GFT Daily Market Commentary

September 30, 2008

Forex Market Commentary for October 1, 2008 by Cornelius Luca

GFT Daily Market Commentary

The dollar surged across the board on Tuesday on expectations that the House of Representatives will actually pass the TARP as early as Thursday. The equity indices recovered nicely after being obliterated a day earlier. Do we still need a TARP? Illiquid market conditions on the last day of September and of the third quarter exacerbated the move.  The good US reports on confidence and Chicago PMI were nice but irrelevant, since the surveys were taken before the most recent financial meltdown. But the increase risk to the Eurozone should hurt the euro in the medium term. Following some early strength, the dollar should correct lower. Keep an eye on the Eurozone, UK and US manufacturing PMI.

Euro/dollar

The euro/dollar fell sharply to reach an 18-day low on Tuesday and my model remains short.  The pair is likely to bottom early and then to attempt to recover briefly.
 
Immediate support is at 1.4010. The next level is 1.3935. A distant pivotal low is at 1.3883. 
 
Good resistance is seen at 1.4210. The next level is 1.4275. Above 1.4335, resistance now follows at 1.4540.

Oscillators are mixed.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Dollar/yen

Dollar/yen reversed aggressively from a four-week low after holding above 103.55 and avoiding the risk of forming a massive head-and-shoulders formation, and my model promptly went long. The short-term outlook is only mildly bullish, as the upside looks limited.
 
Immediate resistance is at 106.75 from another 50-point pivot, which targets 106.25 and 107.25. The next level is 107.95 from a 50-point pivot, which targets 107.45 and 108.45.

Good support is now at 105.60 from a 50-point pivot that targets 105.10 and 106.10. Further support is 104.50 by a 50-point pivot, which targets 104.00 and 105.00.   

Oscillators are rising.

NEAR-TERM: Mixed to slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Mixed

Sterling/dollar

Sterling/dollar fell further on Tuesday, nailing a two-week low, and my model remains short.  The downside is only mildly and early favored, as the pair is heavily oversold and needs to recover. 
 
Initial support is at 1.7760. Below 1.7710, support is at 1.7805. This is followed by 1.7540.   A distant pivot low is at 1.7448.
 
Initial resistance is at 1.7916. Good resistance follows at 1.8060. Distant resistance is at 1.8205. 

Oscillators are falling.

NEAR-TERM: Mixed to slightly bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Dollar/Swiss franc

Dollar/Swiss franc exploded higher on Tuesday to the highest levels seen since September 19. My model remains long. The initial bias is bullish, but the pair is overbought and the risk is lower.  
 
Initial resistance now comes at 1.1250. The next level is 1.1279.  A key pivot high lies at 1.1417. 
 
Immediate support is seen at 1.1160. Below 1.1090, support is now pegged at 1.0920. Only a break below 1.0845 would turn the medium-term outlook negative, but this is unlikely.
 
Oscillators are rising.

 
NEAR-TERM: Mixed to slightly bullish
MEDIUM-TERM: Mixed  
LONG-TERM: Bullish

New York Session – September 30, 2008 4:31 PM

September 30, 2008

The buck extended gains against the majors in NY trading as hope that the TARP bailout package will be resurrected had stock markets jumping for joy.  US stocks jumped more than 5% as financials were heavily bid and gained a whopping 13% on the day.  US bonds saw heavy selling as investors bought up risk and the 2-year yield jumped more than 30 bps to 1.96%.  This flight to risk saw USD/JPY push more than 100 pips higher into a close near 106.30/40.  Moreover, large portfolio re-balancing ostensibly led to firm USD demand from US real money accounts ahead of quarter-end.  Full text »

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Despite Financial Turmoil, GFT Remains Strong

September 30, 2008

Forex trading with GFTOne of the advantages of forex trading with a company like GFT is that you enjoy the advantages of a strong and stable company.

Even as the financial markets are rocked with turmoil, GFT remains stable and strong. This is due, in part, to GFT’s strong financial position and fundamentally sound decisions. GFT CEO Gary Tilkin points this out about the company:

“We are virtually debt-free, and our financial strength puts us in a position to serve the trading needs of our customers today and for many years to come.”

Additionally, it is worth noting that GFT is privately held, and therefore not subject to the whims of the stock market.

See Also

Asian Currencies Fall in FX Trading

September 30, 2008

Currency trading with Asian marketsAsian currencies are falling in FX trading on the currency market. It is important to remember in currency trading that Asian markets are closely tied to what happens on the U.S. stock market.

With the U.S. stock market plunging yesterday, it is no surprise that emerging markets in Asia are dropping in currency trading. Bloomberg reports on Asian currencies and FX trading:

“We’ll see broad-based Asian currency weakness,” said Mitul Kotecha, global head of foreign-exchange strategy at Calyon in Hong Kong. “The weakness in equities results in further outflows from equity markets among foreign investors.”

See Also

Down Under Currencies to Fall

September 30, 2008

Forex trading forecast for Australian dollarThe down under currencies are struggling right now, and the forex trading forecast does not look promising for the Australian dollar and the New Zealand dollar.

Much of the success of the down under currencies in FX trading relies on a strong commodities market and good global economic growth. Both of those indicators are in trouble, and that means that the Aussie and the kiwi are facing some severe challenges as the future approaches.

See Also

European Bailout Possibilities and the Euro in Forex Trading

September 30, 2008

Currency trading and the euroThe euro continues to fall in forex trading against the U.S. dollar. And, even as the U.S. bailout package fails in Congress, some sort of bailout is being considered in Europe.

Even though the U.S. bailout package was rejected, the currency market sees hope for the U.S. dollar. There is speculation that the greenback will overcome the current crisis and continue rising in FX trading.

On the other hand, the euro is expected to continue faltering in forex trading, since there are signs that economic troubles are just beginning in the eurozone.

See Also

U.K. Pound Advances Against the Euro in Forex Trading

September 30, 2008

Sterling gains a slight advantage in currency tradingThe U.K. pound is advancing against the euro in forex trading this morning. The sterling is making gains after a rather dramatic fall in currency trading yesterday.

Part of the help that the sterling is getting some help in currency trading on the FX market is to do with the willingness for the Senate to consider taking up the bailout idea as the House scrambles for some other solution.

Even though investors showed their displeasure with the vote by driving down stocks, there is hope that the market will move up today. And that hope is what is supporting the U.K. pound against the euro in forex trading, reports Bloomberg:

“There is a grinding improvement in equity market sentiment and that’s driving the uptick in sterling,” said Robert Minikin, a senior currency strategist at Standard Chartered. “Yesterday we had a catastrophic day for the pound. Today we’re getting a slightly better tone.”

See Also

London Session – September 30, 2008 8:11 AM

September 30, 2008

The USD strengthened some more in London trading as further problems across the pond coupled with renewed optimism that the US government will revive the bailout package helped take the greenback higher.  Euro was lower as France and Belgium looked to bail out the world’s largest lender to local governments with more than billion in capital.  EUR/USD sank roughly -40 pips towards a close near the 1.4330/35 zone.  GBP/USD was also lower, dipping about -30 pips to a close near the 1.8000 mark.  This level has proven to be good support and we would expect a break below here would see weakness extended. Full text »

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Asia Session – September 30, 2008 1:48 AM

September 30, 2008

The Yen benefited as the US equity collapse carried over into Asia in the aftermath of the unexpected rejection of the Rescue Bill by the US House of Representatives. USD/JPY hit a four month low as agitated investors bailed out of risky positions in order to flee to safe havens such as the Yen and Gold. USD/JPY continued its decline from earlier in NY as slid to a low of 103.54. The pair did however reverse as Asian stock markets bounced back from their lows and US equity futures pushed into positive territory. Japan’s soft jobless data and household spending data did not even budge the pair this session. EUR/JPY was in free-fall early on, and broke below 149.00 to 148.77, before its reversal as carry trades were abandoned and the pair showed strength above the 150.00 level. Tomorrow brings Japanese Tankan, which of late has not been as big a market mover as it once was. Full text »

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New York Session – September 29, 2008 5:51 PM

September 29, 2008

US stocks were annihilated as the US House of Representatives failed to pass legislation on the mortgage bailout.  The Dow Jones Industrials plunged -7% or -780 points while the S&P 500 was down a whopping -107 points or nearly -9% — the sharpest one day decline since the 1987 crash.  The flight to safe assets was palpable as US bonds rallied hard.  The 2-year note saw its yield down -44 bps to 1.66%.  Gold rallied to 7/oz while oil plunged – to /bbl on fears that an economic downturn will continue to hurt demand. Full text »

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