Dollar Strengthens As The S&P Moves Lower
Dollar Strengthens As The S&P Moves Lower
Overall, the currency markets traded mostly side-ways during the overnight session on Wednesday. In the U.S. session, the major pairs became very volatile, as equity markets headed lower. The final strike came during the last part of the U.S. session, when the dollar surged against every other major currency, following closely the moves seen in the S&P futures. Following Wednesday’s gains, the dollar regained some of the ground lost over the last few days of trading.
The Euro (Eur/Usd) fell to TheLFB R1 (1.3890) during the overnight session, but the pair became very volatile once it touched that level. During the U.S. session, the pair had some sudden swings in sentiment, causing extreme volatility with its moves up and down. As with the other major pairs, the pair saw strong selling orders in the last part of the U.S. session, something that contributed to its 160 pip decline on Wednesday.
The Pound (Gbp/Usd) was the only major pair that did not drop compared to the dollar on Wednesday. The pair posted gains up until the last part of the U.S. session, when the S&P plunge caused the pound to shed most of the gains seen earlier. At the end of the day, the pound gained only 30 pips.
The Aussie (Aud/Usd) moved only side-ways on Wednesday, but during the second part of the U.S. session, the aussie broke through the support area of the intra-day range and fell more than 100 pips. The move came inline with the declines observed in the equity markets.
The trend estimate for total new capital expenditures in Australia fell in terms of volume by 0.7% percent in the March quarter of 2009 while the seasonally adjusted rate fell 8.9 percent. The estimate for buildings and structures rose by 4.4 percent this quarter, and 4.7 percent seasonally adjusted.
The Cad (Usd/Cad) spent most of the European and the U.S. trading hours testing the 1.1100 support level, but the pair was unable to break any lower. During the late U.S. session, the cad started to reverse the gains posted earlier, and picked up more than 120 pips from the session’s low. At the end of the day, the cad gained 60 pips.
The Swissy (Usd/Chf) saw a very chaotic day of trading on Wednesday. The swissy had a 60-pip range during the European and the U.S. sessions, from which the pair just bounced up and down repeatedly. However, by the end of the U.S. session, the swissy managed to break through this range.
The Yen (Usd/Yen) moved relatively volatile in the previous day trading, on Wednesday. The pair struggled to hold above the 95.00 support level, but during the U.S. open, the pair broke lower for a short period. During tonight’s Asian session, the yen surged 60 pips in a very short time-span, breaking above the 100-day moving average.
Markets Decline As Treasury Yields Rise
Current Futures: Dow -6.00, S&P -0.90, NASDAQ -1.25
Asian markets are posting modest declines, following the negative close on Wall Street. The possible bankruptcy of GM, coupled with Treasury yields rising very fast made investors reduce their exposure to the equity markets.
The U.S. car-manufacturer GM is getting very close to bankruptcy, after it failed to reach an agreement with its bondholders. GM proposed to its creditors to swap debt for equity stakes, but the company was unable to reach an agreement with all parties involved in the transaction. TheLFB-Forex.com Trade Team said that it is not hard to see how the bondholders refused such an offer, since GM has been losing money for years, time in which the company was unable to come to a realistic restructuring plan.
If GM’s bankruptcy really happens, it will become the largest in the history of the U.S., and probably the most expensive too. For now, this position is shared by Lehman Brothers and Nortel, which at its peak had a market value of $366 billion.
The possible bankruptcy has renewed fearers that the financial sector is not as strong as previously thought, and contributed to the 2% decline of the S&P and Dow Jones indexes. Moreover, investors also sold the longer-term notes yesterday, as the Treasury is planning to sell a record amount of debt this year.
TheLFB-Forex.com Trade Team said that Treasury notes declined in a day of negative equity markets, something that rarely happens. On Wednesday, the spread between the 2- and the 10-year Treasury notes became the steepest on record, suggesting that investors may start to fear inflation. A huge deficit ran by the government, combined with the Fed expanding its balance sheets are known to spark long-term inflation, and this is now being priced in the financial markets, TheLFB-Forex.com Trade Team said.
Overnight, the Japanese Nikkei declined 19.82 points (0.21%) to 9,418.95. The Australian S&P/Asx fell 45.00 points (1.18%) to 3,756.10.
Crude oil for June delivery was recently trading at $62.90 per barrel, lower by $0.55.
Gold for June delivery was recently trading lower by $6.80 to $948.40.
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