Asian Market Update USD continues to benefit from Fed's extension of liquidity

Daily Forex Fundamentals | Written by Trade The News | Jul 09 08 04:20 GMT |

USD continues to benefit from Fed's extension of liquidity

Forex: The USD continues to benefit from Fed Chairman Bernanke's extension of liquidity, and the currency managed to hold on to most of the gains made during the U.S. session. EUR/USD moved in a 20pip range, with 1.5650/55 providing some early support. Chartists say that the EUR/USD's intraday bias should still be mildly positive, as long as intraday low at 1.5611 holds. On the upside, if EUR/USD had to break above 1.5754 it might encourage stronger rise towards 1.5908 high. AUD/USD came under significant pressure in Asia, with the pair dropping from a session high at 0.9545 to 0.9480. The pair is currently hovering around 0.9490/95, the daily lows from May 20 and May 23. Stable oil prices in Asia meant that USD/CAD failed to extend the gains made during the U.S. session, and chartists say that a break of 1.0238 resistance is needed to confirm the rise from 1.0048 has resumed. The U.S. session low at 1.0175 also offered support during the Asian session. USD/JPY moved in a 10pip range, with traders now focusing on 107.70 (a level close to the 200 day MA).


Economic data underlines Japan's dependence on Asian, Middle East demand: (JP MAY MACHINE ORDERS MOM: 10.4% V 1.1% expected, 5.5% prior; YOY: 5.1% V -3.7% expected, 0.5% prior) Analysts said the data provides more evidence that Japan's manufacturing sector is being supported by demand from emerging economies, cushioning the impact of a U.S. slowdown. Considering the extreme volatility of the data series, the market didn't take it too seriously, and the reaction was limited. The data also failed to convince the skeptics. They continue to argue that Japan's deteriorating terms of trade, coupled with weakening corporate profits, mean that capital spending will slow down in the months ahead.

Aussie consumer mood sours: (AU JULY WESTPAC CONSUMER CONFIDENCE: -6.7% V -5.6% prior; Lowest reading since 1992) 'Following last month's 5.6 per cent fall this is another surprisingly large fall in the index,' said Westpac chief economist Bill Evans. 'Recall that it was already at a 16-year low and we have had another month of stable official interest rates,' he added. Another question asking people to compare their family finances with a year ago fell 6.2 per cent in the same period to 63.7.

Equities: At 0:10 EDT Japan's Nikkei is +1.36%, the S&P/ASX200 is +1.73%, South Korea's KOSPI is +1.16%, and the Shanghai composite index is +2.98%. The S&P500 futures contract gained +0.05% since the U.S. close, last trading at 1,274.30. The Nikkei 225 benefited from the sharp overnight decline in oil prices, with exporters, banks, airlines and steelmakers generally trading higher. The S&P/ASX200 continues to hover around the psychologically important 5,000 level, with financials leading the charge. Bargain hunting supported the Kospi, while oil refiners and airlines supported the upside in Shanghai.

Commodities: Nymex crude oil gained 0.23% between 18:00 EDT and 0:06 EDT, last trading at $136.30/bbl. Oil might have had a sharp pullback during the U.S. session, but many investors remain bullish. Since the G-8 meeting failed to come up with any concrete measures that can stem rising crude oil prices and reverse the trend, bulls argue that crude oil prices may resume their rise. Spot gold lost -0.42%, last trading at $919.40/oz.

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