Daily Report: Markets Stabilized by FNM/FRE Rescue Package

Market Overview | Written by ActionForex.com | Jul 14 08 07:12 GMT |


Markets are stabilized by US Treasury and Fed's rescue package to save Fannie Mae and Freddie Mac from further troubles and ensure both Government Sponsored Enterprises to continue to be key providers of mortgage credits in the US. Treasury Paulson asked Congress to inject capital into both GSEs trough investments and loans, including buying shares of both of them. Fed also announced it will provide liquidity by allowing effective access to the discount window. The Treasury will also ask that the Federal Reserve have a "consultative role" in setting future capital standards for the GSEs.

Dollar recovers mildly as the week starts on the news but reactions are so far mild. Asian stock markets also responded positively by opening higher but turned red again as the day goes. Markets will probably remain calm until US market opens to see the reactions from investors.

Other focus today include PPI inflation data from UK, which is expected to show input prices accelerated again from 27.6% yoy to 28.9% in Jun. Output price is also expected to climb from 8.9% yoy to 9.8% yoy. Core PPI is expected to be up from 5.9% yoy to 6.5%. Eurozone industrial production is expected to drop -2.3% mom in May, with yoy rate up 0.3%.

New Zealand retail sales released overnight dropped -1.2% mom in May, below expectation of -0.1%.
AUD/USD Daily Outlook

Daily Pivots: (S1) 0.9599; (P) 0.9657; (R1) 0.9720; More

AUD/USD continues to consolidate below 25 years high of 0.9716 today. Further rally is still in favor but note that near term trend line resistance at 0.9721 which could limit upside initially. Though, as long as 0.9597 support holds, another rise is still expected towards next target of 1.0000 psychological resistance. Below 0.9597 will indicate that a short term top is possibly in place and put focus back to trendline support (now at 0.9466).

In the bigger picture, the whole rally from 0.8512 is still in progress. Regardless of the structure, such rally is treated as part of the long term up trend from 0.4773 (01 low) and is still expected to extend further to next medium term target of 100% projection of 0.4773 to 0.8008 from 0.6773 at 1.0008 which overlaps with parity.

However, the upside momentum since making a low at 0.7675 is still far from being convincing, with bearish divergence conditions in daily MACD and RSI. A break below 0.9327 support will be the first alert that rise from 0.9512, as well as that from 0.7675 has completed. This will set the stage for deeper decline back into 0.7675, 0.8870 support zone, with key long term support of 0.8008 lying in between.

Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
22:45 NZD New Zealand Retail sales M/M May -1.20% -0.10% 1.00% 1.20%
8:30 GBP U.K. PPI core M/M Jun 0.80% 1.20%
8:30 GBP U.K. PPI core Y/Y Jun 6.50% 5.90%
8:30 GBP U.K. PPI input M/M Jun 2.50% 3.80%
8:30 GBP U.K. PPI input Y/Y Jun 28.90% 27.60%
8:30 GBP U.K. PPI output M/M Jun 1.20% 1.60%
8:30 GBP U.K. PPI output Y/Y Jun 9.80% 8.90%
9:00 EUR Eurozone Industrial prod'n M/M May -2.30% 0.90%
9:00 EUR Eurozone Industrial prod'n Y/Y May 0.30% 3.90%
14:00 USD Fed Governors Vote on Mortgage Rules in Open Meeting