Dollar Strength Across The board

Daily Forex Fundamentals | Written by The LFB-Forex.com | Aug 05 08 10:14 GMT |

Overall, the dollar has shown strength during the overnight sessions, as the market expects the FOMC statement to support the stronger dollar and the Fed to switch their view to inflation fighting, something opposite to what the other central banks are doing now. If the Fed follows through with what is expected by the market, more dollar strength will be seen in the following weeks.

The Euro traded lower during the overnight session and the outlook remains to the downside. The pair made a triple bottom on the 4h chart at the 1.5500 area, and if the pair manages to break lower it will trigger a number of short orders. The Euro-zone is starting to miss economic expectations with regularity and this is now starting to be reflected in the market's valuation.

The Pound broke the lower support of the 4h channel yesterday and since then the pair has tumbled an additional 100 pips. As was the case with the RBA, the market expects the Bank of England to switch it's view from inflation to assuring growth, at a time when most of the UK indicators point to a hard lending environment for the economy in the coming quarters

The Aussie moved lower after the RBA changed its objective from fighting inflation to assuring growth. The market saw this coming and initiated two weeks of continued Australian dollar selling. During the overnight sessions, the pair lost 70 pips and found support at the 200-day moving average. The relative strength index is very close to the oversold line.

The Cad managed to break the range it has been trading in for almost half a year. During the overnight session, the pair gained 60 pips, something that happens very rarely. It is very likely the uptrend will continue at a strong pace during the U.S. session as the market expects the FOMC decision.

The Swissy tried to break the high of the previous session and at the same time the 1.0500 resistance area, but the lack of momentum stopped the pair from doing so. The swissy is a very good tool to gauge the dollar's strength, so if the pair does manage to break to the upside, it is very likely the whole market will follow.

The Yen had a quiet Asian session, but the London open sent the pair 60 pips lower almost immediately. The yen is usually correlated with global equity markets, but it seems the yen has lost the correlation lately. Therefore, the yen pulled some very strange moves in the last period.
European Session Wrap Equities in Europe and US Futures higher

Current Futures: Dow +78.00, S&P +9.40, NASDAQ +17.00

European Trade: European shares are trading in positive territory, barely, as important companies are expected to release their earnings today and top analysts' estimates and oil continues its downtrend, reaching a 3 month low. Societe Generale, one of Europe's largest banks reported a 63% decline in profit to 644 million euros after write-downs shed an important part of profits. Air France-KLM Group beat analyst expectations, despite the higher oil prices during the last two quarters. It seems the market valued the two better than expected reports and despite the negative global equities from the past 24 hours, the major European indexes may have the strength to hold in positive territory.

During the Asian session, the Nikkei closed losing 18.52 points (0.14%) to 12,914.66. The Australian S&P/Asx closed the session reaching a two and a half year low, shedding 67.30 points (1.38%) to 4,820.40. In Europe, the Dax has advanced 9.26 points (0.15%) to 6,359.07 while the U.K.'s FTSE gained 6.50 points (0.12%) to 5,326.70

Gold fell as a slump in crude oil to a three-month low added to signs of weakening global economic growth and speculation demand for precious metals used in jewelry will wane. Bullion for immediate delivery fell $13.10 (1.44%) to $894.80

Crude oil fell to $118 a barrel on speculation Tropical Storm Edouard won't damage U.S. Gulf facilities and as concern economic growth will slow prompted investors to sell commodities. Crude oil for September delivery fell $2.09 (1.72%) to $119.32

Previous Asian trade: Asian shares are trading mixed as inflation fears and global slowdown make investors re-price market assets. Inflation is eroding consumers' buying power, while for companies; it is increasing operating costs. In time, inflation will slowly erode the balance sheets of companies, reducing their market value as well as reducing dividends. Commodities have reached multi-month lows, and this lowers commodities stocks. Oil reached a 3-month low, and the index tracking traded metals had a similar decline.

The MSCI Asia-Pacific Index has been trading lower for 3 days in a row. The Nikkei 225 is struggling above the neutral line, gaining 47.45 points (0.37%) to 12,980.63. The S&P/Asx reached a two and a half year low as commodity prices tumbled - Australia's biggest export product. The index tracking the Australian stock market declined 100.00 points (2.05%) to 4,787.70.

The LFB-Forex.com