risks to higher fluctuations in the economy and prices may be intensified due to prolonged easy monetary conditions". This hints that the BoJ is concerned that its loose monetary policy might actually be aiding to inflation and that they therefore, are willing to tighten should CPI move above their comfort zone. We expect that this comment will only benefit Jpy in the short term as markets are still trading on yield differentials and risk appetite.

In New Zealand inflation moves higher than expected, with food and energy by far the largest contributors. Headline inflation printed strong at q/q 1.6% vs. 1.4% exp, y/y 4.0% vs. 3.8% exp. Given these elevated figures it would be difficult for the RBNZ to rationalize a rate cut in July and even puts Sept cuts in jeopardy.

In Australia the RBA minutes released today were mildly dovish. The Key takeaway for the minutes were "weighing up the various factors, the Board judged that the current stance of monetary policy remained appropriate". The RBA recognized that the economy was clearly weakening stating "Consumer spending had slowed significantly and there had been a marked decline in the growth of credit to both households and businesses. Surveys indicated that confidence had fallen further over the past month and asset prices were weakening".

In the UK markets, we will be watching CPI data which is likely to rise from 3.3% to 3.6% y/y and give the Gbp some support. In addition with signs of acceleration in June PPI the BoE will be gauging second round effects into core. In our view with inflation far from peaking, the MPC should be on hold for the next few months at least.

On the continent, German ZEW will have trades attention. We are expecting another decline to -56.0 from -52.6…getting precariously close to all time recession lows of -62.0. While this index is not very accurate in regards to predicating GDP we don’t expect the market to look kindly on the gloomy data.
14.00gmt - Fed’s Bernanke Testifies to Senate on Economy

Daily Forex Pivot Points
AUDUSD
R 3: 0.9923
R 2: 0.9792
R 1: 0.9758
CURRENT: 0.9788
S 1: 0.9664
S 2: 0.9597
S 3: 0.9546

EURJPY
R 3: 171.88
R 2: 170.00
R 1: 169.67
CURRENT: 168.52
S 1: 167.83
S 2: 167.13
S 3: 166.09

USDSGD
R 3: 1.3850
R 2: 1.3827
R 1: 1.3729
CURRENT: 1.3480
S 1: 1.3476
S 2: 1.3470
S 3: 1.3400

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.