US GOVERNMENT BAILS OUT FREDDIE AND FANNIE

U.S. Dollar Trading (USD) August Non-farm Payrolls came in worse than expected at -84K vs. -75K forecast. The Market reacted to the actual August Unemployment rate though which gapped to 6.1% vs. 5.7% previous. Trading was already volatile given heavy carry unwinding in the Asian session and these figures added fuel to the fire. Dollar was sold off across the board but manages to pare some losses against the YEN as equities shrugged off the employment data. News surfaced late in the US Session that the Government was stepping in to take over Fannie Mae and Freddie Mac. Details announced over the weekend from the US Treasury was that as much as $200 Billion in new capital plus credit lines would be made available and that the two companies would be put under management of the Federal Housing Finance Agency. In an extremely positive step for the banking and housing sector, early Asian trading on Monday saw a surge in risk appetite. In the U.S. share markets, the NASDAQ was down -3 points (-0.14%) and the Dow Jones was up 32 points (0.29%). Crude Oil closed down $1.66 ending the New York session at $106.23 per barrel.

The Euro (EUR) traded lower as EUR/JPY was sold hard in the Asian session then continued to track lower before US data allowed a recovery. German Industrial Production was considerable weaker than expected at -1.8% vs. forecasts of -0.5%. Overall the EUR/USD traded with a low of 1.4197 and a high of 1.4347 before closing the day at 1.4241 in the New York session.

The Japanese Yen (JPY) traded in huge ranges on Friday as Heavy carry unwinds in the Asian session were reversed as the GSE bailout plan from the US government was processed. In Q1 Business Capex fell -6.5% vs. 2.5% forecast and -4.9% previously. Overall the USDJPY traded with a low of 105.54 and a high of 107.35 before closing the day around 107.14 in the New York session.

The Sterling (GBP) pretty much tracked the Euro losing heavily via the GBY/JPY in Asian and rebounding as US Unemployment jumped to 6.1%. Sterling was also able to gain against the Euro as the rebound became a broad based Pound rally. Overall the GDP/USD traded with a low of 1.7627 and a high of 1.7834 before closing the day at 1.7630 in the New York session. Looking ahead, August PPI is released expected lower at -1.2% as cheaper Oil filters through the economy.

The Australian Dollar (AUD) was extremely volatile bearing the brunt of the carry trade unwind with a 500 pip trading range on the AUD/JPY setting the stage. Stable stocks and an AUD/USD rebound into the US session close helped reverse sentiment. Overall the AUD/USD traded with a low of 0.8030 and a high of 0.8222 before closing the US session at 0.8120.

Gold (XAU) surged on the US Unemployment rate jump, breaking above $800 trading quickly to $820 before retracing all the way to $794. Overall trading with a low of USD$790 and high of USD$820 before ending the New York session at USD$803 an ounce.

TECHNICAL COMMENTARY

 

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.4200	1.4310	1.4410	1.4535	1.4599
USD/JPY	106.75	107.70	108.45	109.05	109.55
GBP/USD	1.7540	1.7745	1.7905	1.7930	1.8005
AUD/USD	0.8030	0.8160	0.8315	0.8340	0.8400
XAU/USD	783.35	789.74	815.00	819.65	836.50

Euro – 1.4410  

Initial support at 1.4200 (Sep 5 low) followed by 1.4310 (Sept 8 low low). Initial resistance is now located at 1.4535 (10 Day SMA) at followed by 1.4599 (Sept 2 high).

Yen – 108.45

Initial support is located at 107.70 (Sep 8 hourly low) followed by 106.75 (Cloud Top). Initial resistance is now at 109.05 (Sep 8 hourly high) followed by 109.55 (Sep 3 high).

Pound – 1.7905

Initial support at 1.7745 (Sept 5 high) followed by 1.7540 (Sept 5 low). Initial resistance is now at 1.7930 (Sep 8 hourly high) followed by 1.8005 (10 day SMA).

Australian Dollar – 0.8315

Initial support at 0.8160 (Sept 8 hourly low) followed by 0.8030 (Sep 5 low). Initial resistance is now at 0.8340 (Sept 8 hourly High) followed by 0.8400 (Sept 3 high).

Gold – 815

Initial support at 789.74 (Sept 3 low) followed by 783.35 (Aug 15 low). Initial resistance is now at 819.65 (Sep 5 high) followed by 836.5 (Sep 1 high).