Equities better but oil climbing also - Evening Session - GMT

Overnight Asia/Europe
• USD lower
• G-10 adds liquidity on behalf of the Fed
• Equities better but oil climbing also

Today’s Economic Reports
All times EASTERN (-4 GMT)
•  8:30am USD Unemployment Claims
• 10:00am USD Philly Fed Manufacturing Index
• 10:00am USD CB Leading Index m/m
• 10:35am USD Natural Gas Storage

Looking Ahead to Friday
All times EASTERN (-4 GMT)
• NONE in the US

Summary
The USD is lower this morning as traders continue to assess the developing potential in the world financial markets for further losses. Although equities are mostly higher overnight, Oil prices are flirting with the important $100/BBL level with most analysts suggesting a close back above that number this week would have negative consequences for the Greenback. Overnight the US Fed coordinated a large injection of capital from G10 banks; no doubt this move adding a lot of liquidity and pressuring the USD lower. Yen crosses remained active with solid two way action; after the recent drop lower for most pairs a bit of upward pressure was seen as shorts tool money off the table; USD/JPY rallied off the low prints at 104.11 to trade back at the 105.80 area to open New York. Overnight highs at 105.59 were on knee-jerk reaction to the liquidity injection but failed to attract large buyers. GBP and EURO both rallied to new weekly highs overnight; GBP dragging EURO higher but both seeing solid bids from semi-official names traders say. GBP had a high print at 1.8275 before dropping back while EURO scored the 1.4500 handle for a high print at 1.4542; traders note stops also in the mix helping to lift both rates. Although both rates are firm traders expect a reasonable pullback soon as both rates have reached Fib defense areas of the recent run up for the USD and USD bulls are still out there looking to sell rallies in the GBP and EURO. In my view, given today’s financial climate and volatility I think the sell side of the majors is suicide but that is what makes the markets. Swissy is under the 1.1000 handle for a low print this morning at 1.0899 before returning the mid-1.0900 area; traders note that the USD is likely to lose more against the CHF if gold rallies again. With equities recovering this morning gold likely will take a breather from the massive run-up the past week so expect a bit of support under Swissy today. In my view, the rate is likely to test under the 1.0800 handle by the end of the month but volatility can’t be ruled out of course. In my view, the USD is returning to its overall broader bear trend in place for years. Most of the majors are showing strong signs of potential change in trend and of course the fundamentals support a weaker USD. Today’s US data is the last for the week; expect further USD weakness today but be ready for a rally on Friday as traders square-up ahead of the weekend.

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