The Dollar Strength Came To A Test

Daily Forex Fundamentals | Written by TheLFB-Forex.com | Sep 25 08 03:22 GMT |

Overall, since the Asian session opened, traders tested the dollar's strength from the last sessions. Even though, the market still has an acute lack of momentum, many of the major pairs are trading way under the daily ATR. The Euro (Eur/Usd) continued to trade in a tight range yesterday. In the overnight session, the pair's trading range reached 70 pips, but during the U.S. session, the trading became a little more volatile. In the Asian session, the pair had already gained 70 pips, recovering every pip lost one day earlier. The euro is now trading just below TheLFB R1 (1.4705). The Pound (Gbp/Usd) traded all over the place yesterday as the pair failed again to break above the 1.86 resistance area. The pound traded between TheLFB R1 (1.8620) and TheLFB S1 (1.8455) yesterday, closing the day 60 pips lower. In the Asian session, the pound re-gained every pip lost from the day before. The Aussie (Aud/Usd) fell 15 pips yesterday, after the pair traded flat all-day long in a 100-pip trading range. However, the pair just moved around the neutral pivot point (0.8360), not being able to pull any breakouts. The Australian leading index was unchanged for the month of July. This follows four consecutive monthly increases. In July, real money supply contributed positively to the leading index, while share prices, the yield spread, rural goods exports, and building approvals all made negative contributions The Cad (Usd/Cad) moved all day long in a 40-pip range, however, just before the last trading day closed, the pair broke to the upside. At the end of the U.S. session, the cad closed the day gaining less than 10 pips, despite that during the intra-day session, the pair traded lower. Furthermore, this was the third consecutive day that the cad failed to break under the 100-day moving average. The Swissy (Usd/Chf) traded between the neutral pivot point (1.0825) and TheLFB R1 (1.0920) yesterday, gaining 65 pips at the end of the day. In the Asian session, the pair reverted some of the gains, falling 40 pips. The next downside support can be found at the 50-day moving average. The Yen (Usd/Yen) closed the last day of trading just under the 200-day moving average, gaining 40 pips. During the trading day, the yen posted gains as the U.S. futures were advancing. However, the major U.S. indexes traded mixed and this was reflected over the yen's behavior. Japans exports have declined in August which was led by a slowdown in the shipment of vehicles to the U.S. as consumers curb spending in the face of the financial crisis. This increases the likelihood that the Japanese economy will stay in a recession until at least 2009. The Japanese corporate services price index was up 1.4 percent on the year to August. This was higher than the 1.2 percent that analysts had been expecting for annual expansion in the index. This was also the 25th month of annual increase for the index. Markets down for a third day Asian trade: Fears that Congress will not be able to vote the bailout plan drove the global stock markets down for a third day. Signs of criticism coming from Congress added further doubts that the bailout plan will be voted in with the current form. Creating a new one or coming up with a solution that will satisfy the Fed, the Treasury and Congress will require time, something that is a luxury right now. The Senate has only a few days left for voting, and an optimal agreement between the involved parties could span much more than the available time. From all this, banks are feeling the biggest pressures and constraints. Yesterday, the LIBOR rate showed again, that banks are hesitant to lend to each other, fearing the loan may never be paid back. The U.S. major indexes closed in the red, after most of the session floated around the neutral line. Traders had to choose between the uncertainty surrounding the bailout plan and the good news that one of the best stock-pickers from Wall Street, Mr. Warren Buffett, had gone shopping. The Asian equities opened the trading session lower, reflecting the global markets. The Nikkei tumbled 248.34 points (2.05%) to 11,866.69. The Australian S&P/Asx fell 23.70 points (0.48%) to 4,958.20. Crude oil fell for a third day after a government report showed that U.S. fuel demand declined to the lowest in almost five years. Crude oil for November delivery fell $0.14 (0.13%) to $105.59. Gold fell in the Asian session as traders see less inflationist pressures. Bullion for immediate delivery slipped $1.40 (0.16%) to $893.60. Previous Wall Street trade: Lawmakers are making all the right sounds and voicing all the proper concerns as elections gear up, but it would seem certain that the Treasury's plan is going to become law. The reason? The risk to the economy is too great to ignore. "Stock markets could melt down if the Treasury's plan does not pass," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "We are in crisis mode and if lawmakers decide to do nothing, the credit markets will cease to function and the global economy will be at a severe risk of failure. While lawmakers will likely add several things they wish to see, such as limits on executive pay, I cannot imagine the plan not becoming law very quickly." Commenting on his $5 billion investment in Goldman Sachs, Warren Buffett said during a CNBC interview that he would not have bought anything right now if he wasn't confident Congress will do the "right thing" and approve the Treasury's plan to purchase distressed mortgage assets. He compared the urgency of passing a bailout with American's decision to go to war after Pearl Harbor and said the financial system was on the brink of collapse last week before Paulson and Bernanke went to Congress with their plan. After all is said and done, Mr. Buffett believes the government could make a profit on the debt it acquires. "They could make money on this," he predicts, if it's handled properly. He also said that Mr. Paulson is doing a great job, and he recommended that the next president keep him as Treasury Secretary for another year or so. Previous European trade: European stocks surged at the opening bell as the investment made by Warren Buffett in Goldman Sachs gave investors some measure of hope. The credit crunch and the recent sell-off in financial shares have made some banks appear as attractive buying opportunities. Adding that the bailout plan may be just around the corner, investors may be looking at increasing stakes in financial stocks. However, markets in Europe declined after seeing that Wall Street was not following up on the positive sentiment Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com