US Stimulus Package sends Stocks Higher

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) was able to make solid gains on the back of a positive reaction to news that the US was thinking of a second stimulus package in response to Bernanke’s suggestion. Also helping sentiment was the better than expected at +0.3% in September vs. -0.9% previously. In the U.S. share markets, the NASDAQ was up 58.74 points (3.43%) and the Dow Jones was down 413 points (4.67%). Crude Oil closed up $2.40 ending the New York session at $74.25 per barrel.

European Euro

The Euro (EUR) gained during Asia testing the top of its recent range before pulling back and testing the downside. Support at 1.3380 gave way leading to the day lows as the market focused on the continued friction between European Banks and the German Government. Overall the EUR/USD traded with a low of 1.3290 and a high of 1.3530 before closing the day at 1.3350 in the New York session.

Japanese Yen (JPY)

The Japanese Yen (JPY) was sold for most of the day against the USD as equities recovered. The selling was tempered by mixed crosses with the EUR/JPY and GBP/JPY being dragged down by their respective majors although the AUD/JPY remained buoyant. Overall the USDJPY traded with a low of 101.37 and a high of 102.42 before closing the day around 102.10 in the New York session.

Pound Sterling (GBP)

The Sterling (GBP) the GBP rally seen during the Asian session was capped going into Europe by concerning Economic data. Public sector Borrowing blew out to 8.1B from 6.9B expected, the biggest 6 month budget deficit since WW2. Also released, Rightmove House prices showing the largest annual drop in House prices in 6 years. Overall the GDP/USD traded with a low of 1.7107 and a high of 1.7516 before closing the day at 1.7150 in the New York session.

Australian Dollar (AUD)

The Australian Dollar (AUD) continued to trade in a buoyant nature as it pushed the recovery envelope on high PPI data and soaring stocks. Q3 PPI gained 2% Q/Q vs. 1.0% expected. Large gains in Gold and Oil also helped to support. Overall the AUD/USD traded with a low of 0.6901 and a high of 0.7063 before closing the US session at 0.7030 looking ahead, RBA minutes from the October Meeting along with Governor Stevens Speaking.

Gold

Gold (XAU) jumped higher on bargain hunting and real money investor demand. Overall trading with a low of USD$783.30 and high of USD$808.20 before ending the New York session at USD$797 an ounce.

Technical Analysis: US Stimulus Package

Euro (EUR)

Euro – 1.3325 : Initial support at 1.3288 (Oct 20 low) followed by 1.3260 (Oct 10 trend low). Initial resistance is now located at 1.3531 (Oct 20 high) at followed by 1.3538 (Oct 9 high).

Yen (JPY)

Yen – 101.95 : Initial support is located at 101.36 (Oct 20 low) followed by 99.27 (Oct 16 trend low). Initial resistance is now at 102.41 (Oct 20 high) followed by 103.07 (Oct 14 high).

Pound Sterling (GBP)

Pound – 1.7140 : Initial support at 1.7105 (Oct 20 low) followed by 1.7000 (Key level). Initial resistance is now at 1.7518 (Oct 20 high) followed by 1.7613 (Oct 14 high).

Australian Dollar (AUD)

Australian Dollar – 0.7025 : Initial support at 0.6883 (Oct 20 low) followed by the 0.6731 (Oct 16 low). Initial resistance is now at 0.7076 (Oct 20 high) followed by 0.7239 (Oct 14 high).

Gold (XAU)

Gold – 796 : Initial support at 772.05 (Sept 16 low) followed by 764.6 (Sept 15 low). Initial resistance is now at 850 (Oct 16 high) followed by 856.46 (Oct 15 high).

Interbank Lending Rates fall for the First Week in Months

Last week’s Currency Trading Review

The Dollar was largely unchanged as the market recovered from the extreme volatility seen the week before. A massive relief rally for equities on Monday was offset by an equally large drop on Wednesday after US Retail Sales disappointed at -1.2% vs. -0.6% expected in September. A partial recovery into the weekend left the USD off highs but still well supported as commodities continued to be sold on Global recession fears. Oil traded under $70 per barrel for the first time this year. The Euro was unchanged against the USD but lost ground against the GBP as risk sentiment recovered slightly. On the data front Inflation started to slow at 3.6%. The October Zew Survey of Economic Sentiment deteriorated to -63. The EUR/USD was flat closing at 1.3409 after opening at 1.3410. The Japanese Yen lost ground across the board as the panic subsided and bargain hunters swooped on the USD/JPY below 100. The Bank of Japan left rates at 0.5% in an unscheduled meeting but did create measure to help liquidity in the Japanese Government Bond Market. The USD/JPY gained 0.96% closing at 101.63 after opening the week at 100.65. The GBP did manage to gain a small amount as it continued its bounce off the 1.70 level. The UK Government injected $9 billion into there banking system to sure up tier one capital levels. September CPI was higher than expected at 5.2% Y/Y. Also released Unemployment rate rose to 5.7% vs. 5.5%. The GBP/USD gained 1.33% closing at 1.7277 after opening at 1.7047. The AUD gained the most as the high yielding currency was the worst hit during the market turmoil. The Australian Government agreed to guarantee all deposits with financial institutions for the next three years. Also announced a $10billion stimulus package to help the economy. The AUD/USD closed up 6.62% at 0.6884 after opening at 0.6428.

For the week starting 20/10/08.

This Forex Trading Week Preview

In the States; Focus will be on FedSpeak this week with multiple members speaking. On Monday we have Bernanke Testifying at the House Budget Committee on Economy. Also speaking is Fed Member Lockhart. On Tuesday Fed Member Stern Speaks. ON Wednesday Weekly Jobless claims are seen at 470K vs. 461K last week. Also released the August House price index expected at -0.5%. On Friday we have September Existing Home Sales. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Monday we have German PPI expected at -0.5% vs. -0.6%. On Thursday the Eurozone Current Account expected at -5.0B vs. 1.7B previously. Also Aug New Industrial Orders seen at 0.3%. Finally On Friday we have Flash October PMI’s with the Eurozone, Services seen at 47 vs. 48.4 and manufacturing at 44.0 vs. 45.0 previously In the UK; On Tuesday we have the Bank of England Governor King speaking. On Wednesday BoE Minutes expected at 9-0 for the cut 50Bps. On Thursday we have September Retail Sales expected at -0.6% vs. +1.2% previously. On Friday we finish with the Q3 advance GDP expected at 0.0% vs. -0.2% previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; Very Light Data week with Wednesday we have the August All-industry Activity Index seen at -1.7% vs. 0.8%. We will provide our previews and reviews of these data releases in the daily summary.

In Australia; On Monday we have the Q3 PPI expected at 0.9%. On Tuesday we have the RBA minutes from the October Meeting and RBA Governor Speaks. On Wednesday we have Q3 CPI expected at 1.5% Q/Q. New Zealand Interest Rates are expected to be cut 1.0% to 6.5% in Friday. We will provide our previews and reviews of these data releases in the daily summary.

Technical Analysis: Interbank Lending Rates Fall

Euro (EUR)

Euro – 1.3405 : Initial support at 1.3347 (Oct 16 low) followed by 1.3260 (Oct 13 trend low). Initial resistance is now located at 1.3538 (Oct 16 high) at followed by 1.3690 (Oct 9 high).

Yen (JPY)

Yen – 101.50 : Initial support is located at 99.27 (Oct 16 low) followed by 97.91 (Oct 10 trend low). Initial resistance is now at 102.16 (Oct 15 high) followed by 103.07 (Oct 14 high).

Pound Sterling (GBP)

Pound – 1.7300 : Initial support at 1.7136 (Oct 16 low) followed by 1.7106 (61.8% retrace 1.6781-1.7631). Initial resistance is now at 1.7384 (Oct 17 high) followed by 1.7631 (Oct 14 high).

Australian Dollar (AUD)

Australian Dollar – 0.6900 : Initial support at 0.6731 (Oct 17 low) followed by the 0.6496 (Oct 16 low). Initial resistance is now at 0.6985 (Oct 17 high) followed by 0.7076 (Oct 15 high).

Gold (XAU)

Gold – 785 : Initial support at 774.40 (Sept 17 low) followed by 764.6 (Sept 15 low). Initial resistance is now at 850 (Oct 16 high) followed by 856.46 (Oct 15 high).

USD Surges on Safe Haven Flows

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) made broad based gains as money managers brought their money back to the US and Commodities slumped on demand concerns. Also supporting the Dollar was plans from the Fed to set up a new program to buy assets from Funds to help them meet record redemption demands. In the U.S. share markets, the NASDAQ was down -73 points (-4.14%) and the Dow Jones was down 231 points (+2.50%). Crude Oil closed down $3.36 ending the New York session at $70.89 per barrel. Looking ahead, Treasury Secretary Paulson Speaks Today.

European Euro

The Euro (EUR) traded at its lowest point since February 2007 on USD strength and continued speculation that the ECB will cuts rates aggressively to stop a recession. Also weighing was the large drop in Oil which has kept a close relationship with the Euro this year. 1.3000 is now perilously close and a natural bear target. Overall the EUR/USD traded with a low of 1.3051 and a high of 1.3358 before closing the day at 1.3060 in the New York session.

Japanese Yen (JPY)

The Japanese Yen (JPY) was the strongest currency of the day as Funds pulled their money out of Europe and Carry trades were unwound aggressively. GBP/JPY and AUD/JPY both fell as Equities came off Monday’s rally. USD/JPY held up well but still threatened the 100 level as Stock losses mounted. Overall the USDJPY traded with a low of 100.11 and a high of 102.16 before closing the day around 100.15 in the New York session. Looking ahead, September Japanese Trade Balance seen at 600B Yen and Exports are seen jumping 5.2%.

Pound Sterling (GBP)

The Sterling (GBP) Tracked the Euro lower against the USD as European stocks reversed direction. The pound then took the lead crumbling as Bank of England Governor King stated the UK appeared in recession. Also weighing was October CBI orders falling to -39 from -26 previously. Overall the GDP/USD traded with a low of 1.6650 and a high of 1.7199 before closing the day at 1.6700 in the New York session. Looking ahead, MPC minutes expected at 9-0.

Australian Dollar (AUD)

The Australian Dollar (AUD) was sold heavily after the RBA minutes and Governor Stevens reiterated the markets view that there could be substantial easing of Interest rates. Also weighing was broad USD strength, risk aversion and steep falls in commodities. Overall the AUD/USD traded with a low of 0.6725 and a high of 0.7034 before closing the US session at 0.6750. Looking ahead, Q3 CPI expected at 1% M/M 4.8% Y/Y.

Gold

Gold (XAU) new month lows on USD strength. Cash has become the asset of choice especially as inflation eases around the world. Overall trading with a low of USD$766.20 and high of USD$802.25 before ending the New York session at USD$772 an ounce.

Technical Analysis: USD Surged

Euro (EUR)

Euro – 1.3020 : Initial support at 1.3000 (Key Level) followed by 1.2865 (Jan 12 2007). Initial resistance is now located at 1.3359 (Oct 21 high) at followed by 1.3531 (Oct 20 high).

Yen (JPY)

Yen – 100.20 : Initial support is located at 100.12 (Oct 20 low) followed by 99.27 (Oct 16 trend low). Initial resistance is now at 102.41 (Oct 20 high) followed by 103.07 (Oct 14 high).

Pound Sterling (GBP)

Pound – 1.6525 : Initial support at 1.6500 (Psych Support) followed by 1.6400 (Key level). Initial resistance is now at 1.6652 (Oct 21 low) followed by 1.7000 (Key level).

Australian Dollar (AUD)

Australian Dollar – 0.6775 : Initial support at 0.6725 (Oct 21 low) followed by the 0.6496 (Oct 16 low). Initial resistance is now at 0.7076 (Oct 15 high) followed by 0.7239 (Oct 14 high).

Gold (XAU)

Gold – 775 : Initial support at 766 (Sept 21 low) followed by 764.6 (Sept 15 low). Initial resistance is now at 814 (Oct 17 high) followed by 850.0 (Oct 16 high).