Overall: With little economic data released at the start of the week, traders were focused on credit markets. An enormous risk-aversion move was seen as Wall Street began trading as investors remained concerned over the plan’s ability to mitigate the decline of the housing market and loss of trust now permiating through out the banking system. Stocks made a small comeback towards 12:00 EDT but three hours later were making fresh lows. Equity markets have now declined just over 30% from the October 11, 2007 highs. The conomic calender in the U.S. is relatively light this week, although Fed Reserve Chairman Ben Bernanke will speak about the economic outlook and financial markets at 13:15 EDT on Tuesday. Also that day, the minutes of the last FOMC meeting in September will be released at 14:00 EDT. G7 ministers are scheduled to begin a meeting on Thursday.
The Euro (Eur/Usd) is trading at a 14-month low after it fell in the overnight session, extending losses of 750 pips from last week, as the deepening credit crisis prompted European governments to pledge bailouts for troubled banks. The pair continued its decline in N.Y. as the market grew strongly risk-averse.
The Pound (Gbp/Usd) has had an active start to the trading week, trading in a 200-pip range since the start of last night’s Asian session. During the early hours of the Asian session, the pair moved in a tight 40-pip channel, but started to move much lower as the session came to a close and continued into European trading. Once in N.Y., the pair continued its decline once stocks began to sell strongly. The Boe will announce its Official Bank Rate at 07:00 EDT on October 9; the bank is now expected to make a 25 basis point cut to 4.75%.
The Aussie (Aud/Usd) tumbled 250 pips during the overnight session as the market speculated on a 50 basis point cut from the RBA, which is scheduled to make its decision at 23:30 EDT on October 6. During the Asian session, the pair ran out of pivot points, and continued to struggle to find a bottom heading into the U.S. session. Once in N.Y., the pair continued trading at the lowest level seen in the last two years.
The Cad (Usd/Cad) declined overnight as crude oil futures fell nearly 4.0%. The pair reached its highest level since may 2007 as oil declined nearly 6% on the day on speculation that a slowdown in the global economy would crimp demand.
The Swissy (Usd/Chf) has started the new trading week continuing to move higher, building on gains established last week. The pair has gained 100 pips and is tested the weekly 100 simple moving average during the Asian session. The pair enters the U.S. session trading at the highest level seen since December 2007 and continued to gain as equities sold off strongly. The economic calendar for Switzerland is very light this week, with only employment data scheduled to be released on Friday.
The Yen (Usd/Yen) dropped more than 250 pips since the start of the new trading week, and has traded in a wide 370-pip range. The pair continues to have downside momentum to trade at the lowest level since May. The Japanese yen was the best performing currency in September and continues to look incredibly strong, as equity markets plummet and traders exit carry trades. The pair fell an additional 150 pips within 30 minutes of Wall Street’s opening. The BoJ will release its decision regarding the Official Call Rate sometime during Tuesday’s Asian trading session.
Written by TheLFB Trade Team, © 2007-2009 LFB Services, LLC. All rights reserved. You can join the LFB via http://www.lfbforex.com
