Yen Surge Causing Nikkei trouble

Last week’s Currency Trading Review

The Dollar gained heavily this week as key levels broke and risk aversion spiked higher especially on Friday as the Nikkei Plunged. Recession talks and forced selling from funds facing redemptions led to a very skittish market. Only the Yen gained against the dollar as carry trades were unwound heavily. The USD is being supported from collapsing emerging economies currencies. In US data unemployment claims rose to 478K from 470K previously. Also released Existing Home sales which jumped to 5.18M vs. 4.91M previously. The Euro broke below 1.3000 on suggestion that the Eurozone will cut rates aggressively and that the US is severely limited to the extent that it can cut rates. Also weighing was news of banking bailouts and disunity within the EU for the type of rescue package needed. The sentiment is very bearish right now and EUR/JPY dropped to its lowest ever rate as risk aversion reached capitulation level. On the Data front, German Flash manufacturing PMI was at 43.3 vs. 46.0 forecasts. The EUR/USD fell 6.3% closing at 1.2620, after opening the week at -6.24%. The Japanese Yen was the main gainer as USD/JPY broke below 100 and plummeted to 91. Extreme risk aversion and repatriation flows combined with carry trade unwind the major factors. The USD/JPY fell 7.8% closing at 94.28, after opening the week at 101.63. The GBP fell heavily with the Euro as USD strength and Risk aversion took its toll. Q3 GDP was recessionary at -0.5% vs. -0.2%. The GBP/USD fell 8.55% closing at 1.5917 after opening at 1.7217. The AUD fell the most of all currency as AUD/JPY hit critical levels and support gave way. The AUD/USD closed down 10.88% at 0.6211 after opening at 0.6887.

For the week starting 27/10/08.

This Forex Trading Week Preview

In the States; On Monday we have New Home Sales expected at 455K in September. ON Tuesday CB Consumer Confidence is expected to plummet to 52.2 vs. 59.8 in October. Durable goods are expected to fall -0.9% vs. -4.8% previously on Wednesday. On Wednesday we have the FOMC rate decision were the market is looking for a 0.50% cut to 1.00%. On Thursday we have Advance GDP expected to be -0.5% Q3. Finally on Friday University of Michigan expected at 49.1 vs. 56.7 previously. Also on Friday Fed Chief Bernanke speak. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Monday we have the German IFO business Climate is expected at 91.2 vs. 92.9 previously. On Tuesday GFK Consumer Climate is expected at 1.5 vs. 1.8 in November. On Wednesday we have Preliminary German CPI released for October expected at 2.4%. On Thursday we have German Unemployment Change expected at -10Kvs -29K previously. On Friday we have October European CPI expected at 3.3% vs. 3.6% previously. In the UK; Light data week with September Mortgage Approvals seen at 33K vs. 32K on Wednesday. On Friday we have GFK consumer Confidence seen at -35 vs. -32 previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; Tuesday we have September Retail Sales seen -0.2% vs. 0.7%. On Wednesday we have Sept Industrial production expected at 0.4% vs. -3.5% previously. On Friday we have Interest rate announcement widely expected to remain at 0.5% and National CPI forecast at 2.3% vs. 2.4% previously. We will provide our previews and reviews of these data releases in the daily summary.

In Australia; very quiet week with no tier one data. Friday sees September Private sector credit expected to rise 0.4% vs. 0.5%. We will provide our previews and reviews of these data releases in the daily summary.

Technical Analysis: Yen Surge

Euro (EUR)

Euro – 1.2585 : Initial support at 1.2497 (Oct 24 low) followed by 1.2334 (April 24 2006). Initial resistance is now located at 1.3078 (Oct 22 high) at followed by 1.3359 (Oct 21 high).

Yen (JPY)

Yen – 93.20 : Initial support is located at 90.93 (Oct 24 low) followed by 90.00 (Key level). Initial resistance is now at 98.32 (Oct 24 high) followed by 100.57 (Oct 22 high).

Pound Sterling (GBP)

Pound – 1.5805 : Initial support at 1.5269 (Oct 24 low) followed by 1.5000 (Key level). Initial resistance is now at 1.6327 (Oct 24 high) followed by 1.7198 (Oct 21 high).

Australian Dollar (AUD)

Australian Dollar – 0.6165 : Initial support at 0.6057 (Oct 24 low) followed by the 0.5929 (April 07 2003 low). Initial resistance is now at 0.7076 (Oct 15 high) followed by 0.7239 (Oct 14 high)

Gold (XAU)

Gold – 736 : Initial support at 671.49 (Sept 04 2007 low) followed by 600 (Key Level). Initial resistance is now at 745.15 (Oct 24 high) followed by 750 (Key Level).

Historic relief rally brings hope

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) gave up gains against all except the yen as worlds stocks surged on bargain hunting. CB Consumer Confidence Plummeted but that was ignored as the rally that began in Asia spread to the Europe and then the US. Expectations of a Fed Rate Cut were combined with news that the Bank of Japan might also cut rates. In the U.S. share markets, the NASDAQ was up 143 points (9.53%) and the Dow Jones was up 899 points (10.88%). Crude Oil closed down -$0.49 ending the New York session at $62.73 per barrel. Looking ahead, September Durable Good Orders are expected at -1.5% vs. -3.3% previously. Also released the FOMC statement widely expected to contain a 0.5% rate cut.

European Euro

The Euro (EUR) capitalized on surging stocks by breaking the key 1.25 level and consolidating. The late Dow surge induced the run up to resistance at 1.2800 in early Asia. GFK German Consumer Sentiment unexpectedly jumped to 1.9 vs. 1.5 expected and the German Stock market surged 11%. Overall the EUR/USD traded with a low of 1.2331 and a high of 1.2791 before closing the day at 1.2520 in the New York session.

Japanese Yen (JPY)

The Japanese Yen (JPY) sold from the start to the finish of that day losing a record against multiple currencies on a combination of negative Yen factors. Threats and possible intervention in the Yen by the Bank of Japan was supported by a large rally in the Nikkei. Overall the USDJPY traded with a low of 92.66 and a high of 99.70 before closing the day around 98.20 in the New York session. Looking ahead, September Industrial Output is expected at 0.5% vs. -3.5% previously.

Pound Sterling (GBP)

The Sterling (GBP) was a major from the equity rebound, climbing rapidly off lows. A possible bottom maybe in place given the rejection at 1.5280 twice and subsequent sharp rally. A break above 1.6000 early Asia is seen as a major bull test. CBI Sales in October we better than expected remaining unchanged at -27. Overall the GDP/USD traded with a low of 1.5405 and a high of 1.6060 before closing the day at 1.6020 in the New York session. Looking ahead, September Mortgage Approvals are seen unchanged at 32K.

Australian Dollar (AUD)

The Australian Dollar (AUD) after holding the 0.6000 level with RBA intervention seen for a third day, the subsequent rally in the Nikkei and Global stocks sent the risk averse currency straight up. Resistance at .6240 gave way and subsequent surged through to test the major resistance at 0.6500. AUD/JPY was the biggest gainer of the day up well over 10%. Overall the AUD/USD traded with a low of 0.6030 and a high of 0.66529 before closing the US session at 0.6490.

Gold

Gold (XAU) continued to make gains as investors sold the USD and searched for safe investments. Trading continues to be volatile though and downside was tested in Asia. Overall trading with a low of USD$726 and high of USD$755 before ending the New York session at USD$748 an ounce.

Technical Analysis: Historic Relief Rally

Euro (EUR)

Euro – 1.2800 : Initial support at 1.2686 (Oct 27 high) followed by 1.2329 (Oct 28 low). Initial resistance is now located at 1.3078 (Oct 22 high) at followed by 1.3260 (Oct 22 high).

Yen (JPY)

Yen – 98.20 : Initial support is located at 97.78 (Oct 28 high) followed by 92.49 (Oct 28 level). Initial resistance is now at 98.32 (Oct 23 high) followed by 100 (Key Psychological Number).

Pound Sterling (GBP)

Pound – 1.6050 : Initial support at 1.5830 (Oct 28 high) followed by 1.5402 (Oct 28 low). Initial resistance is now at 1.6297 (Oct 27 high) followed by 1.6350 (Oct 24 high).

Australian Dollar (AUD)

Pound – 1.6050 : Initial support at 1.5830 (Oct 28 high) followed by 1.5402 (Oct 28 low). Initial resistance is now at 1.6297 (Oct 27 high) followed by 1.6350 (Oct 24 high).

Gold (XAU)

Gold – 755 : Initial support at 724.65 (Oct 28 low) followed by 707.5 (Oct 27 low). Initial resistance is now at 756 (Oct 28 high) followed by 775 (Oct 22 Level).