A Slow Asian Session

The Euro (Eur/Usd) strengthened 100 pips yesterday; it seems the market found a temporary bottom for all the recent dollar strength. Yesterday, early in the session the euro looked like it wanted to break under the first support level, but by the end of the day, the pair closed at TheLFB R2. In the Asian session, the euro bounced from the high of the previous session, now losing 20 pips.

The Pound (Gbp/Usd) managed to close for the first time in 13 days of trading on the positive side. This happens, because it seems the dollar had a technical bounce lower, but the trend may start once again as more bad news surrounding the U.K. economy might hit the market.

The Aussie (Aud/Usd) wants to show throughout its price action that it has found a temporary bottom. No matter what happened in the past few days, the aussie could not make lower lows showing the support area could hold for a while. During the Asian trading hours, a news release showed the economic conditions in Australia have slightly improved in the last month.

The Cad (Usd/Cad) bounced yesterday from the resistance of the range it is trading in for this past week. The Canadian dollar was strengthened by two fundamental factors, a very strong wholesale release, together with gains in the crude oil market. In the Asian session, the pair is floating around the neutral pivot point.

The Swissy (Usd/Chf) fell 70 pips in the last trading day even in the European session the pair broke the resistance level. However, it seems that the dollar did not have the strength to hold that valuation and was sold lower during the rest of the trading day. In the Asian session, the swissy made a quick test at the low of the previous session, and now, it seems to have bounced higher.

The Yen (Usd/Yen) had been trading in a downtrend for the last 3 days, due to global equities trading in the red. The yen will soon reach the 4h trend-line that holds the pair since the end of July. In the last trading day, the yen had lost 50 pips, but could not break lower of TheLFB S2.

Equities down as inflation and credit losses panic investors

Current Futures: CAC -119.00, DAX -146.50, FTSE -124.50

Asian trade: These last two days, the equity markets stayed on the negative side by the credit crunch related problems. Adding to those concerns, the market has to face a new wave of problems including inflation and a housing market that looks as if it cannot find a bottom.

Markets are crippled by rumors that the credit losses may widen and some banks may even be taken out. As the housing market slows, an even a bigger number of defaults hit the market, just adding more losses to the bank’s sheets. A report showed yesterday that the number of new houses declined to the lowest point in the last 17 years, while at the same time, inflation experienced by producers reached the highest level since 1981. This data can be a confirmation that the economic slump may continue well beyond the fourth quarter, as previously anticipated.

Because of the latest developments in the financial markets, Asian shares are trading on the negative side. The recent selling pressure led the Asian stock into having the lowest valuation since July 2006. The Nikkei declined 85.49 points (0.66%) to 12,779.56, because investors fear the U.S. demand might slow in the coming months. The Australian S&P/Asx rose 20.80 points (0.43%) to 4,887.20.

Gold rose as the dollar dropped on speculation a slumping U.S. economy will prevent the Federal Reserve from raising borrowing costs. Bullion for immediate delivery rose $4.80 (0.59%) to $821.60.

Crude oil rose for a second day, as a weakening dollar prompted investors to purchase commodities. Crude oil for September delivery gained $0.45 (0.39%) to $114.98.

Previous Wall Street trade: Lingering concerns regarding mortgage giants Fannie Mae and Freddie Mac dragged down the financial sector and the broader market again on Tuesday. A report on producer prices that came in twice as high as expected, along with a report on new housing that said starts remained at a 17 year low also damaged investor's sentiment. Shares in the GSE's fell 2.59% and 4.78% respectively after falling over 20% during Monday's trading. From a technical viewpoint, renewed financial concerns seems to have turned the tide on the S&P's 8% rally off the low at 1200.97 made on July 15. Today's closing price is well below the .386 Fibonacci retracement of the May to July sell off, a level which had previously held as support. The S&P also closed for a second day below a daily support trend line established between July 15 and 28. An extension of this line had acted as support on three separate occasions during this last 8% move to the upside.

Previous European trade: New worries hit investors after the rumor that the two largest U.S. home finance companies may need to be saved by the Treasury. As the credit crunch deepens, financial companies will have to write-down more bad credit, shedding the bank’s profits and taking some other financials a step closer to bankruptcy. This news made the financial shares unattractive to investors, causing them to move lower. The U.K. FTSE fell 129.80 points (2.38%) to 5320.40. The German DAX fell 150.45 (2.34%) to 6282.43. The DJ Stoxx 600 fell 7.24 points (2.52%) to 279.71.

Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com

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