Market Commentary for Tuesday 18th March 2008

Market Awaits FOMC Rate Decision Tonight.

The market certainly start with a “BANG” this week, with the sudden bid for Bear Sterns by JP Morgan at $2.00/Share, has a created a huge Risk Aversion move. Carry Trade was Unwound rapidly causing a sharp Fall in nearly all the majors, with the exception of Euro, which sailed full wind ahead of everyone.

Asian Markets Crumbling, as Investors Scurry to safety. Rumors of Major central bank planning for a coordinated intervention was abound the whole day yesterday. When the US Market Opens, Commodity, Gold, Oil Prices Slump in a bout of profit taking. Why did I mention all this? Does it even affect the currency market? YES IT DOES!

AUD was Hit Hard Yesterday, with slump of Commodity prices and Gold, the unwinding of carry trade, AUD/USD as a high Yielding Currency started the day with the high of 0.9445 went to the lows of 0.9125 near the end of the day. AUD/JPY slumps from 92.60 to 88.06.

GBP/JPY as we all know a big Mover and yesterday's drop from Friday Highs was simply incredible 205.03 to 192.53. Speechless to say the least.

The FED does an Emergency Discount Rate Cut of 25bp as well yesterday, I would wonder what the damage would have been if fed didn't do that yesterday.

FOMC Rate Decision will be tonight, with market expecting a 75bp to be confirmed, some are even speculating a 100bp cut. But Personally I think it would be either 50 or 75bp cut.

GBP/USD Outlook

Daily Trend line was Broken yesterday with further down side move expected in the short term, although I wouldn't be surprised if we see a reversal today, FOMC Rate Decision is tonight a Rate Cut by the FED is usually followed by a drop in the Dollar Index and a Rally in The DJIA. This would negate Risk Aversion and push all the majors up against USD.

Resistance Levels

2.0047 – Daily Pivot
2.0152– R1 Daily
2.0336 – R2 Daily
2.0441 – R3 Daily

Support Levels

1.9630 – S1 Daily
1.9758 – S2 Daily
1.9574 – s3 Daily

Market Commentary for Wednesday 5th March 2008

Don't you miss volatility?

I Do miss Market Volatility! A volatile market for Currency Traders, would relate to a kid with candy, so much to do in so little time. The Adrenaline pumping, Calculating charts in a frenzy is much much better than staring at the charts not going anywhere. These few days is just like watching primary kids having a Table Tennis match, tedious and boring.

Market has been quiet this week, with EUR/USD and GBP/USD still trapped in a range market conditions. Momentum to break either way for them would probably happen today, with a barrage of data to be released today.

We have three market moving data today starting with UK Services PMI and from the US we have ADP Non farm Employment Change an ISM Non Manufacturing. Whether or not The Dollar will continue to recover would be highly dependent on data releases this week.

Also we just had the GDP Release from Australia, the result was 0.6% below expectations of 0.8%. The Drop in GDP, is countered with a strong Domestic Demand, therefore the likelihood of RBA doing another hike is still high.

GBP/USD Outlook

Nothing Major for the Cable this week Market is still trapped in a triangle which should be breaking out hopefully today, Looking at the Daily charts and 4 hourly Charts A break to the downside is more likely. Especially with cable keep making lower highs the past few days.

Resistance Levels

1.9850 – Daily Pivot
1.9889 – R1 Daily
1.9929 – R2 Daily
1.9968 – R3 Daily

Support Levels

1.9810 – S1 Daily
1.9771 – S2 Daily
1.9731 – s3 Daily

EUR/USD Outlook

Euro is more or less in the same condition with Cable, With the pair losing momentum to push upwards and not enough seller to bring it down either.

The Pair is seriously very overbought. Therefore a correctional move this week is more of a possibility rather than pushing on for new highs. But it would all depends again on data releases this week from the US. Indications of How bad the economy is over there is key to the movement of this pair.

Resistance Levels

1.5209 – Daily Pivot
1.5245 – R1 Daily
1.5275 – Historical High 3rd March
1.5285 – R2 Daily

Support Levels

1.5169 – S1 Daily
1.5133 – S2 Daily
1.5093 – S3 Daily

Market Commentary for Tuesday 4th March 2008

Further weakness in the dollar or that's it?

Let's Re-cap yesterday, Nothing much happened until Around the release of the ISM manufacturing Index From the US, Market was expecting a forecast of 48.0 from a previous of 50.7.

Right Before the data was released EUR/USD printed a new Historical High of 1.5275, when the actual Data shows up 48.3, still Weaker than the previous month but better than the actual forecast, Euro went right back to where it started.

Is this market's way of thinking, “ Hey The economy is not that bad, yeah it's slowing but not as bad as we thought” ? Maybe... but USD/JPY back to its 3 years low @102.60, still shows sign that Traders in the market are not willing to think that way.

Risk Aversion is There and will probably stay this week,with what I call the Rate week, we have 5 Major Central banks with their rate decision, Starting with the RBA in about 2 hours time.

AUD/USD Outlook

RBA is expected to announce their rate decision in about 2 hours from writing this, Rumors have been circulating around that there might be a possibility that the RBA will Hold interest rate @ 7%. (market is expecting a 25bp Hike to 7.25%)

Earlier we had a Release of the retail sales data from Australia Which printed 0.5% lower than Expectations. Data Printed 0.0% compared to 0.5% the previous month. Coupled with the Current Account which came out at -19.4 B from A revised -16.4 B (Expectations was -18.0 B)

The Data Today Would Probably be taken into consideration By The RBA in their Interest Rate Statement, a Scenario Where The RBA would Wait and see, is now higher. Do keep In Mind that the RBA was willing to Hike 50bp Last Month but Decided to Go for 25bp and see what coming month will bring.

Technical wise, we have a confirmation of a bullish hidden divergence on the 4hour Chart Yesterday. Uptrend Channel is still Intact. Personally still Bullish on the AUD in the long run, but I still expect a healthy correctional pullback this week, especially with the daily stochastic unwinding the Overbought conditions.

No Divergences seen in the hourly Chart and There is room to move down further towards the 200MA @0.9300 area.(hopefully before the RBA Rate Statement).

With Market Uncertainties going around today, it is safer to trade the AUD only after the RBA Rate Statement. Majority of the Market is still expecting a 25bp Hike, but you cannot disregard rumors nowadays.

Resistance Levels

0.9494 –- February 28th High
0.9444 –- R1 Daily

0.9419 –- March 3rd High

0.9364 –- Pivot Daily

Support Levels

0.9310 -- S1 Daily
0.9260 -- Daily trendline Support
0.9230 -- S2 Daily

Market Commentary for Monday 3rd March 2008

Dollar slammed last week but recovered some ground on Friday.

The Dollar has recovered some lost ground against all Majors on Friday, profit taking has been blamed for the drop especially in Euro and AUD.

The drop in Dollar mid last week was hugely attributed to comments made by Fed Chairman Bernanke on his 2nd day testimony, in which he stated that smaller banks are most likely going to be affected with all the Economic concerns for the USA.

The comment itself spurred new found fears on the recession concern for the US Economy, although Growing inflation is also a concern. FOMC prioritized the growth of the economy rather than growing inflation. Therefore a further cut ranging from 25% - 75% is predicted by most economics, and a statement from Fed Chairman Bernanke, on his pledge that The FED will step in if there is further slowdown in economic growth.

AUD/USD Outlook

AUD since Friday has dropped like a stone, after creating a new high @ 0.9494 on Thursday, AUD has retreated to 0.9295 as of time of writing. The drop is hugely attributed to a bout of profit taking as February came to a close.

Possibility for another rate Hike By the RBA tomorrow is still high, a 25bp hike is expected to be announced by the RBA.

On a Technical note, AUD has been on an up move for more than a month, The move started on the 22nd of January from 0.8511 to 0.9494. the move have created an overbought market condition for AUD/USD.

Fundamentally Parity is what analyst and economist expected, but in order to achieve that a correctional pullback is necessary for the Australian dollars before aiming for the upside again.

Possibility of AUD going down for the week is there but do keep in mind that AUD is now close to a daily trendline @0.9260 area. A rejection from that trendline would create a new momentum to reach further up. Looking at the 4 hour Chart, There is a possibility of the pair forming an Bullish Hidden Divergence, not yet confirmed but the probability is high. With Price making Higher highs and Stochastic forming a lower low.

Resistance Levels

0.9494 –- February 28th High

0.9363 –- Pivot Daily

0.9425 –- R1 Daily

Support Levels

0.9260 -- Daily trendline Support

0.9242 -- S1 Daily

0.9180 -- S2 Daily