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Dollar surged against major currencies on fears of a global recession.
By: ACM Advanced Currency Markets - 27-10-2008
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Dollar surged against major currencies on fears of a global recession.
The Dollar surged to 2-year peaks versus a basket of currencies on Friday as some economic data from Europe reinforced fears of a global recession, adding to a selling on world stock markets. The Yen rose to multiyear highs versus the Dollar and Euro on risk aversion, while the Sterling suffered its biggest one-day % drop against the Dollar since September 1992. Worries about a world-wide recession and its impact on company profits savaged global equities, with Tokyo's Nikkei average diving 9.6% to a 5-1/2-year closing low. Stocks on Wall Street followed global markets down, with the Dow Jones industrial average dropping more than 5% at one point before recovering to close down 3.6%. That equities sell-off buoyed the low-yielding Japanese Yen as risk-averse investors dumped carry trades. The sharp surges in the Dollar and Yen have raised concerns that financial authorities may act in the currency market to slow volatile moves. But some traders are skeptical and Central banks would likely prefer more interest rate cuts.
News and Events:
The Dollar surged to 2-year peaks versus a basket of currencies on Friday as some economic data from Europe reinforced fears of a global recession, adding to a selling on world stock markets. The Yen rose to multiyear highs versus the Dollar and Euro on risk aversion, while the Sterling suffered its biggest one-day % drop against the Dollar since September 1992.
Friday’s data showed the euro zone's private sector economy shrank this month at its fastest pace since the monetary union, while the British economy contracted in Q3 for the first time in 16 years.
EurUsd dropped to a 2-year low at 1.2497. It was last down 2.15% at 1.2624. GbpUsd sank to a 6-year low 1.5265 and was last down 1.71% at 1.5903. EurGbp was down 0.5% at 0.7934 after hitting 0.8197 high. EurJpy fall 5.48% to 119.02 posting 113.80 low. GbpJpy dropped as low as 139.03, it was last 5.03% down at 149.98. UsdJpy posted 90.91 intraday low before ending 3.38% lower at 94.31. UsdChf rose 0.4% to 1.1668.
Worries about a world-wide recession and its impact on company profits savaged global equities, with Tokyo's Nikkei average diving 9.6% to a 5-1/2-year closing low. Europe's FTSEurofirst 300 dropped to its lowest since April 2003. Stocks on Wall Street followed global markets down, with the Dow Jones industrial average dropping more than 5% at one point before recovering to close down 3.6%. That equities sell-off buoyed the low-yielding Japanese Yen as risk-averse investors dumped carry trades. Before the current financial crisis, investors often borrowed cheaply in Yen to invest in higher yielding assets.
The sharp surges in the Dollar and Yen have raised concerns that financial authorities may act in the currency market to slow volatile moves. But some traders are skeptical and Central banks would likely prefer more interest rate cuts.
Today's Key Issues (time in GMT):
00:00 NZD Market Holiday
07:00 GBP October Nationwide House Price -1.5% vs -1.7% (mom)
07:00 GBP October Nationwide House Price -14.6% vs -12.4% (yoy)
09:00 EUR October German Ifo business climate 91 vs 92.9
09:00 EUR October German Ifo current conditions 96.8 vs 99.8
09:00 EUR October German Ifo expectations 85 vs 86.5
09:00 EUR September Euro zone Money – Private loans 8.4% vs.8.8%
09:00 EUR September Euro zone Money – M3 annual growth 8.5% vs. 8.8%
14:00 USD September New home sales 450k vs 460k
23:30 JPY September Retail sales 0% vs 0.7%
The Risk Today:
EurUsd:
Market dropped as low as 1.2497 last week. On the downside, further weakness will open the way down to strong support 1.2490 Trendline. Next long-term support holds 1.1640 November 2005 low. On the upside, only a return over 1.4000 (former trendline support) and 1.5000 will release actual pressure and may put key resistance 1.6000 into focus. Resistance holds 1.4002 former trendline support. Initial resistance holds 1.3769 last week high.
GbpUsd:
Market was 7.98% lower last week hitting 1.5265 low. This move was following Tuesday break of the low triangle pattern (1.7000) which did open the way through 1.6568 November 2003 low and 61.8% retracement of 1.3682–2.1161 advances. Initial support holds 1.5471 August 2003 low. Following supports are 1.4560 trendline and 1.3682 March 2001 low. On the upside, strong resistance holds 1.7631 last weeks high ahead of 1.8304 former support.
UsdJpy:
Market broke down the lower trendline on September-October downtrend accelerating drop to 90.91 on Friday. Further pressure might open the way down to 79.70 April 1995 low. On the upside, only a recovery over 103 upper trendline and 105 pivot point will put focus again on 108 and 110.67 15th August high.
UsdChf:
Market posted new high 1.1749 last week. Further advance may open the way to 1.1895 October 2007 high and strong resistance. On the downside, only weakness below initial support 1.1489 early October high would undermine the current uptrend and reverse through 1.0692 22nd September low and down to 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low.
Resistance and Support:
Next Analysis: USD is stronger than anybody anticipated for this year, How long/far can it still go?Content Provided by:
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