The Forex Market Overview

The Forex Market Overview 11 July 2008

The Usd was range bound in Asian Session after being sold-off in NY trading. EurUsd traded between 1.5760 - 1.5800 resistance while UsdJpy found slightly more direction trending upwards from 106.90 to 107.28. Rumors around Fannie & Freddie continue to distract the markets with risk appetite shaky and equity markets falling. While Paulson and Bernanke reiterated views that they were adequately capitalized the market are not so easily convinced.

In Japan consumer confidence dropped to a new record low as concerns over the domestic economy, inflation & employment all weighing on sentiment. The index slid to 32.6 in June (lowest level since Dec 01) from 33.9 in May. In addition, personal demand indicators for consumption include a -3.2% fall. Without support from the Japanese consumer, there is little chance we shall see the current pace of domestic deterioration slow in 2008. And expect the Jpy to depend on bouts of risk aversion rather then underlying fundamental for currency support.

The Gbp continues to struggle despite the MPC holding rates steady at 5.00% yesterday. The rational is that while inflation is a persistent problem, weakening domestic data, highlighted by the housing sector, suggest that there is a higher probability that next rate move will be down. While rising inflation will keep the BoE vigilant near term the fear of sliding into a full recession will keep the Bank for hiking and pressure on the Gbp.

In the US, University of Michigan’s consumer confidence index will be released today. There has not been much to be positive about, with falling home prices, surging energy costs and unemployment rising we expect there is little chance that the index will improve. In addition, the US trade deficit is expected to widen as the higher energy cost start to have a profound effect. This round of gloomy economic data, on this light calendar week should weigh on the Usd today.

Daily Forex Pivot Points
AUDUSD
R 3: 0.9670
R 2: 0.9642
R 1: 0.9618
CURRENT: 0.9611
S 1: 0.9545
S 2: 0.9477
S 3: 0.9459

EURJPY
R 3: 170.00
R 2: 169.75
R 1: 169.50
CURRENT: 169.17
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

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Australian Dollar Crosses Face Resistance

AUDCHF Daily Bars

If 1.0823 holds, then the count in black is valid. That count indicates that the AUDCHF is in wave C of a large correction that will eventually come under .8882. However, with price so close to breaching 1.0823, we are presenting the alternate (in red); which suggests that the advance from .8882 is wave B of a triangle.

AUDCAD Weekly Bars

The rally from .8271 is roughly equal to the .8119-.9514 advance and the rally stalled at the 61.8% of the 1.0546.8119 decline. These measurements bring to the forefront the possibility that a large triangle is unfolding since the April 2001 low. In a triangle, the next leg would be lower in wave D towards .88 or so. The alternate count treats the advance from .8819 and subsequent decline as waves 1 and 2 in a bull cycle. We favor the triangle scenario given the unmistakable 3 wave movements and Fibonacci measurements.

AUDNZD Daily Bars

Expect the AUDNZD to complete the small 4th wave near the 38.2% of 1.1331-1.2413 at 1.20. This level is former congestion. It is also possible that a triangle is unfolding from the wave iii top (1.2412). Either way, sideways / downward on balance action is expected for the next few weeks.

Tell us what you think about this report: contact the strategist about the article at jsaettele@dailyfx.com

TREND ANALYSIS is based on a rolling pivot model. LONG TERM TREND is determined by the last 3 months of price data (high, low, close). SHORT TERM TREND is determined by the last 4 weeks of price data (high, low, close). R3, R2, R1, PL, PH, S1, S2, and S3 are provided to aid in identifying entries and exits. These are objective measures and our subjective analysis (STRATEGY) may differ.

SCHEDULE

Monday: EURGBP, EURCHF, EURCAD, EURAUD, EURNZD

Tuesday: EURJPY, GBPJPY, CHFJPY, CADJPY, AUDJPY, NZDJPY

Wednesday: GBPCHF, GBPCAD, GBPAUD, GBPNZD

Thursday: AUDCHF, AUDCAD, AUDNZD

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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.