Daily Forex Snapshots

US Session: Investors Square Positions Ahead Of FOMC Rate Decision

August 12, 2009 7:55 PM CEST

G10 Advancers and Decliners vs USD

	Nok	2.22
	Sek	1.65
	Cad	1.25
	Nzd	0.88
	Aud	0.57
	Chf	0.55
	Dkk	0.49
	Eur	0.49
	Gbp	0.29
	Jpy	-0.09

Global Indexes

Current Level

% Change

DJIA Index	9,375.52	+ 1.45
NASDAQ 100 Index	2,004.21	+ 1.75
S&P 500 Index	1,008.04	+ 1.38
Nikkei 225 Futures	10,420.00	+ 0.19
Hang Seng Futures	20,484.00	+ 2.75

World Markets

Current Level

% Change

Crude wti	4,714.00	+ 1.33
Gold	950.38	+ 0.45
Silver	14.60	+ 1.85
USD Index	78.77	- 0.48
VIX	25.49	- 1.92

Todays Calender

Estimates

Country / GMT

No Major Events Scheduled

Currency Tech

AUDUSD
R 2: 0.8520
R 1: 0.8470
CURRENT: 0.8198
S 1: 0.8239
S 2: 0.8125

USDCAD
R 2: 1.1345
R 1: 1.1225
CURRENT: 1.1066
S 1: 1.0865
S 2: 1.0758

EURJPY
R 2: 139.25
R 1: 138.70
CURRENT: 134.44
S 1: 134.30
S 2: 132.80

USDMXN
R 2: 13.305
R 1: 13.070
CURRENT: 13.12
S 1: 12.868

Market Brief

Global markets seemed indecisive of whether they were on the path to recovery ahead of this morning’s FOMC report. The EurUsd rose 60pips, finding support at 1.42, while the UsdJpy rose 30pips to the lower-range of 96. The GbpUsd rose 63pips, lifting the cable slightly above 1.65. Equity markets rose in the U.S. but fell in Europe, with the Dow rising 1.37% or 125pts and the FTSE declining by 1.08% or -50.86pts. The yield curve is expected to continue steepening although it was relatively unchanged today, with 10 and 30 year bonds higher by 2 and 3bps respectively. Commodities were positive across the board with oil up $1.29bbl at $70.75bbl and gold $2.5oz higher above $950oz.

Euro zone industrial output slipped to -0.6% in June compared with estimates of 0.3, suggesting that recovery in the region will be slow and drawn out. Disregarding the negative data, the euro rose 54pips, breaking through resistance at 1.42; economists still anticipate a recovery in the industrial sector by year end. In the UK, the BoE said it may miss its inflation target amid a “slow and protracted” economic recovery. With predictions of tight credit conditions and excessive debt hindering improvements in the private and public sectors, Mervyn King said it’s quite likely that inflation will dip under 1% by year end. The unemployment rate in the UK rose to 4.9 in July versus 4.8 in June. ILO unemployment rose 220k, taking the jobless rate up to 7.8% in June versus expectations of 7.7%; demand for sterling was mostly flat, rising 75pips midday. Despite Norwegian retail sales falling by -2.5 in July versus expectations of -0.4, a positive outlook from the central bank drove the Nok up 115pips to 6.10 during intraday trading. The Norges Bank did not change its rate from 1.25%, even though inflation is in line with expectations and unemployment was lower than projected. Overall the Norges Executive Board feels it’s too early to determine whether the economy has turned around, warranting a change in interest rates; however recent developments are contributing to a recovery story in the medium term.

Analysts expect uplifting statements following today’s FOMC report at 2.15pm EST. The Fed is not expected to change its funds rate or Treasury purchase program from $300bln; however expanding purchases could spark a change in investor sentiment to risk aversion, possibly supporting the dollar. Whether or not the dollar will benefit from positive risk sentiment is an outstanding question and more in line with expectations for more normalized markets. Trade Balance in the United States was -27.0 from -26.0 versus expectations of -28.5. A near positive Canadian trade balance was reported -0.1 in June versus lower forecasts of -0.8 and up from May’s reading of -1.4. Midday rallies in US equity markets have sent the Cad over 140pts higher near 1.087

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Asian Session: UK Inflation Report & FOMC

August 12, 2009 10:53 AM CEST

G10 Advancers and Decliners vs USD

	JPY	0.58
	CHF	-0.20
	SEK	-0.26
	NOK	-0.35
	EUR	-0.37
	DKK	-0.39
	GBP	-0.49
	CAD	-0.49
	NZD	-1.11
	AUD	-1.14

Global Indexes

Current Level

% Change

Nikkei 225 Index	10,435.00	- 1.41
Hang Seng Index	20,444.14	- 2.99
Shanghai Index	3,113.72	- 4.65
FTSE 100 Index	4,640.97	- 0.65
DAX Index	5,270.28	- 0.29
SMI Index	5,895.13	- 0.92
DJIA futures	9,176.00	- 0.43

World Markets

Current Level

% Change

Gold	942.32	- 0.40
Silver	14.21	- 0.85
VIX	25.99	+ 4.00
Crude wti	68.96	- 0.70
USD Index	79.30	+ 0.19

Todays Calender

Estimates

Country / GMT

BoE publishes Q3 Inflation Report	--	--	GBP / 09.30
Norges Bank interest rate announcement, %Aug	1.25	1.25	NOR / 12.00
Claimant count, change, KJul	26.0	23.8	GBP / 08.30
ILO unemployment rate, %Jun	7.7	7.6	GBP / 08.30
Average earnings growth, % 3m y/yJun	2.2	2.3	GBP / 08.30
Core average earnings growth, % 3m y/yJun	2.5	2.6	GBP / 08.30
Industrial production, % m/m (y/y wda)Jun	0.5, -15.9	0.5,-17.0	EUR / 09.00
Int'l merchandise trade, C$ bnJun	-0.5	-1.4	CAD / 12.30
Trade balance, $ bnJun	-28.5	-26.0	USD / 12.30
Budget balance, $ bnJul	-131.0	-102.8	USD / 12.30
FOMC rate decision, %	0.00-0.25	0.00-0.25	USD / 18.15

Currency Tech

Market Brief

The USD traded range bound against most major currencies yesterday, as traders will likely remain cautious ahead of the FOMC decision later today. Risk trades continued to come under pressure as traders continue to reduce risks ahead of the FOMC. US Treasuries continued to trade higher, with 10yr yields falling back to pre NFP levels-11bps at 3.668%. Equities in the US dropped most in a month, with Standard and Poor’s 500 falling 1.3% to close below the 1,000 support level at 994, after JP Morgan Chase & Co. said credit losses may overwhelm capital at the biggest bond issuer “MBIA”, and CIT Group delaying its earnings report.

Commodity currencies dropped most against the US Dollar. The CAD dropped for the 5th consecutive day, as crude oil fell below $70 and the figures in Canadian housing starts were disappointing. The Australian Dollar also had a bad performance yesterday. Despite the National Australian Bank report, which showed improvement in business confidence and RBA's favorate measure of wages, the ABS Wage Price Index, increasing by 0.8% QoQ in the June quarter, the AUD/USD pair broke below the 0.83 level.

The EURUSD kept hovering around 1.4150 level against the USD even though Germany’s CPI had the first annual drop in 22 years. The pound also traded in a tight range against the Dollar, awaiting today’s Bank of England inflation report that could possibly threaten the economy with a prolonged period of deflation. We expect the tone of the MPC's Inflation Report to be downbeat and GDP forecast to be downgraded, reflecting weaker outturns in H1 and the effects of the stronger exchange rate.

The Yen was the best performer yesterday, rising against all major currencies, as risk aversion improved, with stocks falling worldwide and China released worse than expected reports regarding exports and industrial production. Also out of China, some disturbing comments for the growth bulls. The Ministry of Commerce says domestic demand can't offset export drop Aug 12 (Reuters).

Trader’s eyes today will be on the FOMC meeting. Last week, nonfarm payrolls showed better than expected figures, which reignited the market’s speculation that the Fed will tighten its monetary policy earlier than previously anticipated. Even though interest rates are expected to stay at their current levels, focus will be on a couple of points: Will the Fed extend the $300 asset purchase program? Will there be any discussion about raising interest rates in the near future? Will the Fed change upgrade their outlook on the economy? We expect the FOMC to leave rates unchanged with the accompanying statement staying that rates will remain low "for an extended period". We also expect that the members will not expand their asset purchase programs, considering progress in credit conditions. The assessment of incoming economic data will be the key market mover. A signal of more confidence should be USD positive (given the USD reaction to last week’s NFP).

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