Stocks recover and Dollar Surges on European bailouts

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) gained heavily today posting one of its biggest one day advances as markets focused on other economies and equities rebounded. US data also supported with weakness in the Case-Schiller Home Prices Index at -16.3% being overlooked and instead concentrated on improvements to Chicago PMI (56.7 vs. 53.5) and CB consumer Confidence (59.8 vs. 54.6). In the U.S. share markets, the NASDAQ was up 98 points (4.97%) and the Dow Jones was up 485 points (4.68%). Crude Oil closed up $4.27 ending the New York session at $100.64 per barrel. Looking ahead, ADP unemployment report seen at -60K in September and the Manufacturing ISM fairly steady at 49.5.

European Euro

The Euro (EUR) rumors of emergency rate cuts and focus on the European banking sector sent the Euro tumbling. End of Quarter USD demand added to the downside moves. European CPI was confirmed as expected at 3.6% in September and German Unemployment fell -29K vs. -15 K expected in September. Overall the EUR/USD traded with a low of 1.4008 and a high of 1.4433 before closing the day at 1.4090 in the New York session. Looking ahead, September Eurozone Manufacturing PMI is seen at 45.3 vs. 47.6 previously. Also released German Retail Sales seen +0.5% vs. -1% in August.

Japanese Yen (JPY)

The Japanese Yen (JPY) came off considerable as equities reversed course and the USD/JPY jumped over 200 pips. Unemployment was confirmed at 4.1% in August. Quite surprisingly there was no capitulation in the crosses which one would have expected given the stock market crash. Overall the USDJPY traded with a low of 103.50 and a high of 106.52 before closing the day around 106.05 in the New York session. Looking ahead, Q2 Tanken Survey expected at -2 vs. 5 in Q1.

Pound Sterling (GBP)

The Sterling (GBP) tracked the Euro lower succumbing to the USD strength as well. Q2 GDP was confirmed at 0.0% and the Current account dropped to -11B vs. -9.7B expected. Overall the GDP/USD traded with a low of 1.7758 and a high of 1.8119 before closing the day at 1.7790 in the New York session. Looking ahead, September Manufacturing PMI seen slightly lower at 45 vs.45.9 previously.

Australian Dollar (AUD)

The Australian Dollar (AUD) broke aggressively to the downside in the US session after staging a recovery off Asian lows going into the European session. Gold fell over $40 an ounce and talk of a possible 1% rate cut next Tuesday sent the AUD spirally lower. AUD/JPY held up quite well given the large turnaround in equities. Retail Sales were quite solid at +0.3% in August. Overall the AUD/USD traded with a low of 0.7859 and a high of 0.8097 before closing the US session at 0.7925.

Gold

Gold (XAU) came off the $900 handle and fell quickly to $860 supports as USD strengthened and credit fears eased. Overall trading with a low of USD$857.20 and high of USD$908.05 before ending the New York session at USD$871 an ounce

Technical Analysis: Stocks Recover

Euro (EUR)

Euro – 1.4110 : Initial support at 1.4008 (Sept 30 low) followed by 1.3974 (Sept 12 low). Initial resistance is now located at 1.4426 (Sept 30 high) at followed by 1.4679 (Sept 29 high).

Yen (JPY)

Yen – 104.35 : Initial support is located at 103.50 (Sept 16 low) followed by 102.57 (May 12 low). Initial resistance is now at 106.96 (Sep 29 high) followed by 107.02 (Sept 25 high).

Pound Sterling (GBP)

Pound – 1.7835 : Initial support at 1.7735 (Sept 16 low) followed by 1.7544 (Sep 12 low). Initial resistance is now at 1.8118 (Sep 30 high) followed by 1.8445 (Sep 29 High).

Australian Dollar (AUD)

Australian Dollar – 0.7925 : Initial support at 0.7802 (Sept 17 low) followed by the 0.7676 (Aug 17 2007 low). Initial resistance is now at 0.8097 (Sept 30 high) followed by 0.8348 (Sept 29 high).

Gold (XAU)

Gold – 872 : Initial support at 867.83 (Sept 29 low) followed by 865 (Sept 25 low). Initial resistance is now at 924.75 (Sep 29 high) followed by 935 (July 25 high).

US Bailout the Currently the Focus

Last week’s Currency Trading Review

The Dollar waxed and waned with market enthusiasm for the US Government’s 700 Billion Bailout package. Markets were very hopeful of the plan being passed by congress on Monday. On The data front we had the GDP downgraded to 2.8% from 3.3% in the Q2. Also downgraded, Personal Consumption Growth to 1.2% from 1.7%. The Euro tested highs on Monday but came off for the rest of the weak as the USD strengthened. Helping the Euro to come off highs was the disappointing result in the German IFO for September at 92.9. Eurozone PMI’s showed a further deterioration to 48.2 for services and Manufacturing at 45.3. Also Dropping, Gfk German Consumer Confidence Index dropping to 1.5 from 1.8 previously. The EUR/USD gained 1.01% closing at 1.4611 after opening at 1.4464. The Japanese Yen was little changed so gained against most currencies as market uncertainty. Significant falls were seen in all crosses and USD/JPY traded in a tight range. Japan Core CPI remained steady at 2.4% in August. The USD/JPY fell 1.31% closing at 106.03, after opening the week at 107.42. The GBP rebounded to 1.8500 and remained at these relatively elevated levels for most the week before ending weaker as USD strengthened into the weekend. UK data was mixed with Rightmove House prices dropping 1% M/M and the CBI realized sales improving to -27 from -46. The GBP/USD gained 0.74% closing at 1.8449 after opening at 1.8312. The AUD remained at lofty heights as the USD and markets gave the Aussie a little reprieve and AUD/JPY jumped higher on plans to Bailout the US mortgage sector. Huge gains in Gold underpinned the movement. The AUD/USD closed down 0.23% at 0.8290 after opening at 0.8309.

For the week starting 28/04/08.

This Forex Trading Week Preview

In the States; Nonfarm Payrolls Week. On Wednesday we have ADP Unemployment change seen -55K vs. -33K in September. Also released the September ISM Manufacturing Index forcasted for a small decrease to 49.5 from 49.9. On Thursday we have Weekly Jobless claims expected to fall from last weeks spike high to 493K to 475K this week. Also on Thursday we have August Factory Orders down -2.5% vs. +1.3% previously. On Friday we have September ISM non manufacturing expected at 50 vs. 50.6. Non Farm Payrolls are expected at -100K vs. -84K last month. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Wednesday we have Eurozone Unemployment in August expected to remain at 7.3%. On Thursday we have the ECB interest rate decision and this could result in a unexpected cut to 4.00% given the recent market turbulence. On Friday we end the week with September retail sales forecast at 0.1% In the UK; on Wednesday we have Manufacturing PMI forecast at 45 down from 45.9 in August. On Thursday we have Nationwide House Price Index seen -1.6% vs. -1.9% previously. Also released the BoE Credit Conditions Survey. On Friday we have September Service PMI at 48 vs. 49.2. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; On Wednesday we have the Q2 Tankan Survey expected to fall negative for the first time in 5 years forecast at -2 vs. 5 previously. We will provide our previews and reviews of these data releases in the daily summary.

In Australia; On Thursday we have August Trade Balance forecast at .26B vs. -0.72B in July. We will provide our previews and reviews of these data releases in the daily summary.

Technical Analysis: US Bailout

Euro (EUR)

Euro – 1.4520 : Initial support at 1.4555 (Sept 26 low) followed by 1.4437 (Sept 22 low). Initial resistance is now located at 1.4679 (Sept 26 high) at followed by 1.4768 (Sept 22 high).

Yen (JPY)

Yen – 106.40 : Initial support is located at 105.03 (Sept 26 low) followed by 103.54 (Sept 16 low). Initial resistance is now at 107.02 (Sep 25 high) followed by 107.47 (Sept 22 high).

Pound Sterling (GBP)

Pound – 1.8320 : Initial support at 1.8265 (Sept 26 low) followed by 1.8202 (38.2% retrace 1.7447 to 1.8668). Initial resistance is now at 1.8468 (Sep 26 high) followed by 1.8669 (Sep 25 High).

Australian Dollar (AUD)

Australian Dollar – 0.8310 : Initial support at 0.8240 (Sept 26 low) followed by the 0.8011 (Sep 19 low). Initial resistance is now at 0.8380 (Sept 26 high) followed by 0.8469 (Sept 23 high).

Gold (XAU)

Gold – 872 : Initial support at 865.4 (Sept 25 low) followed by 825.12 (Sept 19 low). Initial resistance is now at 912.5 (Sep 26 high) followed by 919 (Sept 18 high).