Daily Forex Fundamentals | Written by TheLFB-Forex.com | Aug 12 08 03:25 GMT |
Overall, the dollar continues to strengthen in the Asian session as the market is pricing in a possibility for a rate increase from the Fed in the coming months. However, in the same time the market sees a smaller possibility of a rate hike from the other central banks, like the ECB, BoC or BoE as the economy slows.
The Euro (Eur/Usd) has been trading lower for the past 6 days, a period in which the pair fell close to 700 pips. The markets are now pricing the possibility of at least 25 basis points by the end of the year from the Fed, which empowers the dollar. In the Asian session, the pair fell 30 pips and broke underneath the 1.49 support area.
The Pound (Gbp/Usd) had a very volatile Asian session, with the trading range close to 70 pips. The pound started moving downward after a release showed house prices in UK had fallen less than expected. Even though, the pair is now trading under the low of the previous session, reaching the lowest parity since November 2006.
The Aussie (Aud/Usd) wants to set a new record for a losing streak it seems. The market sees high probability that the RBA will cut this year a number of times, reducing the overnight yield. As such, traders are dumping the pair at an alarming rate, and it has been falling for 11 consecutive days.
The Cad (Cad/Usd) is moving up for eight days and looks like it is going to do the same in the Asian session, but volumes in the overnight session are limited so it may have a hard time doing so. The cad is now trading between the neutral pivot point and TheLFB R1.
The Swissy (Usd/Chf) advanced a small number of pips in the Asian session, after the pair gained almost 40 pips yesterday. The strength the dollar posts lately made this pair trade above all the important moving averages.
The Yen (Usd/Yen) is trying to take out the high of the previous session and make a new high this year. In the last day, the yen traded mixed, as equities could not find a strong pace to grow. During the Asian session, a release showed that wholesale inflation reached a 27-year high lead by oil costs.
Shares in Asia down
Current Futures: CAC +43.00, DAX +50.00, FTSE +58.00
Asian trade: Equities in Asia are trading lower as more bad news hit the wires. In the period when the market was tumbling lower, the only shares that actually posted gains were the commodity stocks, which grew once oil and other raw materials traded near record highs. Now, time has passed and the same commodity stocks are dragging down the entire market as raw material prices are tumbling due to the global slowdown. Gold tumbled to the lowest level since December and oil traded near a 14-week low.
At the same time, rating agencies are cutting the debt rating of various banks, reducing the investors’ confidence in them. A lower debt rating also means the bank will have to pay more in interest, increasing cost and reducing profits. To add more fuel to the fire, a news release showed inflation in Japan at the wholesale level, reached a 27-year high. Inflation erodes in time the purchasing power of customers, something that will directly affect consume and demand in a negative way. For an economy to shine, it needs its consumers to spend at a strong pace. In the Asian session, the Nikkei declined 64.57 points (0.48%) to 13,366.34. The Australian S&P/Asx fell 7.10 points (0.14%) to 5,019.80.
Gold sold lower as the dollar further advanced, dropping the need for an alternative investment. Bullion for immediate delivery fell $9.20 (1.11%) to $819.10.
Crude Oil changed very little with signs that the U.S. economic slump will extend into 2009, reducing fuel demand. Crude oil for September delivery gained $0.15 (0.13%) to $114.60.
Previous Wall Street trade: Equity markets couldn't maintain their earlier gains but still closed the session higher, finishing about 50% off their best levels of the day after oil rose 1.5% off its lowest price. News that Russian troops have entered Georgia proper may persuade some traders to reduce their bearish bets on the commodity because of the risk that supplies could be disrupted. Still, the bears do seem to be in control of the market now, and are likely to continue trading the "demand destruction" theory after China reported a 7% drop in oil imports to about 3.25 million barrels a day in July, the lowest since December,
At the close of floor trading on the NYSE, the DOW was on 11782.35 after gaining 48.03 (0.41%), The S&P closed on 1305.82, up 9.00 (0.69%) while the NASDAQ finished trading on 2439.95 with an increase of 25.85 (1.07%). Treasuries were lower as traders moved into equities. The two-year note yield rose 5.7 basis points to 2.55%. The benchmark 10-year note gained 7.2 basis points to yield 4.007%. The dollar continued its recent remarkable run against the euro (0.7%) and pound (0.6%) while trading flat against the yen after the S&P moved declined from its high.
Previous European trade: Equities rose in Europe and Asia, in part, because of the weakening commodity prices and dollar strength during the last few days. Cheaper commodities raise the profit margin of companies, allowing them to post bigger earnings. At the same time, a strong dollar favors companies that export their product to the U.S., the biggest commercial market. In addition, markets got another boost after UBS AG, one of the biggest European banks, maintained its earning guidance. This news shows that banks may weather what is left of the credit crunch, since UBS has been one of the hardest hit banks. The German DAX rose 47.98 points (0.7%) to 6609.63, while the U.K.’s FTSE gained 52.60 (0.96%) to 5541.80. The DJ Stoxx 600 was up 3.78 (1.31%) to 293.06.
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