The Market Is Preparing For The European Calendar

Daily Forex Fundamentals | Written by TheLFB-Forex.com | Aug 14 08 03:34 GMT |

Overall, the market is preparing for the busy European schedule. The German and European GDP numbers are to be announced during the European trading hours and these two releases could influence the long-term currency valuation.

The Euro (Eur/Usd) formed a doji star at the end of last session, the second one in row. This pattern usually shows the market indecision and sometimes signals the previous trend may be over. At the same time, the daily chart shows the pair is trading under all the important moving averages, the closest being the 200-day moving average, which is 350 pips away.

The Pound (Gbp/Usd) fell to a 22-month low after the Bank of England's projections confirmed what the market already knew: the UK economy may be facing a slowdown, if not recession. The pound tumbled an impressive number of pips soon after the release. At the end of the trading session, the pound had a loss of 250 pips.

The Aussie (Aud/Usd) snapped a 12-day rally yesterday, in which the pair fell 870 pips. At the close of the US session, the aussie had gained 35 pips, forming a pin bar pattern. At the open of the Asian session, the pair fell an additional 100 pips, but later recovered some of the losses.

The Cad (Cad/Usd) fell for the second day as crude oil posted gains. The Canadian dollar
strengthened and closed the day 30 pips lower, even if most of the time the pair traded above the opening price. In the Asian session, the cad made a quick check on TheLFB S1 to test its weakness, but failed to break any lower.

The Swissy (Usd/Chf) is unable to break the range the pair is trading in for the past two days. The pair cannot find the momentum to break the support, which is in the 1.0820 area, or the resistance, found in the 1.9020 area.

The Yen (Usd/Yen) closed the session yesterday, a little higher, even though the global equity markets were trading in the red. Furthermore, the pair had a 100 pips rally at the end of the US session, bouncing off the 108.50 area and TheLFB S2. During the Asian session, the pair moved 40 pips lower, but soon recovered and is now trading flat.

Asian shares up on commodity stocks

Current Futures: CAC -113.50, DAX -156.00, FTSE -82.00

Asian trade: Equities in Asia are advancing for the first time in two days, after a one-day rally in oil and gold made investors see the commodity stocks as a good buy. The shares of financial companies continue to tumble after the Merrill Lynch Company said the credit crisis is far from over. The XLF, an index tracking the financial sector on the U.S. stock markets, had been in a downtrend for almost a year because the credit crises affects the earnings of virtually every major bank and thus, investors confidence in them.

In Japan, the Nikkei is trading mixed despite news that a large real estate developer filed for bankruptcy, having a $2.35 billion debt. The Nikkei declined 20.38 points (0.16%) to 13,002.67. The Australian S&P/Asx advanced 73.60 points (1.49%) to 5,025.20 aided by mining and oil companies.

Gold rose for the first time this month as investors marked a part of their profits for safety. Bullion for immediate delivery gained $3.70 (0.44%) to $835.20.

Crude oil futures rose for a second day after a report showed a bigger-than-forecasted decline in inventories. Crude oil for September delivery advanced $0.70 (0.60%) to $116.70.

Previous Wall Street trade: The rule against naked short selling against 19 financial stocks expired after Tuesday's trading session, and financial stocks took a hit on Wednesday after Merrill Lynch warned the credit crisis is "far from over" while it downgraded the shares of rivals Goldman Sachs, Morgan Stanley and Lehman Brothers. The S.E.C.'s restriction didn't do much for the shares of financial firms anyway, as Arturo Bris, a finance professor at IMD business school in Lausanne, Switzerland, found that the SEC-imposed restraints "contributed to a decline in share prices for the 19 stocks" totaling about $60 billion. Depending on whether you use the IMF ($1 trillion) or Nouriel Roubini ($2 trillion), since financial firms have written off about $500 billion of losses, we're either 50 or 25 percent through the worst credit crisis since the Great Depression. It's almost quaint to think that Lehman's shares declined nearly 50% in 1973 when the firm announced it had lost $6.7 million on some wrong-way interest rate bets.

Previous European trade: Equities are now running now on fear that the financial companies are in a poorer shape that previously thought. The earnings season was bad for most of the banks involved in the sub-prime mess as more write-downs were announced. The negative momentum surrounding the U.S. stock market carried over to the Asian equities, which closed the session deep into negative territory and European markets, which opened with large gaps to the downside. At the same time, oil and gold advanced, further eroding investors' confidence in stocks.

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