Daily Forex Snapshots

Dollar Slides as Concern shifts from financials to Govt. Balance Sheet

September 22, 2008 7:03 PM CEST

G10 Advancers and Decliners vs USD

	Nok	2.22
	Chf	1.82
	Eur	1.45
	Dkk	1.43
	Sek	1.40
	Aud	1.03
	Jpy	0.99
	Cad	0.95
	Gbp	0.77
	Nzd	0.50

Global Indexes

Current Level

% Change

DJIA Index	11,195.70	- 1.69
S&P 500 Index	1,230.48	- 1.96
NASDAQ 100 Index	2,230.18	- 1.92
FTSE 100 Index	5,288.00	- 1.21
CAC 40 Index	4,259.50	- 1.46
DAX Index	6,170.00	- 1.24
SMI Index	6,920.00	- 1.47

World Markets

Current Level

% Change

Crude wti	108.30	+ 3.59
Gold	897.13	+ 2.71
Silver	13.33	+ 5.50
USD Index	76.72	- 1.23
VIX	31.70	- 1.15

Todays Calender

Estimates

Country / GMT

No Major Events Scheduled

Currency Tech

AUDUSD
R 3: 0.8694
R 2: 0.8534
R 1: 0.8403
CURRENT: 0.8309
S 1: 0.8011
S 2: 0.7803
S 3: 0.7675

EURJPY
R 3: 157.76
R 2: 156.99
R 1: 155.57
CURRENT: 154.31
S 1: 150.79
S 2: 149.01
S 3: 147.52

USDSGD
R 3: 1.4542
R 2: 1.4478
R 1: 1.4394
CURRENT: 1.4207
S 1: 1.4182
S 2: 1.4142
S 3: 1.4116

Market Brief

rose over 200 pips to the high 1.46 level, while the UsdJpy trades slightly lower at the mid 106 price area. The GbpUsd continues to build strength, up over 130 pips at the mid range of 1.84. Commodities carried last week's gains into today's trading, with oil up at 109 and gold at 894, testing 900 as a point of resistance. Equity markets are trading lower in the US and Europe, with the Dow down 200pts, regional and mid-sized banks are amongst the largest losers in stock trading as the outlook for their current market share may deteriorate with GS and MS as competitors. Bond yields indicate a bit of easing in regards to risk aversion, with the 2, 10, and 30yr wider across the curve. The 10yr yield is wider by 8bps, raising the current coupon to 3.88%, we still have a bit more room to go before we claim that interest markets have stabilized.

The ECB shows no signs of easing rates anytime soon, based on commentary released earlier. ECB member Stark stated that "The central bank cannot contribute to a solution of the problems by lowering rates." This is somewhat of a surprising statement following the recent data out of Germany showing economic growth rising at a much slower pace than expected The growth forecast have been lowered to 0.5% from 1.2% prev. this will make it a difficult environment for the ECB to be steadfast on monetary policy. The EurUsd is likely to build on recent momentum, we are looking for the pair to stay within the range of 1.45-1.48, in the near-term. Light data out of the UK following higher retail sales data, the cable is likely to see further upside as the market digests the Fed bailout plans.

US financial markets are moving towards a recovery after the recent plans by the Fed to purchase over $700bln in illiquid assets from ailing institutions. The dollar fell as expected, due to the trillion dollars of cash needed to restore liquidity is a major liability to the govt. balance sheet. Stabilization in the housing sector and a string of positive economic data out of the US, otherwise Traders will become increasingly pessimistic through Usd selling.

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Asian Session - $700bn Bailout

September 22, 2008 9:24 AM CEST

G10 Advancers and Decliners vs USD

	CHF	0.67
	EUR	0.67
	DKK	0.62
	NOK	0.61
	JPY	0.55
	SEK	0.53
	AUD	0.25
	CAD	0.14
	NZD	0.08
	GBP	-0.02

Global Indexes

Current Level

% Change

Nikkei 225 Index	12,090.59	+ 1.42
Hang Seng Index	19,521.97	+ 1.01
Shanghai Index	2,236.41	+ 7.77
FTSE 100 Index	5,323.60	+ 0.23
CAC 40 Index	4,331.90	+ 0.16
DAX Index	6,193.54	+ 0.06
DJIA futures	11,270.00	- 0.74

World Markets

Current Level

% Change

Gold	869.92	- 0.41
Silver	12.68	+ 0.35
VIX	32.07	- 3.12
Crude wti	105.20	+ 0.62
USD Index	77.44	- 0.30

Todays Calender

Estimates

Country / GMT

Retail Sales m/m (July)	0.2%	0.5%	CA / 12.30
Retail Sales less Autos m/m (July	0.4%	1.4%	CA / 12.30

Currency Tech

Market Brief

The Usd was weaker in the Asian session, as the US Treasuryʼs bailout plan consequence is viewed with uncertainty. The EurUsd, in choppy trading, ranged from 1.4440 to 1.4560, while the UsdJpy dropped from 107.40 to 106.43. Carry trades came under pressures, as risk aversion was still the name of the game. The EurJpy slipped to 154.00 and the NzdJpy traded down to 72.73. Participants are still warys of EM and high yielders, despite weakness in the Usd. Crude is well trenched above the $100bll at $105.36bll and VIX is down slightly at 32.00. Regional Asian equity markets are in the green, following Fridayʼs Wall Street rally and European stock futures are poised to open higher (however US markets are looking to correct with futures trading lower).

The US Treasuryʼs plan was debated and adjusted over the weekend. The current plan has the US government purchasing up to $700bn in mortgage related assets. So far, the purchases will be limited to financial institutions with significant operations in the US (a point causing much irritation). US Senator Schumer stated that the schedule is for Congress to vote on the legislation this week and have the legislation to be given to President Bush by Friday. How this bailout will play out in the FX markets is still very much open for interpretation. Generally monetary rescues are Usd negative, while fiscal rescues are Usd Positive. As the plan stands, it should be viewed as a fiscal bailout and therefore Usd positive. However, that is not what we are seeing in the markets currently. One explanation is that the massive scale of the bailout would cause treasury yields to rise and, therefore, put additional stress on the already fragile US economic conditions.

With no major data releases scheduled today, markets will be watching Trichetʼs speech, developments around the bailout plan & equity markets levels. The situation remains fluid and highly volatile.

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