Wallstreet Meltdown is now ubiquitous and widespread, Asian and European markets down

Tsunami, cataclysm, meltdown – a plethora of superlatives can been used to qualify yesterday’s news which took the financial world by storm. Between the Lehman Brother’s chapter 11 bankruptcy, Merrill being taken over by Bank of America currency markets reacted in desperation as the Dollar initially took a dive against majors. The EURUSD rose as high as 1.4481 in the early hours of Monday’s Asian trading session as news of a crisis on Wall Street began to seep through – a 1.8% jump from Friday’s close. The ensuing debacle on AIG’s uncertain future and the imminent FOMC rate decision to be the focus of today’s trading session.
News and Events:


Tsunami, cataclysm, meltdown – a plethora of superlatives can been used to qualify yesterday’s news which took the financial world by storm. Between the Lehman Brother’s chapter 11 bankruptcy, Merrill being taken over by Bank of America currency markets reacted in desperation as the Dollar initially took a dive against majors. The ensuing debacle on AIG’s uncertain future and the imminent FOMC rate decision to be the focus of today’s trading session. Asian session traders will be focused on the People Bank of China cutting rates by 27bp’s.

The EURUSD rose as high as 1.4481 in the early hours of Monday’s Asian trading session as news of a crisis on Wall Street began to seep through – a 1.8% jump from Friday’s close. As the news of Lehman’s bankruptcy and Merrill’s takeover were confirmed at the European open the dollar rose against the Euro as the Eurozone equities opened sharply lower on the back of this news. However the day still had much more in store, AIG initially announced it was seeking $40Bn in capital to avoid getting downgraded by rating agencies, a number that got bumped up to $75Bn later in the day.

The Japanese Yen and Swiss Franc rose drastically as Risk aversion reigns in current market conditions. The Dollar Yen slumped 3.2% (From 108.00 to 104.50) yesterday as the Japanese yen continues to attract carry traders, and investors keen to offload their risky assets. Sterling continues to be strong against the Dollar, rising 1% yesterday to 1.8128 from 1.7936, Friday’s close.

A close eye to be kept on commodities, Crude drops away to $91.8/barrel as Hurricane Ike misses key Oil infrastructures in the Gulf of Mexico. Gold continues to be very volatile as prices rose on first news of Lehman’s troubles last week, peaking at $787/oz yesterday as investors seek it for it’s refuge nature on the same note as the Swissy.





Today's Key Issues (time in GMT):


12:30 CAD Manufacturing Shipments
12:30 USD Consumer Price Index (SPI)
13:00 USD Total Net TIC Flows
17:00 USD NAHD housing market index
18:15 USD Federal Open Market Committee Rate Decision
20:00 USD ABC Consumer confidence
The Risk Today:

EurUsd:
The pair is in a corrective phase, after confirming a slide from 1.6039 (July 15 High) at 1.3882. On Friday the pair crossed the 1.4475 level then suddenly dropped as low as 1.4090. The hourly chart clearly showing a dagger entry formation as the corrective phase comes to an end. Initial Upside resistance sits at 1.4289, and 1.4315 being the 23.6% retracement level from yesterday’s move acting as a clear signal for a strong bullish move, paving the way for 1.4450 – 1.4500 levels. On the downside we observe an initial support at 1.4205, and 1.4172 being the 50% retracement and strong support line.


GbpUsd:
The cable has confirmed it’s resumed bullish trend and is attempting to breach the 1.8000 level. Should the breakaway take place, the pair may further extend it’s bull run. A strong bullish triangle has formed since yesterday’s trading. On the up side initial resistance can be sought at 1.7960, and confirming the bullish trend at 1.8000.


UsdJpy:
Traders saw the JPY undergo a strong bullish session yesterday against the majors. The JPY appreciated almost 400 pips against the USD, the pair currently trading 104.45 levels. The recent 106.3 – 103.60 move sees a retracement to 104.65 – which is currently underway. Initial resistance is seen at 104.65, then 105.00. However, continued strong risk aversion pointing to 3 month support at 103.92, which would lead the way for 103.60.


UsdChf:
The strong bearish momentum on the pair highlights the Swissy’s safe haven attractiveness for investors in this current market. Initial resistance stands at 1.1155, then 1.2000. Short side support seen at 1.1095 then 1.1065, bearish trend seen to be strong as investors continue to revel in Swiss currencies rock steady status.



Resistance and Support:



By
Philippe Meyer
- ACM Advanced Currency Markets, Geneva, Switzerland
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Provided by ACM: http://www.ac-markets.com