Live Forex Market Analysis

The US front end is being well supported in Asia, with 2 year note yield now down 5bps to 2.76%. We wonder if the recent WSJ article entitled "Oil Retreat Takes Pressure Off Fed" is behind the move. The article argues that the recent retreat in the price of oil will allow the Fed more breathing room to leave rates on hold, and therefore allow the US economy to stabilise before hiking. This line of thought would not sit well with some of the Fed Presidents who of late have been mounting a hawkish campaign to have rates lifted sooner rather than later. Also infaltionary pressures and expectations having gained traction, which seems to be case globally, are notoriously difficult to stop. The USD pairs have not reacted as yet.

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Tags: g7

An intersting article here by Irwin Kellner with some ideas on how the US can get out of its current economic predicament.

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Tags: economicis

Japan"s trade surplus for June dived 89% To Y139bn driven lower by r ecord oil prices and Japan"s slumping terms of trade. Exports fell 1.7% y/y to June (exports to the US slumped 15.4%) while imports surged 16.2%, their fastest gain in a year. Japan"s reliance on exports to help support flagging domestic demand has been well documented over the years, so the latest fall in exports, the first since November 2003, is particularly worrying. If export weakness is sustained (likely given the dour Beige book assessment overnight), then recession looks more likely in the second half of 2008.

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Tags: jpy

Although something of a wave of excitement came over me when we finally managed to break free of the 200 day MA during the past 48 hours we now have two more hurdles to take in our stride:
1. The Feb and June highs just above 108.20/40; and
2. The 200 Week Moving Average which also comes in around 108.50/60. (i will include a weekly chart tom.)
When you add both of those together, if USD/JPY gets through 108.20/60 region, it is probably going to go to 110 at a minimum and 112-114 best case. Given the amount of congestion we are going to run into 108.20/60 it is worth squaring longs here and waiting for a break above 108.60 before jumping back in. If the desire of the market to take USD/JPY higher remains, we could see some 106/108 for a few days and i would suggest buying closer to 106 and selling when it gets back near 108 and going with the break of 108.60. More...

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Tags: fx , technicals , usdjpy

The high that fell just short of 1.6000 a few days back is potentially a very significant failure as it has opened the way for the sub 1.5400 levels that i have been harping on about for the past two weeks. Sellers should now have come down to above 1.5800 and for those of us that get excited about moving averages, well the 5 day looks like it has turned down nicely and crossed the 15 day which should see us test 1.5600 at least. Not a big call i know, sorry.
The reaction at 1.5600 will be interesting to watch and will help us determine just how the market is thinking re the EUR/USD. A bounce back to 1.5800 would indicate reasonable buying interest still out there and slow the move lower, whereas if we find little interest there we may also struggle to stop once we get to 1.5400.
Best idea is to cover some shorts at least ahead of 1.5600 and go with the break when it happens, or wait for a bounce back towards 1.5800 before re-entering shorts.
Overall, be patient and wait More...

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Tags: fx , technicals , eurusd

Ouch seems like the right word to describe the sharp move lower in Gold and Silver during the past few days. Gold has fallen from around 975 to 920 in two days, over 5%. It reminds me of how the AUD/USD usually reacts when coming off! It looks like we are now on target to test the support at 910. Given the severity of the fall, i am sure that sellers are lining up ahead of 950 once more and i would be surprised if we did not see 850/870 tested before deciding whether to head back up or move lower to test 775. Lets not get ahead of ourselves though, same story as yesterday, lower stops on shorts from above 980 to above 950 now with a view to adding to shorts on bounces above 935.

Silver seems to be leading the way a little at the moment, and just seems to be one step ahead of gold in all the moves. If Silver stays true to form we should see it test 16.50 a day before Gold manages to test 870, just something to keep an eye on. Stops on shorts should remain above 18.75 for the More...

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Tags: commodities , technicals , gold , silver