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Barclays causes market jitters by suspending trading. High yielder’s tumble on a plunge in stock prices

By:

Easy Forex

2007-12-11

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U.S. Dollar Trading (USD) rallied to end the week as risk aversion aided the dollar in relieving much of its pressure against a basket of majors. Federal Chairman Bernanke indicated to the market that the economy will continue cool “noticeably” for the remaining fourth quarter causing the markets to price in further rate cuts out of the U.S. Much of the dollar strength came after prominent risk aversion markets fuelled by carry trades unwinding prompted by a drop in stock prices. In U.S. share markets the NASDAQ was down - 68.06 points (-2.52%) whilst the Dow Jones also tumbled -223.55 points (-1.69%). Crude oil rose by US$0.86 a barrel to US$96.32

The Euro (EUR) eased against the USD as investors bought Treasury bills for safety. In other news ECB President Jean Claude Trichet said yesterday the decline in the dollar has been “brutal”. Overall the EURUSD traded with a low of 1.4632 and high 1.4752 before closing the 1.4667 in the New York session.

The Japanese Yen (JPY) gained as carry trades were unwound to trade at its highest level since May 2006. The yen headed for the biggest weekly advance since March after speculation Barclays Plc, Britain's third-biggest lender, would write down assets. As a result the Japanese Yen was able to gain 3.6% against the USD on Friday. Overall the USDJPT traded with a low of 110.52 and a high of 112.88 before closing the session at 110.96 in New York.

The Sterling (GBP) was one pf the biggest movers through out the session weighed upon by as trading on Barclays were temporarily suspended to curb volatility. A Barclay’s spokesman denied speculation that it will announce a write down of about $10 billion in the value of its assets. Overall the GBPUSD traded with a low of 2.0892 and a high of 2.1161 (26 year high) before closing the session at 2.0917 in New York.

The Australian Dollar (AUD) tumbled as investors looked to minimize carry trade exposure. Overall the AUDUSD traded with a low of 0.9102 and high of 0.9321 before closing the day at 0.9140 in the New York session

Gold (XAU) fell for the first time in more than a week on speculation the Euro's rally against the dollar may stall, reducing the appeal of the precious metal as an alternative investment. XAU traded with a low of 827.20 and a high of 838.88.

TECHNICAL COMMENTARY

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.4552	1.4615	1.4655	1.4753	1.4782
USD/JPY	110.28	110.52	110.75	112.88	113.88
GBP/USD	2.0755	2.0861	2.0855	2.1161	2.1200
AUD/USD	0.8998	0.9078	0.9075	0.9331	0.9400
XAU/USD	806.40	822.65	829.10	845.80	846.15

Euro 1.4685
Initial support at 1.4554 (Nov 7 low) followed by 1.4467 (Nov 6 low). Initial resistance is now located at 1.4731 (Nov 7 high) followed by 1.4782 (Nov open + (Oct range * 0.618)

Yen 118.70
Initial support is located at 112.07 (Nov 8 low) followed by 111.61 (Aug 17 reaction low). Initial resistance is now at 114.96 (Nov 5 high) followed by 115.93 (Nov 1 high).

Pound – 2.1080
Initial support at 2.0974 (Nov 8 low) followed by 2.0861 (Nov 7 low). Initial resistance is now at 2.1088 (Nov 7 trend high) followed by 2.1200 (Channel line)

Australian Dollar – 0.9270
Initial support a 0.9190 (Nov 8 low) followed by 0.9109 (Nov 1 reaction low). Initial resistance is now at 0.9331 (Nov 8 high) followed by 0.9400 (Nov 7 trend high).

Gold – 835.40
Initial support at 822.50 (Nov 7 low) followed by 806.40 (Nov 6 low). Initial resistance is now at 845.80 (Nov 7 trend high) followed by 846.15 (November open + (October range * 0.618)

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