US GOVERNMENT BAILS OUT FREDDIE AND FANNIE

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) August Non-farm Payrolls came in worse than expected at -84K vs. -75K forecast. The Market reacted to the actual August Unemployment rate though which gapped to 6.1% vs. 5.7% previous. Trading was already volatile given heavy carry unwinding in the Asian session and these figures added fuel to the fire. Dollar was sold off across the board but manages to pare some losses against the YEN as equities shrugged off the employment data. News surfaced late in the US Session that the Government was stepping in to take over Fannie Mae and Freddie Mac. Details announced over the weekend from the US Treasury was that as much as $200 Billion in new capital plus credit lines would be made available and that the two companies would be put under management of the Federal Housing Finance Agency. In an extremely positive step for the banking and housing sector, early Asian trading on Monday saw a surge in risk appetite. In the U.S. share markets, the NASDAQ was down -3 points (-0.14%) and the Dow Jones was up 32 points (0.29%). Crude Oil closed down $1.66 ending the New York session at $106.23 per barrel.

European Euro

The Euro (EUR) traded lower as EUR/JPY was sold hard in the Asian session then continued to track lower before US data allowed a recovery. German Industrial production was considerable weaker than expected at -1.8% vs. forecasts of -0.5%. Overall the EUR/USD traded with a low of 1.4197 and a high of 1.4347 before closing the day at 1.4241 in the New York session.

Japanese Yen (JPY)

The Japanese Yen (JPY) traded in huge ranges on Friday as Heavy carry unwinds in the Asian session were reversed as the GSE bailout plan from the US government was processed. In Q1 Business Capex fell -6.5% vs. 2.5% forecast and -4.9% previously. Overall the USDJPY traded with a low of 105.54 and a high of 107.35 before closing the day around 107.14 in the New York session.

Pound Sterling (GBP)

The Sterling (GBP) pretty much tracked the Euro losing heavily via the GBY/JPY in Asian and rebounding as US Unemployment jumped to 6.1%. Sterling was also able to gain against the Euro as the rebound became a broad based Pound rally. Overall the GDP/USD traded with a low of 1.7627 and a high of 1.7834 before closing the day at 1.7630 in the New York session. Looking ahead, August PPI is released expected lower at -1.2% as cheaper Oil filters through the economy.

Australian Dollar (AUD)

The Australian Dollar (AUD) was extremely volatile bearing the brunt of the carry trade unwind with a 500 pip trading range on the AUD/JPY setting the stage. Stable stocks and an AUD/USD rebound into the US session close helped reverse sentiment. Overall the AUD/USD traded with a low of 0.8030 and a high of 0.8222 before closing the US session at 0.8120.

Gold

Gold (XAU) surged on the US Unemployment rate jump, breaking above $800 trading quickly to $820 before retracing all the way to $794. Overall trading with a low of USD$790 and high of USD$820 before ending the New York session at USD$803 an ounce.

Technical Analysis: Forex Trading Currencies Update

Euro (EUR)

Euro – 1.4410 : Initial support at 1.4200 (Sep 5 low) followed by 1.4310 (Sept 8 low low). Initial resistance is now located at 1.4535 (10 Day SMA) at followed by 1.4599 (Sept 2 high).

Yen (JPY)

Yen – 108.45 : Initial support is located at 107.70 (Sep 8 hourly low) followed by 106.75 (Cloud Top). Initial resistance is now at 109.05 (Sep 8 hourly high) followed by 109.55 (Sep 3 high).

Pound Sterling (GBP)

Pound – 1.7905 : Initial support at 1.7745 (Sept 5 high) followed by 1.7540 (Sept 5 low). Initial resistance is now at 1.7930 (Sep 8 hourly high) followed by 1.8005 (10 day SMA).

Australian Dollar (AUD)

Australian Dollar – 0.8315 : Initial support at 0.8160 (Sept 8 hourly low) followed by 0.8030 (Sep 5 low). Initial resistance is now at 0.8340 (Sept 8 hourly High) followed by 0.8400 (Sept 3 high).

Gold (XAU)

Gold – 815 : Initial support at 789.74 (Sept 3 low) followed by 783.35 (Aug 15 low). Initial resistance is now at 819.65 (Sep 5 high) followed by 836.5 (Sep 1 high).

Non Farm Payrolls overshadowed from GSE bailout Rumors

Last week’s Currency Trading Review

The Dollar the dollars advanced fairly consistently all week as hurricane Gustav missed Oil production facilities and fell to $105 a barrel. The rise was only hampered as Non Farm payrolls surprised with a jump in the Unemployment rate to 6.1% from 5.7% shocking the markets into profit taking on USD longs. Large falls in US stocks hurt the Dollar against the JPY as risk aversion spiked. Other US data last week included the August ISM Manufacturing PMI falling slightly to 49.9 from 50 in August and the ISM Non-Manufacturing Jumped to 50.6 from 49.5. Goods news on the productivity front with the Q2 reading a strong +4.3%. The Euro continued to slide as Oil pulled back and Eurozone data continued to weaken. The ECB held rates at 4.25% but was weighed down from President Trichet’s comments that growth was subject to downside risks. Other data out included the August Manufacturing PMI at 47.6 and Services at 48.5. Retails Sales dropped -0.4%m/m in July and Q2 GDP was confirmed at -0.2%q/q, or 1.5% y/y. PPI though continued to rise hitting 9.0% y/y in July. The EUR/USD fell -2.85% closing at 1.4264 after opening at 1.4670. The Japanese Yen was again the star performer outshining even the USD as risk aversion spiked higher especially after the heavy falls in US stocks on Thursday. Friday saw the continuation of heavy unwinding until news of government intervention in Fannie Mae and Freddie Mac emerged to stop the downside slide. Significant falls were seen in all crosses and USD/JPY traded below 106 for the first time in 2 months. Also not helping risk sentiment was the resignation of PM Fukuda. The USD/JPY fell -1.00% closing at 108.77, after opening the week at 110.10. The GBP fell the most of the majors as fears of recession began to mount and USD surged. Heavy selling of the GBP/JPY saw cable hit new multi year lows and a break higher on the EUR/GBP. The Bank of England kept rates at 5.00%. Other data while still low showed some improvement with the Construction(40.5), Services (49.2) and Manufacturing PMI’s (45.9) all rebounding. The GBP/USD lost 1.74% closing at 1.8208 after opening at 1.8524. The AUD came under severe pressure as the RBA cut rates to 7.00% from 7.25% and the Carry trade unwound. Very Heavy AUD/JPY sales kept the AUD on the backfoot. Also weighing was the faster than expected slowing of GDP to just 0.3% in the Q2. The AUD/USD closed down 5.25% at 0.8158 after opening at 0.8586.

For the week starting 08/09/08.

This Forex Trading Week Preview

In the States; Quieter Data week headlined by the August Retail Sales. On Tuesday we have July Pending Homes Sales forecast at -1.3% from the large rebound of +5.3% last month. On Thursday we have Weekly Jobless Claims and the July Trade Balance seen at -$58.0B. Also released the August Federal Budget forecast to show -$105.0B. Finally on Friday we have August PPI seen up 10.20% y/y. Retail Sales are forecast to rise 0.1%m/m with the Core at -0.2%m/m. Finally on Friday the August UoM Consumer Confidence is expected to rise to 63.9. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; light data week. On Tuesday German Trade Balance is seen at +18.5 Billion. Wednesday we have ECB President Trichet speaking before the EU parliament. On Thursday the ECB Bulletin. On Friday August French CPI is expected to gain 0.1% up from -0.2% in July. Finally on Friday we have the July Eurozone Industrial production expected to fall -0.3% from +0.1% in June. In the UK; On Monday with Have August PPI expected to fall -1.3% vs. -0.6% in July. Tuesday we have the RICS August House Price Balance expected to continue its fall to -85.0%. Also on Tuesday we have July Manufacturing Production forecast at -0.1%. On Wednesday we have the UK Trade Balance expected at -7.5 Billion. Finally on Thursday we have the MPC Treasury Committee Hearing and BoE inflation Attitudes. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; light data week with Core machinery Orders for July on Thursday the highlight expected at -4.00%. On Friday we also have the final Q2 GDP expected to fall to -0.9% from -0.6% previous. We will provide our previews and reviews of these data releases in the daily summary.

In Australia; Economic Data kicks off on Tuesday with the July Retail sales expected to rebound to 0.3% from the -1.0% fall in June. July Home Loans are also released expected to be flat in July. On Wednesday New Zealand RBNZ is expected to cut 25bps to 7.75%. Finally on Thursday we have August Unemployment change seen at +5.9K with an unemployment rate increasing slightly to 4.4% from 4.3% in July. We will provide our previews and reviews of these data releases in the daily summary.

Technical Analysis: GSE bailout Rumors

Euro (EUR)

Euro – 1.4410 : Initial support at 1.4200 (Sep 5 low) followed by 1.4310 (Sept 8 low). Initial resistance is now located at 1.4535 (10 Day SMA) at followed by 1.4599 (Sept 2 high).

Yen (JPY)

Yen – 108.45 : Initial support is located at 107.70 (Sep 8 hourly low) followed by 106.75 (Cloud Top). Initial resistance is now at 109.05 (Sep 8 hourly high) followed by 109.55 (Sep 3 high).

Pound Sterling (GBP)

Pound – 1.7905 : Initial support at 1.7745 (Sept 5 high) followed by 1.7540 (Sept 5 low). Initial resistance is now at 1.7930 (Sep 8 hourly high) followed by 1.8005 (10 day SMA).

Australian Dollar (AUD)

Australian Dollar – 0.8315 : Initial support at 0.8160 (Sept 8 hourly low) followed by 0.8030 (Sep 5 low). Initial resistance is now at 0.8340 (Sept 8 hourly High) followed by 0.8400 (Sept 3 high).

Gold (XAU)

Gold – 815 : Initial support at 789.74 (Sept 3 low) followed by 783.35 (Aug 15 low). Initial resistance is now at 819.65 (Sep 5 high) followed by 836.5 (Sep 1 high).

USD REVERSES EARLY DIRECTION TO GAIN ON BAILOUT NEWS

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) after being sold off initially in the Asian session the USD reversed direction in the European and US sessions as the Government Bailout of Fannie Mae and Freddie Mac was digested. Year highs on the Dollar Index were hit as Oil slumped from highs on speculation OPEC will not cut production. In the U.S. share markets, the NASDAQ was up 13 points (0.62%) and the Dow Jones was up 289 points (2.58%). Crude Oil closed up $0.11 ending the New York session at $106.34 per barrel. Looking Ahead, August Pending Home Sales are seen -1% down from the surprising +5.3% in July.

European Euro

The Euro (EUR) Initial Asian gains were reversed brutally in Europe and continued into the US session. Year lows on the Euro were hit below 1.4100 as Oil slumped to $104.70 and EUR/JPY came under heavy selling pressure. Overall the EUR/USD traded with a low of 1.4055 and a high of 1.44429 before closing the day at 1.4130 in the New York session. Looking Ahead, August Trade Balance is forecast at 17.5 Billion slightly weaker than 18.1 Billion.

Japanese Yen (JPY)

The Japanese Yen (JPY) was initially the major loser from the GSE bailout plan but going into the European session heavy cross selling started to pare the YEN losses with most trading back at opening levels and the JPY regaining the initiative. Trading was extremely volatile with the EUR/JPY trading in a 400 pip range. Overall the USDJPY traded with a low of 107.77 and a high of 109.07 before closing the day around 108.30 in the New York session.

Pound Sterling (GBP)

The Sterling (GBP) the reversal in cable was pronounced losing over 400 pips from the day highs as UK data came in weak. August PPI fell more than expected at -2.0% vs. forecasts of -1.2% and showed inflation is moderating opening up the possibility of early rate cuts to prop up the stalling economy. Overall the GDP/USD traded with a low of 1.7473 and a high of 1.7975 before closing the day at 1.7547 in the New York session. Looking ahead, July Industrial Orders are expected to fall -0.1% and the August Manufacturing production is expected to fall -1.1% vs. -1.3% in July.

Australian Dollar (AUD)

The Australian Dollar (AUD) surged on AUD/JPY buying early in Asia but reversed direction as Oil and the Euro fell heavily during the rest of the day and JPY support was removed. RBA Governor Stevens spoke earlier in the day and commentated that the falling AUD will not hamper its efforts to combat inflation. Overall the AUD/USD traded with a low of 0.8077 and a high of 0.8353 before closing the US session at 0.8127. Looking ahead, Australia July Retail Sales are expected to rebound to +0.5% from the -1.0% in June. Also released the July NAB Business Confidence Index.

Gold

Gold (XAU) tracked Oil gaining early before slumping to the $800 support in Late US trade. Overall trading with a low of USD$797.50 and high of USD$818 before ending the New York session at USD$803 an ounce.

Technical Analysis: USD Reverses Early Direction

Euro (EUR)

Euro – 1.4120 : Initial support at 1.4054 (Sep 8 low) followed by 1.4015 (Oct 10 2007 low). Initial resistance is now located at 1.4429 (Sept 8 high) at followed by 1.4545 (Sept 4 high).

Yen (JPY)

Yen – 108.15 : Initial support is located at 107.72 (Sep 8 low) followed by 105.53 (Sep 5 low). Initial resistance is now at 109.48 (Sep 2 high) followed by 109.57 (Aug 29 high).

Pound Sterling (GBP)

Pound – 1.7570 : Initial support at 1.7472 (Sept 8 low) followed by 1.7371 (Apr 5, 2006 low). Initial resistance is now at 1.7976 (Sep 8 high) followed by 1.8003 (Sep 2 high).

Australian Dollar (AUD)

Australian Dollar – 0.8150 : Initial support at 0.8076 (Sept 8 low) followed by 0.8030 (Sep 5 low). Initial resistance is now at 0.8353 (Sept 8 High) followed by 0.8394 (Sept 4 high).

Gold (XAU)

Gold – 802 : Initial support at 789.74 (Sept 3 low) followed by 783.35 (Aug 15 low). Initial resistance is now at 819.65 (Sep 5 high) followed by 836.5 (Sep 1 high).