Daily Forex Snapshots

US Session: FX Price Action Calm Following Friday’s Moves Canada Seeing Weakness

August 10, 2009 10:24 PM CEST

G10 Advancers and Decliners vs USD

	Nzd	0.61
	Jpy	0.46
	Aud	0.01
	Eur	-0.02
	Dkk	-0.32
	Chf	-0.39
	Cad	-0.66
	Gbp	-1.31
	Sek	-1.41
	Nok	-1.57

Global Indexes

Current Level

% Change

DJIA Index	9,306.36	- 0.68
S&P 500 Index	1,003.43	- 0.70
NASDAQ 100 Index	1,984.68	- 0.78
Nikkei 225 Futures	10,510.00	+ 0.38
Hang Seng Futures	20,817.00	+ 2.44
FTSE futures	4,680.00	- 0.48
SMI Futures	6,014.00	- 0.27

World Markets

Current Level

% Change

Crude wti	70.33	- 0.83
Gold	944.30	- 1.12
Silver	14.35	- 1.85
USD Index	79.32	+ 0.44
VIX	25.57	+ 3.27

Todays Calender

Estimates

Country / GMT

Currency Tech

AUDUSD
R 2: 0.8695
R 1: 0.8519
CURRENT: 0.8392
S 1: 0.8238
S 2: 0.8125

USDCAD
R 2: 1.1012
R 1: 1.0935
CURRENT: 1.08317
S 1: 1.0633
S 2: 1.0575

EURJPY
R 2: 139.25
R 1: 138.70
CURRENT: 138.23
S 1: 135.97
S 2: 134.30

USDMXN
R 2: 13.305
R 1: 13.070
CURRENT: 12.918
S 1: 12.820
S 2: 12.620

Market Brief

Following Friday’s positive US economic data and dollar movement, investor sentiment turned risk-averse during intraday trading. The EurUsd declined 64pips, testing intraday support at 1.41, while the UsdJpy appreciated 54pips to the bottom-end of 97. The GbpUsd fell 237pips, pressuring the cable to just above 1.64. Equity markets fell in the U.S. but rose in Europe, with the Dow declining .57% or -53.58pts and the FTSE rising by .87% or 41.03pts. The yield curve was slightly steeper with 10 and 30 year bonds up 9bps and 8bps respectively. Commodities were lower across the board with oil down $.55bbl at $70bbl and gold $12oz lower at $947oz.

Price action was somewhat muted ahead of Wednesday’s FOMC meeting, as investors left high yielding assets and moved into safe haven currencies such as the yen. The FOMC is expected to keep the Fed Funds rate unchanged at 0.25% and not expand its treasury purchase program beyond the currently scheduled $399bln. Statistics Canada reported a 44,500 job loss which was nearly three times greater than what economists expected at 15,000. Canadian unemployment was 8.6 versus estimates of 8.8%, suggesting that in general, economists underestimated the number of people who stopped actively seeking employment.

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Asian Session: Correlation in Question

August 10, 2009 9:49 AM CEST

G10 Advancers and Decliners vs USD

	NOK	0.43
	AUD	0.29
	CAD	0.13
	JPY	0.12
	NZD	0.10
	EUR	0.06
	DKK	0.02
	CHF	0.01
	SEK	-0.17
	GBP	-0.35

Global Indexes

Current Level

% Change

Nikkei 225 Index	10,524.26	+ 1.07
Hang Seng Index	20,973.72	+ 1.93
Shanghai Index	3,249.79	- 0.33
FTSE 100 Index	4,714.32	- 0.36
DAX Index	5,437.78	- 0.38
SMI Index	6,014.65	- 0.19
DJIA futures	9,322.00	- 0.03

World Markets

Current Level

% Change

Gold	956.10	+ 0.12
Silver	14.68	+ 0.37
VIX	24.76	- 3.54
Crude wti	70.82	- 0.15
USD Index	78.84	- 0.17

Todays Calender

Estimates

Country / GMT

RICS housing market survey, price balanceJul	-4	-18	GBP / 23.01
BRC retail sales monitor, total sales, % y/y	--	3.2	GBP / 23.01

Currency Tech

Market Brief

The Greenback rallied on Friday, erasing its huge losses from the beginning of the week, after dropping to a new 2009 low against most major currencies. The comeback of the US Dollar was supported by US unemployment data and nonfarm payrolls. Even though employment market is still weak the US nonfarm payrolls fell just by 247K below the 320K expected. The bigger surprise was the drop in unemployment rate which fell down to 9.4% from 9.5%, being the first drop in unemployment since April 2008, while most analysts forecasted the rate to jump by 0.1% to 9.6%.

The first reaction on the employment data was sending the dollar lower, because as we used to see, good economic data boosts risk appetite and traders move towards high yielding currencies and sell the US Dollar. This time USD ignored risk sentiments and responded positively on the released data, arguing that investors are possibly back to fundamentals, where positive data in the US pushes the dollar higher and vice versa.

Friday’s employment data generated speculations that the US will be leading the way to economic recovery outperforming other developed countries, and reinforcing the expectations that Fed will start changing its monetary policy and possibly raise its current funding rate from 0 – 0.25% by the beginning of 2010.

Is it possible the correlation between stocks/high yielding currencies/risk appetite and US Dollar begins to delink? Are we back to Fundamentals? Has the Dollar Bottomed? Those questions could be on everyone’s mind now, but in my opinion it’s still early to judge! We have to watch the market closely this week and see how it will respond to coming data.

Other important events last week was ECB and BOE meeting, where both decided to keep their interest rate unchanged at 1% and 0.5% respectively. There was nothing surprising in ECB’s press conference regarding exit strategies, interest rates, or monetary policy, but the surprise came from BoE which decided to extend the asset purchase program by 50 Billion Pounds, as recessions was deeper than expected. This had put pressure on the pound and led the GBP/USD pair to drop approximately by 200 pips.

This week Focus will turn on FOMC meeting. Even nothing is expected to change regarding interest rate or the QE program, but we’ll see whether Mr. Bernanke’s tone will be more hawkish this time, especially after the Job data released on Friday. Other Important data from the US to watch closely this week would be trade balance, retails sales, CPI, and consumer confidence. From the Eurozone, the Q2 GDP will be released and expected to show that economic contraction had slowed, we’ll also have the EU CPI. From UK, employment report will be released, and the Bank of Japan will be meeting for the rate decision where no changes are expected.

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