Currency market remains skeptical despite last week rescue plan

Last week, US Treasury Secretary Henry Paulson urged the government to spend billions of Dollars to deal with toxic mortgage assets choking the financial system, while the Federal Reserve said it would provide loans for purchases of high-quality asset-backed commercial paper from money market funds. He will also ask Congress to take action this week on legislation to calm the turbulence on financial markets. Those developments pressured the Yen, which had tapped safe-haven flows from the markets turmoil, sparked by the collapse of Lehman Brothers Holdings this week and forced the government to bail out insurer American International Group. Higher-yielding currencies such as the Australian Dollar also surged as investors regained some confidence. AudUsd rose as high as 0.8362. It was last up 3.63% at 0.8341. AudJpy jumped 5.11% to 89.60.
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The Yen fell on Friday as steps by US authorities to boost morale in distressed financial markets revived global appetite for risky trades.

US Treasury Secretary Henry Paulson urged the government to spend billions of Dollars to deal with toxic mortgage assets choking the financial system, while the Federal Reserve said it would provide loans for purchases of high-quality asset-backed commercial paper from money market funds. Paulson will ask Congress to take action this week on legislation to calm the turbulence on financial markets. Despite the initial optimism over the rescue plan, traders said the currency market remained skeptical.

Those developments pressured the Yen, which had tapped safe-haven flows from the markets turmoil, sparked by the collapse of Lehman Brothers Holdings this week and forced the government to bail out insurer American International Group.

UsdJpy rose as high as 108.02, a 10-day peak. It was last up 1.44% at 107.45. EurJpy rose to 155.58 intraday on Friday and closed at 155.45 up 2.61%. That buoyed the Euro against the Dollar. EurUsd rose 1.15% at 1.4466 after dipping to 1.4152. UsdChf was 0.33% lower at 1.1052 after posting 1.1280 high. GbpUsd rose 0.95% at 1.8315 having hit 1.7915 low earlier.

Higher-yielding currencies such as the Australian Dollar also surged as investors regained some confidence. AudUsd rose as high as 0.8362. It was last up 3.63% at 0.8341. AudJpy jumped 5.11% to 89.60.




Today's Key Issues (time in GMT):


00:00 USD September Nationwide HousePrice -1.6% vs -1.9% (mom)
00:00 CAD September Nationwide HousePrice -12.4% vs -10.5% (yoy)
12:30 CAD August National Activity Index -0.67
12:30 July Retail sales ex-autos 0.4% vs 1.4% (mom)
12:30 July Retail sales 0.2% vs 0.5% (mom)
The Risk Today:

EurUsd:
Market recovered 0.8% to 1.4582 last week from 1.3882 three-week low. On the current upside, only a return over 1.5000 and 1.5500 will release actual pressure and may put key initial resistance 1.6000 into focus. Still a break up there would open the way to Trendline resistance 1.6200. But renewed weakness below 1.4250 will put the focus on strong support 1.3666 December 2004 high and 1.3056 support (retracement of 0.8231 – 1.6039 advance).


GbpUsd:
Cable posted 1.7447 low two weeks ago. It rose 2.11% last week to 1.8315 not far from 1.8387 last week high. On the upside, strong resistance holds 1.8795 21st August high. Former support 1.9363 holds also strong resistance. Key level holds 2.0100 resistance. Renewed weakness below 1.7447 may find support on 1.7422 (50% retracement of 1.3682 – 2.1161 advance). Strong support holds 1.7251 3rd April low.


UsdJpy:
Last week strong volatility posted 104.20 to 106.20 consolidation range before recovery to 108.02 Friday high and initial resistance. Further advance will put 110.67 15th August high. Renewed pressure below 105.88 initial support may open the way toward 105 pivot (38.2% retracement of 95.75 – 110.67 advance), as well as 103.54 last week low and 100 pivot point.


UsdChf:
Market rose as high as 1.1418 two-weeks ago and strongly reversed 1 ½-month uptrend last week. High volatile Friday session posted 1.1280 high initial resistance and 1.1007 low. On the downside, initial support holds 1.0900 last week low. Only weakness below 1.0734 former resistance would undermine the current trend and open the way down to 1.0500 and 1.0375. This move could also test the 1.0013 15th July low in front of 0.9637 17th March low. Initial resistance holds 1.1280 Friday high ahead of 1.1418 11th September trend high. Strong resistance holds 1.1593 December 2007 high.



Resistance and Support:



By
Jean-Claude Braha
- ACM Advanced Currency Markets, Geneva, Switzerland

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Provided by ACM: http://www.ac-markets.com