Stocks Crash, Carry trades Unwind, EURO pummeled.
U.S. Dollar Trading (USD)
U.S. Dollar Trading (USD) weak jobs data highlighted the weakness of the US economy and preceded a sharp sell off in US stocks. Other US economic data was slightly higher than expected with Non-Manufacturing ISM for August at 50.6 and Non-Farm Productivity jumping to 4.3%. In spite of extreme stock weakness, continued commodity selling and the carry trade unwind allowed the USD to gain against most majors. In the U.S. share markets, the NASDAQ was down 74 points (-3.20%) and the Dow Jones was down 344 points (-2.99%). Crude Oil closed down $1.46 ending the New York session at $107.89 per barrel. Looking ahead, August Nonfarm Payrolls are expected to fall -75K down from -51K in July. August Unemployment Rate is expected to remain at 5.7%.
European Euro
The Euro (EUR) ECB held rates at 4.25% but was weighed down by Trichet comments that highlighted risks to the downside for economic growth. Also weighing was the July German Industrial Orders coming in worse at -1.7% vs. a forecast of 0.4%. Heavy EUR/JPY selling weighed as stocks slumped. Overall the EUR/USD traded with a low of 1.4272 and a high of 1.4545 before closing the day at 1.4275 in the New York session. Looking ahead, German Industrial Output is seen at -0.5% in July. EUR/USD BREAKS 1.4300 early Asia
Japanese Yen (JPY)
The Japanese Yen (JPY) was the biggest gainer yesterday as equities plunged and the carry trade unwound lead by the AUD/JPY and GBY/JPY. In Q1 Business Capex fell -6.5% vs. 2.5% forecast and -4.9% previously. Overall the USDJPY traded with a low of 106.97 and a high of 108.47 before closing the day around 106.97 in the New York session. August FX reserves in at $996 Billion.
Pound Sterling (GBP)
The Sterling (GBP) enjoyed a brief rally before and just after the Bank Of England held rates at 5.25% but fell broadly. Strong US data and heavy GBP/JPY selling pulled cable down. EUR/GBP fell back below .8100 and provided some relief. 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.
Australian Dollar (AUD)
The Australian Dollar (AUD) recovered with the Euro into the US session before more commodity weakness and strong US data renewed AUD weakness. Large Falls in US stocks lead to a carry trade capitulation sending the AUD/JPY to 16 month lows. Overall the AUD/USD traded with a low of 0.8216 and a high of 0.8394 before closing the US session at 0.8224.
Gold
Gold (XAU) weakened as safe haven buying was overwhelmed buy USD strength and falls in Oil. Overall trading with a low of USD$794 and high of USD$814.70 before ending the New York session at USD$795 an ounce.
Technical Analysis: EURO Pummeled
Euro (EUR)
Euro – 1.4260 : Initial support at 1.4125 (Oct 22 07 low) followed by 1.4092 (Oct 10 07 low). Initial resistance is now located at 1.4545 (Sept 4 high) at followed by 1.4599 (Sept 2 high).
Yen (JPY)
Yen – 106.70 : Initial support is located at 105.67 (day low) followed by 105.38 (0.236 of110.68 -103.74). Initial resistance is now at 108.57 (Sep 4 high) followed by 109.09 (Sep 3 high).
Pound Sterling (GBP)
Pound – 1.7570 : Initial support at 1.7523 (Apr 1 06 low) followed by 1.7423 (50% Retracement of 1.3685-2.1161). Initial resistance is now at 1.7859 (Sep 4 high) followed by 1.8015 (Sept 2 high).
Australian Dollar (AUD)
Australian Dollar – 0.8150 : Initial support at 0.8108 (Aug 31 07 low) followed by 0.8049 (Aug 29, 2007 low). Initial resistance is now at 0.8403 (Sept 3 High) followed by 0.8535 (Sept 2 high).
Gold (XAU)
Gold – 793 : Initial support at 789.74 (Sept 3 low) followed by 783.35 (Aug 15 low). Initial resistance is now at 819.65 (Sep 2 high) followed by 836.5 (Sep 1 high).
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