European markets Likely to extend losses on weak global cues

Global cues are pointing towards a lower opening for the major European markets on Tuesday. The U.S. market tumbled overnight after Fannie Mae and Freddie Mac fell to their lowest level in twenty years on concerns that the U.S. government may have to bail out the mortgage lenders. The Asian markets are trading sharply lower Tuesday on fresh fears about U.S. credit markets. Crude oil prices declined on Monday as Tropical Storm Fay steered clear of oil-producing infrastructure in the Gulf of Mexico.

However, the major European index futures are mixed. The FTSE 100 index futures show marginal strength, while the CAC 40 and DAX 30 index futures are showing weakness.

In the Asian session Tuesday, Brent North Sea crude was down 67 cents at $111.27 a barrel by 11:11 p.m. ET. In London Monday, October Brent crude futures fell 61 cents to settle at $111.94 a barrel on the ICE Futures exchange.

In Europe, the major economic data scheduled for release are the Euro-Zone and the German ZEW surveys for August and the German producer prices for July. In the U.S., traders await data on July housing starts and producer price index. Economists at UBS have predicted that housing starts and permits probably fell sharply in July.

The European markets fell for the first time in three days on Monday, as banking stocks edged lower following media reports of further troubles in the sector and a weaker dollar hurt export-sensitive stocks. The FTSEurofirst 300 index of pan-European blue chips closed down 0.1% at 1,189 and the narrower DJ Stoxx 50 index closed flat at 2,905. Around Europe, the U.K.`s FTSE 100 index slipped 0.08% to 5,450, France`s CAC 40 index declined 0.11% to 4,448 and Germany`s DAX index dropped 0.20% to 6,432.

On Monday, the Dow Industrials fell 1.55%, the broader S&P 500 index shed 1.51% and the technology-heavy Nasdaq composite index lost 1.45%.

In Asia Tuesday, Japan`s Nikkei 225 index is down 2.26%, South Korea`s KOSPI is down 1.95%, Australia`s All Ordinaries index is down 1.31% and Hong Kong`s Hang Seng index is down 0.65%. China`s Shanghai composite index is edging up 0.18%.

On the currency front, the euro slipped to a new multi-month low of 161.03 against the yen in Asian deals Tuesday, but it recovered against the dollar. The euro is largely choppy against the pound. At about 11:45 p.m. ET, the euro traded at $1.4695 and 0.7887 pound. The euro closed Monday`s European session at 0.7891 pound, 162.24 yen and $1.4740.

In the U.K., Brixton, Mears Group, Findel and Tribal Group are scheduled to report earnings. Kesa Electricals may see some activity after Goldman Sachs raised the rating of the company to `buy/cautious` from `sell/cautious`.

Renesola, the world`s largest recycler of scrap wafers used in solar panels, is scheduled to release a trading statement. Woolworths Group may react to a report by Financial Times that the grouping led by Baugur Group Hf, which was rebuffed by the board of Woolworths, has contacted other shareholders of the U.K. retailer in an effort to force its directors to open discussions.

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Forex Market Overview

Forex Market Overview 15 August 2008

The Usd was slightly stronger in the Asian session, as commodities, specifically precious metals, weakened. The Gold fell below $800oz for the first time this year and silver followed right behind down a whopping -11.00%. The EurUsd slipped from 1.4803 to 1.4754, while UsdJpy trended higher from 109.57 to 110.34. The GbpUsd continued to come under selling pressure on the back of BoE inflation report, dropping steadily from 1.8710 to 1.8628. The commodity bloc gave up much of their gains over the past few days, with the AudUsd continuing to slide from 0.8732 to 0.8635. Wall Street closed higher yesterday and Asia regional indexes are all positive, with the exception of the Hang Seng down 0.84%. European stock futures are pointing to a higher opening.

In New Zealand, retail sales declined 1.5% q/q slightly better than the -1.8% expected fall. However, the drop was the largest on record and the second consecutive quarter of declines. The Nzd advanced on the news, but then reversed as the market released this figure just pointing to a continued economic weakness. We are still expecting the RBNZ to cut 25bp at the next meeting (in a string of cuts), which should continue to weigh on the Nzd sentiment

With no major events or data scheduled for European session, the market will have to wait for the US session. With Industrial Production, Capacity Utilization and Consumer confidence on the docket, the market will have their hands full. The Michigan confidence might have benefited from a modest recovery in equities and decline in gasoline prices. However, the housing markets will still weigh on the consumer.

Daily Forex Pivot Point
AUDUSD
R 3: 0.8952
R 2: 0.8846
R 1: 0.8797
CURRENT: 0.8629
S 1: 0.8625
S 2: 0.8593
S 3: 0.8513

EURJPY
R 3: 165.59
R 2: 164.41
R 1: 163.88
CURRENT: 162.56
S 1: 162.01
S 2: 161.39
S 3: 160.14

USDSGD
R 3: 1.4265
R 2: 1.4219
R 1: 1.4159
CURRENT: 1.4164
S 1: 1.4025
S 2: 1.3891
S 3: 1.3819

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Dollar Edges

Dollar edged up ahead of G8 comments and last week Oil record high

News and Events:

The Dollar edged up to a one-week high versus a basket of major currencies on Monday, on speculation that comments from G8 officials could push Oil prices further away from last week's record highs.

The Greenback also continued to benefit from a neutral European Central Bank tone, which reduced expectations of further rate hikes after last Thursday's move to 4.25%.

Oil hit 145.85 high on Thursday ahead of G8 meeting in Japan. Crude prices show a close negative correlation with the Dollar because the United States is a heavy energy.

Investors have started to take the view that risks to growth and concern about the financial sector will prevent the Fed from raising the fed funds rate from 2% for now.

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Rupee Rose on Earning Conversion

The Indian rupee rose today as the exporters had to convert their overseas earnings after the India’s currency has been losing significantly to the U.S. dollar in May.

The rupee recovered from two days of losses this week as the oil continued to drop today, easing the concerns that the commodity importers will have to sell even more rupees for dollars. On the other hand, large exporters found 13-month high USD/INR rate attractive enough to start converting their overseas earnings.

The demand for rupee formed by the exporters offers a nice support level for the Indian currency as at such low levels natural currency conversion will always be profitable for some companies. Apart from that, dollar demand may slow even further if oil prices go for a large scale correction soon.

From the other point of view, in case energy prices continue to rise at a current pace, the India’s current-account deficit may double by the year’s end. Judging from that, such investment banks as JPMorgan Chase & Co. and Goldman Sachs Group Inc. decreased their forecasts on rupee.

USD/INR dropped almost 0.3 percent to 42.855 as of 8:11 GMT; it may continue to drop even further during the next weeks, after gaining almost 5.3 percent in May.

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Yen Rises as Carry Trade Suffers

The Japanese currency rose today on Forex during the Asian trading session as the stocks market drop spurred carry trade sell-offs and the liquidation of the yen-based high-risk assets.

The yen gained against Great Britain pound, U.S. and Australian dollars, while remaining relatively weak against the euro today. German Ifo report on business climate in the country was released today at 8:00 GMT strengthening the euro’s position with a better than expected index value for May.

Although the worries of recession and the worst financial market slumps are slowly fading in the investors’ field of view, the low-yielding currencies, such as yen and Swiss franc, are still seen as a safe haven, when markets are suddenly falling and $130/barrel oil prices threaten to hurt global growth.

The USD/JPY rate declined today for a second day straight — from 103.62 to 103.43 as of 8:33 GMT with a daily minimum at 103.14. GBP/JPY dropped from 203.86 to 203.46 with a daily low at 202.74. AUD/JPY was falling from 99.29 to 98.87 during the Forex Asian session today.

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Yen Weakening against Euro, Pound

The Japanese yen continued its fall against the high yielding currencies today, especially against a very strong bullish euro, and reached 3-month minimum value against it, as the stock market rallies spurred carry trade popularity on Forex.

The yen dropped also against the New Zealand and Australian dollars because of their high interest rate, which makes them the perfect counterparts for the so called carry trade versus the Japanese yen.

In carry trade Forex traders sell low interest currencies for high interest one in order to gain on the overnight rate difference. Carry trade has been becoming less popular since the Autumn 2007, when the subprime lending crisis in U.S. increased the global financial volatility. But these days, with the global stock markets looking more and more stable, carry trade may experience its second birth in this decade.

EUR/JPY reached 162.82 level today — the highest rate since the 2nd of January. GBP/JPY didn’t break any significant records today, but this currency pair reached its weekly high level at 201.46.

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"ForexGen Announcement" European Session - US Sentiment Index Down Again

US consumer confidence index dropped to 64.5 which is it's lowest since March 2003. Figures with regard to Conference Board's forward-looking expectation fell to 47.9 which is its lowest level in 34 years. These numbers clearly show that recession fears are all but settled. Today's figure shows that the consumer's outlook is very pessimistic and suggests that there will be more weakening in the months to come. The Fed will in all probability view these numbers as a queue to act on interest rates by lowering them further still. Many analyst are calling these figures very weak and expect the labor market to weaken for a length of time still difficult to assess. The data does not bode well for the dollar. Ten days ago we had the University of Michigan consumer sentiment index publish figures which hadn't been seen for over 16 years. And before that we had the Case-Schiller house price index, which reflect the price in 20 major cities across the US, falling to 10.7 per cent. Clearly the housing market crisis has yet to peter out and is still creating mayhem in the minds of American consumers. Uncertainties around household throughout America are growing. Despite this string of bad news the European government bonds remained lower. This is because of a persistent rumor that major central banks are considering buying mortgage backed securities from investors. This announcement has weighed heavily on bonds on both sides of the duck pond.

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ForexGen provides its institutional clients with incomparable professional and individualized trading services. As a professional online trading service, ForexGen provides several facilities for all kinds of traders. Our corporate and managed trading service performance are based on respect and appreciation which is only achieved by offering intelligent high end trading tools for secure investment. ForexGen is the easiest and fastest gateway for the corporate traders to perform successful trading, which provides a unique institutional investor professional facilities and highly qualified individualized services for the international customer. ForexGen provides advanced online trading software with full corporate trading services. A rich choice of managed accounts are also available, please check our Managed Account Section

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Winning in trading depends on using the right strategy and controlling all the moves. Trading strategies are discussed in details at ForexGen Academy.