Coordinated Worldwide Emergency Interest Rate Cuts

U.S. Dollar Trading (USD) in an extreme move central banks around the world cut rates in a coordinated fashion to try and restore some confidence in the markets. With the Nikkei down 10% and European stocks following the lead the bold move did stem the selling for a short while. The bounce was brief though and stocks resumed their downtrend to end in the red. The USD lost heavily against safe haven currencies and gold but was able to make gains against higher yielding pairs. Fed Funds Rates cut to 1.50% from 2.00%. In the U.S. share markets, the NASDAQ was down 14 points (-0.83%) and the Dow Jones was down -189 points (-2.00%). Crude Oil closed down +$1.11 ending the New York session at $88.95 per barrel. Looking Ahead, weekly jobless claims are expected to moderate at 475K vs. 497K previously.

The Euro (EUR) received a boost from the EU 0.5% rate cut to 3.75% from 4.25% as markets risk appetite picked up large amounts of EUR/JPY was bought. Stocks were unable to maintain gains though and the Euro fell back from highs. German Industrial Production jumped to 3.4% after stronger factory orders on Tuesday. Overall the EUR/USD traded with a low of 1.3544 and a high of 1.3743 before closing the day at 1.3640 in the New York session. Looking ahead, August German Import prices -4%.

The Japanese Yen (JPY) was the main winner as USD/JPY broke below 100 and all the crosses came under severe pressure as the Nikkei lost 10%. Coordinated rate cuts did provide some support but this proved fleeting and the Yen finished the day on a strong footing but somewhat overbought. Overall the USDJPY traded with a low of 98.60 and a high of 101.70 before closing the day around 101.60 in the New York session.

The Sterling (GBP) traded in a volatile fashion with multiple factors affecting price action. The UK announced a major $350 Billion bank rescue passage. This was quickly overshadowed by coordinated global rate cuts. UK cut rates 0.5% to 4.5% from 5.0%. The GBP recovered with stocks but was very weak going into the US close as stocks capitulated. Overall the GDP/USD traded with a low of 1.7275 and a high of 1.7660 before closing the day at 1.7520 in the New York session. Looking ahead, August trade balance expected at -7.6B.

The Australian Dollar (AUD) was ripped apart from a huge sell order out of the US. The AUD broke below 70 and didn’t stop until the low 64’s. A brief recovery was seen on the Interest rate announcement but the mood is grossly bearish and breaking records for the size and scope of the moves. Overall the AUD/USD traded with a low of 0.6439 and a high of 0.7156 before closing the US session at 0.6711. Looking ahead, September Employment change expected at 0 and the unemployment rate expected to edge higher to 4.3% from 4.1%.

Gold (XAU) broke above $900 as risk aversion soared on crashing markets. Investors are flocking into the precious metal. Overall trading with a low of USD$920 and high of USD$879.90 before ending the New York session at USD$909 an ounce.

TECHNICAL COMMENTARY

 

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.3319	1.3361	1.3615	1.3773	1.3907
USD/JPY	97.68	98.57	99.80	103.29	105.43
GBP/USD	1.7131	1.7231	1.7235	1.7720	1.7839
AUD/USD	0.6342	0.6450	0.6675	0.7157	0.7355
XAU/USD	820.00	856.70	909.00	921.31	925.10

Euro – 1.3615  

Initial support at 1.3361 (Aug 16 2006 low) followed by 1.3319 (61.8% retrace 1.1639 to 1.6038). Initial resistance is now located at 1.3773 (Oct 6 high) at followed by 1.3907 (Oct 3 high).

Yen – 99.80

Initial support is located at 98.57 (Mar 23 low) followed by 97.68 (Mar 19 low). Initial resistance is now at 103.39 (Oct 7 low) followed by 105.43 (Sept 29 high).

Pound – 1.7235

Initial support at 1.7231 (Mar 2006 low) followed by 1.7131 (Dec 2005 low). Initial resistance is now at 1.772 (Oct 6 high) followed by 1.7839 (Oct 3 high).

Australian Dollar – 0.6675

Initial support at 0.6450 (Oct 8 low) followed by the 0.6342 (Sep 03 2003 low). Initial resistance is now at 0.7157 (Oct 8 high) followed by 0.7355 (Oct 7 high).

Gold – 909

Initial support at 856.7 (Oct 8 low) followed by 820 (Oct 3 low). Initial resistance is now at 921.31 (Oct 8 high) followed by 925 (Sep 29 high).