Global forex trading: This is the U.S. session wrap of the global commodity and foreign exchange markets that cover forex trading, forex markets, forex news and commodity overviews. Each day we review the dollar index, the equity markets, as well as commodities. This information answers the what is forex question, by revealing what drives the foreign currency exchange markets.
U.S. Session Wrap l Market Overview l TheLFB News l Apr 01 09 l 17:00 EDT
Wall Street Close: Dr. Doom Is Bullish
Economist Nouriel Roubini, who correctly predicted the housing bust and financial crisis back in 2006, said yesterday that the worst of the economic contraction will be seen in the first quarter this year.
After Q1, the rate of contraction will decrease although the economy will still be contracting through the end of 2009. He also said the economy would grow weakly next year.
In other words, Dr. Doom said the worst is over after this quarter.
Specifically, Roubini is saying that an estimated 6% annualized contraction in this quarter will shrink to an annualized contraction of about 2% by the end of the year. Next year will see a very weak rate of growth, estimated to be 1% or less. Now, you can check arithmetic, but if you go from a 6% contraction to a 2% contraction, that's 4 percentage points of improvement. It isn't growth, because the economy is still contracting, but a 4 percentage point improvement is nonetheless certainly welcome news.
At Thursday’s close of floor trading on the NYSE stocks had closed with a healthy gain although they finished more than 1 percentage point below the high point of the day. The DOW was on 7978.08 after a gain of 216.48 points (2.79%) while the S&P finished on 834.38, up 23.30 points (2.87%). The technology-heavy NASDAQ closed on 1602.63 after rising 51.03 points (3.29%).
The dollar traded in risk-acceptance mode (weaker against the higher-yielders and stronger vs. the yen) in N.Y. as stocks advanced, continuing the trend seen overnight. On the day, the greenback ended with a loss of 1.56% to the euro, 1.74% against the pound and 2.04% against Australia's currency as it gained 0.95% on the yen.
Treasuries were sold as traders moved back into riskier assets. On the day, yield on the 2-year note rose 6.3 basis points to 0.879% while yield on the 10-year note lost 10.1 basis points to 2.755%.
Crude for April delivery was recently trading up $4.11 (8.49%) to $52.50 per barrel.
Gold for April delivery was recently trading down $22.50 (-2.43%) to $903.60 per ounce.
Previous Asian Trade: Most Asian markets advanced Wednesday after a roller-coaster ride, with Japanese shares jumping as the yen's recent weakness and overnight gains on Wall Street lifted exporters and financial shares on the first day of a new financial year. Chip makers stood out in Taipei and Tokyo after Elpida Memory said it was selected to partner Taiwan Memory, a semiconductor company being formed by the government to rescue domestic memory chipmakers.
The Nikkei 225 Average jumped 3% to 8351.91, after flirting with losses earlier in the day. Elsewhere, China's Shanghai Composite gained 1.5%, South Korea's Kospi added 2.3%, Taiwan's Taiex rose 2% and India's Sensex ended 2% higher. Australia's S&P/ASX 200 slipped 0.1%, while Hong Kong's Hang Seng fell 0.4%, after moving in either direction.
Previous European Trade: European shares staged a slight rebound on the last day of the quarter Tuesday, as banks took back some of the previous session's sharp losses. Banks led the market higher, with HSBC Holdings rising 6.6% while Standard Chartered climbed 8.6% and BNP Paribas rose 6.8%. Fortis shares rose 2.9%, despite the bank's report of a €28 billion loss in 2008.
The Dow Jones Stoxx 600 rose 3.5% to 176.39, paring losses for the first quarter of the year to just over 11%. On a regional level, the U.K. FTSE 100 Index rose 4.3% to 3926.14 while the German DAX 30 Index climbed 2.4% to 4084.76.
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U.S. Session Wrap l Market Overview l TheLFB News l Apr 01 09 l 17:00 EDT
Currency Pair Overview: Markets Rise As Data Implies A Bottom
Overall: The market traded in risk-acceptance mode overnight, as traders took heart in better-than-expected economic data from the U.S. on Wednesday and after the G20 announced it was expanding the amount the IMF would have available to help poorer nations to about $1 trillion. The move continued in N.Y. as factory orders (Actual 1.8%, Expected 1.5%, Previous -3.5% (Revised from -1.9%) in February continued the recent pattern of data which seems to be implying that the worst of the contraction which began in December 2007 will be seen this quarter. News that unemployment levels (Actual 669K, Expected 649K, Previous 657K) worsend to record levels didn't seem to do much to dampen the sentiment.
The Euro (Eur/Usd) advanced during the Asian session, but retraced a large portion of those gains as the European session started. The ECB today lowered their main policy rate by 25 basis points to 1.25%, less than the 50 basis points many observers had expected, but left the door open for further reductions. As far as quantitative easing is concerned, the board decided to table a judgment on that to the May meeting, and ECB President Trichet said at the press conference that a decision regarding unconventional measures would be made at "the last minute." The pair rose from the Wall Street open until about 13:30 EDT, where it peaked at 1.3483.
The Pound (Gbp/Usd) rose as much as 150 pips during the overnight session, but gave up some gains as the Asian session concluded. The pound advanced against both the dollar and the euro, helped by a better than expected economic release from the U.K. housing market. The pair has been in a strong up-trend since March 30, with the last top reaching 1.4748 early this afternoon.
March’s U.K. Construction PMI rose more than expected, after last month the index fell to an all-time low. The U.K. Construction PMI was released at 30.9, while analysts forecasted a 27.6 read. Despite this month’s positive read, almost every sub-index of the release still points to a severe slowdown, as the British construction market has tumbled for more than a year. U.K. house prices rose unexpectedly in March, after declining for sixteen straight months. The average price for a U.K. house in March reached £150,946, up 0.9% from the previous month
The Aussie (Aud/Usd) gained 60 pips in the Asian session, testing TheLFB R1 (0.7030), but traded flat until the European session got under way. After the London open, the aussie advanced further, breaking above the 0.7050 area, where it topped in Wednesday’s trade. The pair did very well in N.Y. as stocks advanced, finding resistance only at .7198 in N.Y., the highest level made since Jan. 07.
Australia has posted a higher than expected trade balance for the month of February. Analysts were expecting a 0.70B reading when in fact; the country had a surplus of 2.11B. This is mainly due to imports of consumer goods declining while the price of gold surged higher. However, this may not be enough for Australia to avoid a recession, the nation’s first in two decades. This is the seventh consecutive month in which the Australian trade balance has been in the black.
The Cad (Usd/Cad) extended the decline seen in the last U.S. session overnight as crude advanced in Globex trading off the $47.50 handle. The cad fell an additional 80 pips, breaking below the 20-day simple moving average, and the move continued well into N.Y as front-month oil advanced over 8.6% to $52.54.
The Swissy (Usd/Chf) moved somewhat lower during the Asian session, but hit a support trend-line that connects the lows of the last two days of trading, near to the 1.1400 area. The pair advanced in the afternoon as stocks pulled back from their earlier 4% gains, with support in N.Y. seen at 1.1307.
The Yen (Usd/Yen) came within 42 pips of triple-digits about 2 hours before Wall Street opened, but couldn't find enough buyers to sustain a further upside move. The pair still looks set to make its highest close since Nov. 04 after the rally in global equity markets.
The Japanese monetary base came in with a reading of 6.9 percent year over year in February. Banknote circulation in January was up 0.8 percent. Meanwhile, coins declined 0.1 percent.
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U.S. Session Wrap l Market Overview l TheLFB News l Apr 01 09 l 17:00 EDT
Dollar Index: Technicals Point To Continued Decline
The chart presented here has, and is, providing a number of bearsih technical indications for the dollar index.
After forming a top in early March (gray area), the daily chart provided evidence of downward pressure on March 11 and 12 (red area), where daily candles were made with relatively longish spikes at a lower level of resistance. On Tuesday and Wednesday of this week (blue area) small, alternating pin bar candles indicated the market was still undecided but once the support there iwas broken, a further downside move became indicated.
The stochastic (lower panel) has made a double overbought indication, as price has recently been judged to be overbought at a lower price-area than where the previously overbought price-area was indicated.
The daily trend line (red) indicates where support may be found as price declines. A break of this line is likely to send price lower, especially if price rises from below and finds resistance at or near the line (support turns into resistance).
On Wednesday, the dollar index rose 8.4 basis points (0.10%) to 85.514 as the cash markets reversed the overnight losses in S&P futures.
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U.S. Session Wrap l Market Overview l TheLFB News l Apr 01 09 l 17:00 EDT
Financial Sector: The G20 Speaks
The G20 today agreed to pledge more than $1 trillion in emergency aid to poor nations struggling through the worst global downturn since the Great Depression. The group represents twenty of the world's largest economies, which together make up about 85% of global economic output. Leaders met in London Thursday and will meet again in New York this September.
Specifically, the lending power of the International Monetary Fund was boosted to around $750 billion while the IMF's reserve currency, known as special drawing rights (SDRs), were expanded by about $250 billion.
“We have reached a new consensus that we take global actions together to deal with the problems we face,” U.K. Prime Minister Gordon Brown told reporters after hosting the talks. “There was substantial agreement on the need for us to do whatever is necessary to return to growth.”
President Obama, in an effort to show unity, said today that "all nations" have contributed about $2 trillion in fiscal measures.
On the regulatory side, leaders plan to implement a new Financial Stability Board to bring together regulators and work with the IMF to provide early warnings of potential threats. Regulatory systems will be changed in order to better monitor systemic threats to the global system. New rules will be put in place regarding the amount of leverage financial firms can take on their positions, and banks are likely to be required to increase their reserve balances (in percentage terms) as their portfolio of loans expands. The current Basel II regulations require that banks keep about 8% in reserve.
Systemically important Hedge funds will be subjected to greater regulation and oversight as will all key financial instruments and markets, the G-20 said. The pact marks a narrowing of differences after German Chancellor Angela Merkel and French President Nicolas Sarkozy entered the talks demanding that U.K. Prime Minister Gordon Brown and President Barack Obama endorse a more detailed response to the crisis than that initially planned.
“We never thought we would find an agreement this large,” Sarkozy said today. Merkel called the agreement a “victory for common sense.”
Nobel laureate Joseph Stiglitz, a professor at Columbia University, said in an interview while the “devil is in the details” of how new rules will be implemented, the G-20 had made a “major step forward” in saying markets should be subjected to greater state control.
Principles will also be introduced on pay and bonuses to create “sustainable compensation schemes.” Accounting-standard setters were told to improve valuation methods, while credit-rating companies will be forced to meet a code of good practice.
On Wednesday, the XLF financial sector ETF rose 0.25 points (2.84%) to 9.06. The volume was light; 178,429,354 ETF's changed hands against a rising daily average of 239,181,000.
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Trade Data: Commodities, including forex pairs, tend to move 0.5% each day, anything above that needs to be monitored for an impact elsewhere, and the ability to hold any increasing trading range above the norm.Historically: 1. Oil and gold up = Usd down 2. Treasury notes up = Treasury yields down 3. Treasury yields down = Usd down
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