Daily Forex Snapshots

US Session: Strong Rally in Risk Appetite Pressures the Dollar as Traders Watch Economic Data

May 29, 2009 5:19 PM CEST

G10 Advancers and Decliners vs USD

	Nzd	2.49
	Nok	2.12
	Aud	1.92
	Cad	1.52
	Chf	1.52
	Eur	1.36
	Jpy	1.34
	Dkk	1.35
	Sek	1.32
	Gbp	0.83

Global Indexes

Current Level

% Change

DJIA Index	8,411.45	+ 0.09
S&P 500 Index	908.22	+ 0.15
NASDAQ 100 Index	1,755.77	+ 0.23
FTSE 100 Index	4,440.87	+ 1.22
CAC 40 Index	3,280.04	+ 0.50
DAX Index	4,942.91	+ 0.20
SMI Index	5,347.28	- 0.06

World Markets

Current Level

% Change

Crude wti	66.23	+ 1.77
Gold	974.83	+ 1.60
Silver	15.40	+ 1.62
USD Index	79.63	- 1.11
VIX	31.26	- 1.30

Todays Calender

Estimates

Country / GMT

No Major Events Scheduled

Currency Tech

AUDUSD
R 3: 0.8152
R 2: 0.8097
R 1: 0.7929
CURRENT: 0.7926
S 1: 0.7703
S 2: 0.7630
S 3: 0.7451

EURJPY
R 3: 138.57
R 2: 137.40
R 1: 135.57
CURRENT: 135.03
S 1: 131.50
S 2: 130.73
S 3: 129.75

USDSGD
R 3: 1.4748
R 2: 1.4665
R 1: 1.4583
CURRENT: 1.4470
S 1: 1.4320
S 2: 1.4270
S 3: 1.4167

Market Brief

The dollar sold off against the G10 early in the session, with the commodity currencies leading the rally. The EurUsd surged over 200pips trading at the mid 1.41 level, while the UsdJpy gave up most of the prior session’s gains sinking 137pips to 95.50. The GbpUsd broke the 1.6050 resistance point, in pursuit of a new target of 1.62 as higher risk appetite and better than expected economic data in the UK supported the move. Equity markets are mostly flat with the Dow higher by less than 1% or 12pts, and the DAX also moderately unchanged hovering near yesterday’s close of 4392. Bond yields decreased across the UST curve with the 10 and 30yr off 7 and 4bps in a volatile weak of trading. Commodities rose sharply across all sectors in energy, metals, and agriculture, particularly oil and gold which both experienced gains in excess of 1% bringing the price of each to $65bbl and $978oz respectively.

Following a wave of economic announcements in the US, the trend of dollar weakness remains the central theme in intraday trading. Investors are shifting away from secure assets and looking to reallocate capital into higher yielding assets i.e. equities and commodities. The Aussie, Kiwi, and Cad seem to be direct beneficiaries of this move, also the Nok considering the richness of oil in the Baltic Sea. US GDP was revised upward from -6.1% to -5.7% but failed to meet expectations of -5.5%. In addition, Univ. of Michigan Consumer Confidence came in better than anticipated at 68.7 vs. 68.0 adding more credence to the green shoots theory. Chicago PMI did disappoint at 34.9 from 40.1 previously, but it seems that optimistic investors are not reacting adversely to this particular data point. In the UK, Nationwide home prices surpassed estimates of -13.7% at -11.3% lending to the idea that the housing sector may be stabilizing in the region. The housing data combined with a broad based consensus that the Sterling is undervalued at 1.65 bolstered the currency into a new range of 1.60.

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Asian Session: Final US Treasury Auction Concluded without Incident

May 29, 2009 11:10 AM CEST

G10 Advancers and Decliners vs USD

	NZD	1.64
	AUD	1.53
	CAD	1.17
	GBP	1.11
	SEK	0.85
	NOK	0.83
	DKK	0.62
	EUR	0.61
	JPY	0.59
	CHF	0.47

Global Indexes

Current Level

% Change

Nikkei 225 Index	9,522.50	+ 0.75
Hang Seng Index	18,171.00	+ 1.58
Shanghai Index	2,632.93	+ 1.71
FTSE 100 Index	4,439.18	+ 1.17
DAX Index	4,988.57	+ 1.12
SMI Index	5,383.45	+ 0.61
DJIA futures	8,404.00	+ 0.23

World Markets

Current Level

% Change

Gold	973.05	+ 1.41
Silver	15.46	+ 2.04
VIX	31.67	- 2.13
Crude wti	65.54	+ 0.70
USD Index	80.07	- 0.55

Todays Calender

Estimates

Country / GMT

"Flash" HICP, % y/y May	0.2	0.6	EUR / 09.00
Unemployment rate, % Apr	9.1	8.9	EUR / 09.00
ECB President Trichet speaks on “The role of centr	--	--	EUR / 09.15
KoF leading indicator May	-1.80	-1.86	CHF / 09.30
Current account (BOP), C$ bn 1Q	-10.5	-7.5	CAD / 12.30
GDP, % q/q saar Q1-P	-5.5,-2.5	-6.1,-2.6A	USD / 12.30
GDP price index, % q/q saar Q1-P	2.9 (2.1)	2.9 (2.1)	USD / 12.30
Chicago PMI, index May	42.0	40.1	USD / 13.45
Michigan consumer sentiment May-F	68.0	67.9 P	USD / 13.55

Currency Tech

Market Brief

The Usd was weaker in the Asian session, as the final US Treasury auction concluded without incident sparking risk appetite. The EurUsd traded up to 1.4022 from 1.3907, while the UsdJpy traded between 98.90 and 96.26. The GbpUsd regained its bullish momentum trading back above 1.6050. The final auction of $26bn 7yr notes ended the week where $101bn of new supply hit the streets. The auction was inline with expectations, with indirect bidder’s percentage and bid-cover ratios similar to past results. The uneventful auction combined with higher demand for US durable good (at 1.9%) was celebrated by traders. Equity markets in Asia are largely in positive territory, following Wall Street's strong finish yesterday. With US Treasury yields rising (10yr above 3.50%) and with the greenback continually under pressure, there is a sense that global investors want a higher risk premium to hold USD denominated assets. It's important to mention that the rising yield at the long end is now pushing mortgage rates higher and threatening to trample on US' fragile “green shots”. In other news, the media is reporting that GM is planning to file for bankruptcy on June 1st (widely expected). Overall traders are now clearly focused on credit markets, which are showing renewed signs of strains and FX traders should be ready for a sudden and rapid bout of deleveraging if tensions persist.

In Japan, Key CPI and industrial production data both surprised to the upside. The National headline CPI fell by only 0.1%y/y, a figure that might help ease deflation fears . However, the BoJ is well aware that the country is not in the clear just yet . Industrial production managed a 5.2%m/m expansion, pushing the y/y figure to -31.2%y/y, slightly better than expectations. The unemployment rate, however, increased to 5 .0 % from 4.8% previously, the highest level in over 5 1/2 years. And as the government has expressed along side recent economic upgrades, without a recovery in the labor markets the downside risk to the economic is still a reality.

Today, US preliminary Q1 GDP, Chicago PMI and the University of Michigan confidence index come out and as the markets are watching for more proof of green shots, these will be critical.

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