Dollar Strengthens Over The Weekend. Once More, Gaps At The Sunday Open
Dollar Strengthens Over The Weekend. Once More, Gaps At The Sunday Open
Overall, the market gapped again at the Sunday open. This time, the G20 meeting caused the dollar to strengthen during the weekend. However, the currency pairs are starting to move to the upside, showing that the market is looking to close the gaps. Today, the release calendar is exceptionally light, so it is expected to be a very technical day.
The Euro (Eur/Usd) saw a 135-pip gap at the beginning of the new trading week, extending Friday’s sell off, when the pair plunged 200 pips in just a few minutes. The Friday move came as an answer to the strong selling wave in the U.S. equity markets.
The Pound (Gbp/Usd) had the biggest gap tonight, a whopping 145 pips. There is no surprise here, since in the last few weeks a similar pattern was seen. The pound fell to the lowest level of the year in the past few days, as expectations the Bank of England will cut the overnight rate to unseen low levels.
The Rightmove house price index for the month decreased to negative 2.9 percent, month over month in November. This is following Octobers 1.0 percent decrease. House prices in the U.K. have decreased by 6,712 pounds to an average price of 222,979 pounds for the month. In annual terms, the average price of a house in the U.K. has decreased by 7.1 percent. House prices in London have fallen by 5.4 percent yearly, and 1.3 percent for the month.
The Aussie (Aud/Usd) gapped 70 pips at the Sunday open, the second smallest gap after the swissy. The aussie fell near TheLFB S1 (0.6395) soon after the opening bell, where, it managed to find a bottom and move up to close the gap.
Australian retail turnover in the third quarter, adjusted for inflation, rose 0.1 percent in the third quarter. This is sharply lower than the 0.4 percent that analysts have been expecting. Retail sales for the second quarter were revised to show a decrease to 0.2 percent from the initial 0.6 percent fall.
The Cad (Usd/Cad) opened the new trading week with a 125-pip gap, and moved in a channel since then. Lately, the Canadian dollar moves without clear direction or momentum during the Asian trading hours.
The Swissy (Usd/Chf) gapped 60 pips at the beginning of the new week, opening near the first resistance level. On Friday, the pair moved in a tight channel almost all day long, near the U.S. session closed when it suddenly decided to break to the upside.
The Yen (Usd/Yen) had a pretty wild trading session tonight. After it gapped 95 pips, the pair bottomed at TheLFB S1 (96.05) and then it went straight up to the neutral pivot point (97.10). The pair is now trading under the 20-day moving average, it seems.
Japanese growth contracted by 0.1 percent during the third quarter, which was below market expectations for a 0.1 percent increase. On an annualized basis, the GDP for Japan fell by 0.4 percent in spite of expectations of a 0.1 percent increase. In nominal term, the GDP contracted by 0.5 percent, quarter over quarter. The GDP deflator also saw a decline to 0.6 percent, despite expectations for it to come in at a 0.5 percent drop. Japans tertiary industry activity index decreased 0.6 percent for September. This was in line with analysts’ expectations for the month.
Nikkei Raises Overnight Despite The Poor GDP Data
Asian trade: Asian shares opened the trading session much lower, after two reports saying the Japanese and Hong Kong’s economies are back in a recession. The Nikkei opened the new week in the red, but it now seems the market recovered and trades above the break-even line. The equity markets were also dragged lower by the G20 hesitation to choose a measure to help the world’s economy revive.
The Japanese economy fell 0.1% in the third quarter, after shrinking 0.9% in the second. This is the first time the Japanese economy falls into a recession since 2001, when the IT bubble burst. On the other hand, the Hong Kong economy contracted 0.5% in the third quarter, having exports account for the biggest decline. Tonight, the Nikkei gained 98.80 points (1.17%) to 8,561.19. In Australia, the S&P/Asx fell 93.90 points (2.51%) to 3,654.20.
If the developed countries are in near a recession, some other countries are near bankruptcy. Pakistan is just the latest nation on the list of countries looking for an IMF loan. Pakistan is currently in talks for a $7.6 billion loan, to help the economy revive, as investors fear that Pakistan will have to default on their debt. It now cost $2.5 million dollar to protect from default a $10 million bond issued by the Pakistan’s Government. The sum needed for default protection is a few times bigger than the amount needed to protect junk corporate debt in Europe or the U.S.
Crude oil is heading towards a new low for the current year. Crude oil for December delivery fell $1.06 (1.86%) to $55.98.
Gold traded mixed since the new week had started. Bullion for immediate delivery fell $0.50 (0.07%) to $742.00.
Previous Wall Street trade: Scary reports on consumption led to sharp late-day selling on U.S. equity markets Friday. Aside from the Census Bureau’s report on October retail sales, which showed sales slowed for a fourth consecutive month and by the most on record, corporations announced lay-offs and slashed profit estimates based on weaker global consumption.
Cell phone maker Nokia dropped about 10% in heavy trading after slashing its fourth-quarter profit guidance citing the ’sharp pullback in global consumer spending.’. Sun Microsystems, the server and software maker, said it would be laying off up to 6,000 workers, or 18 % of its global staff, as a slump in the sale of high-end servers has hammered the company.
JCPenney reported this morning that its profit declined as same-store sales dropped 10%. The department-store operator also delivered a fourth-quarter forecast that was well off analysts’ estimates and said that challenging conditions would persist through 2009.
Previous European trade: In Europe, evidence is mounting that the economy is facing a recession. During the European session, a release was expected to show the economy contracted in the third quarter 0.2%, after a similar decline seen in the second quarter. This would be the first recession in the last 15 years that the Euro-area has experienced. This morning, a report showed the French economy grew in the third quarter by 0.1%, even though expectations were for a -0.1% read. However, the German, Spanish and Italian economies are now officially in a recession, as both the second and third quarter reads were negative. Also in Europe, the U.K. is walking a similar path, with both quarters negative, while the Swiss economy is soon expected to join the recessionary trend.
Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com
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