Forex Market Overview

Forex Market Overview 07 July 2008

Usd is stronger against every major currency in the Asian session as speculation grows that the G8 meeting will focus on record high oil prices. EurUsd continued to decline from Thursdays sell-off, sliding to 1.5623 (on rumors that German bonds were to be redeemed rather then re-invested) while UsdJpy traded to 107.52 (7 day high). GbpUsd dropped from 1.9820 to 1.9722 as the market began to once again question the stability of the UK underlying economy. Carry trades gained on renewed Jpy selling and declining risk aversion, pushing EurJpy to 168.07 and AudJpy 103.12. The tight correlation between oil & Usd has lessened slightly in recent day with wti stable around the 143.50bll level while the Usd has taken a bullish tone. After the long weekend in the States, investors have been able to take stock and decide how to react to the Trichet statement that followed the ECB raising rates and the U.S. payroll numbers last Thursday.

Trading was still subdued despite the Usd strength with investors looking for more clues on the U.S. economic situation and to see if the Federal Reserve will be in a position to raise interest rates any time soon. Many will look towards comments from Fed officials over the coming days and in particular to Chairman Bernanke who may give some support to the Dollar during the week ahead.

Asian markets mostly trading higher this morning. Bargain hunters have taken the Nikkei from a 0.5% morning loss to a 1.0% afternoon gain as the market hopes to break its streak of 12 consecutive declines. Banks and exporters were popular choices. But, volumes were thin since the US was closed 4-Jul and could therefore not provide any direction. Chinese banks and airlines led Hong Kong and Shanghai up, but banks led a fall in Sydney over concerns about global credit markets. Also, miners and metals fell in Sydney.

BoJ Governor Shirakawa spoke saying said that global inflationary risks were growing and Japan's economy was slowing due to high energy and commodity prices. A very familiar script and preparing the market for the BoJs growth forecast downgrade expected this week.

A light calendar today will have the markets focused on the UKs Industrial production. The abrupt decline in the output balance of the June CIPS/RBS report on manufacturing suggests that output will soon be collapsing. We have already seen the Gbp come under significant selling pressure and expected the GbpUsd to continued to trade down (in choppy trading) to the 1.9300 mid term.

Daily Forex Pivot Point
AUDUSD
R 3: 0.9829
R 2: 0.9700
R 1: 0.9670
CURRENT: 0.9576
S 1: 0.9580
S 2: 0.9535
S 3: 0.9514

EURJPY
R 3: 170.00
R 2: 169.45
R 1: 169.15
CURRENT: 167.99
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: 1.3647
S 1: 1.3565
S 2: 1.3505
S 3: 1.3470

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

Inflation Watch

Usd lost ground in Asian Session after the greenback rallied on the back of stronger empire manufacturing survey. Speculation has been growing all morning that US CPI will print higher than market expectations. however it was the German inflation figures which stole the show and stayed elevated giving the Eur a swift bounce. EurUsd surged from 1.5800 to 1.5845 and GbpUsd jumped from 1.9620 to 1.9888. Additional European inflation figures should keep the Usd pinned until mid session and as the market adjusts to the incoming US data. Despite the RBA minutes which showed that the Central bank is clearly in a neutral bias the Aud was able to gain ground on both the Usd and Jpy. While the Aud is poised to experience weakness in the mid term, currently commodity prices (crude $114.00brl), increased risk appetite and higher yields will keep Aud supported (however slightly less against the NZD which perhaps has stronger underlying fundamentals). Note, Westpac index was slightly higher than the revised figures indicating the growth is moderating at a slower rate than markets have expected. Markets will be very critical today of European CPI figures given the collapse of the German ZEW yesterday. The Eur strength rests squarely on interest rate differentials. Furthermore, Germany's concerns over the financial markets and lasting strength of the Eur has eroded confidence ; indicating eventually that there could be spillover into the real economy and response from the ECB. However, we currently have the first ECB rate cute scheduled for Sept and the minor dip in economic growth figures will not drastically change Trichet's mind - that is unless inflation ratechanges course. Yesterday PPI figures will keep the Fed diligent and rate expectations influx. Todays CPI will be important and will be covered in depth in the European report.

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

ForexGen delivers what traders want: instant order execution, lowest spreads, flexible starting capital, fast deposits and withdrawal, a local support in more than 18 countries, and most of all, solid funds security.

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

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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

ForexGen delivers what traders want: instant order execution, lowest spreads, flexible starting capital, fast deposits and withdrawal, a local support in more than 18 countries, and most of all, solid funds security.

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