After Tumultuous Week In Financial History, Wall Street Is Defunct

Daily Forex Fundamentals | Written by CMS Forex | Sep 23 08 01:15 GMT |

The dollar plunged against its rivals Monday as the last two investment banks Morgan Stanley and Goldman Sachs were converted into traditional bank holding companies. Following the move, Wall Street will cease to exist and a new phase in the deleveraging of the financial system will begin. The yen gained as risk aversion increased and US stocks fell sharply. Sterling advanced above the 1.85 resistance. We took profits on our short GBP/USD and EUR/USD positions as the stops were hit. The Canadian and Australian dollars rose as gold and energy prices surged. The EUR/USD gained the most since the euro's 1999 debut on a mix of debt deflation and stagflation concerns. Investors are worried the US proposal to buy $700 billion of troubled assets from financial firms will not halt the debt deflation or prevent a US recession, but will increase inflation as the increased budget deficit will be financed by lax monetary policy. The EUR/USD broke resistance at 1.45 and surged to the 1.49 resistance. Financial and Economic News and Comments US & Canada Goldman Sachs Group Inc. and Morgan Stanley concluded there is no future in remaining investment banks and the Federal Reserve approved their bid to become bank holding companies last night, ending an era of Wall Street. The two firms will now be regulated by the Fed, to build their deposit base, potentially through acquisitions. Goldman will become the fourth-largest bank holding company. The firm has more than $20 billion in customer deposits in two subsidiaries and is creating a new one, GS Bank USA. Morgan Stanley had $36 billion of deposits and 3 million retail accounts at the end of August. The company plans to convert its Utah-based industrial bank into a national bank. Canada's retail sales rose for a fifth straight month in July increasing 0.1% m/m to C$36 billion ($34.4 billion), following an upwardly revised 0.6% m/m gain in June, Statistics Canada reported. Excluding price fluctuations, retail sales were 'virtually unchanged,' the agency said. July retail sales rose 5.0% y/y. Excluding automobile and parts dealers, retail sales were up 0.4% m/m in July, up 7.7% y/y. Europe UK house prices declined a fourth month in September falling 1.0% m/m to £227,438 ($414,000), Rightmove Plc said. House prices fell 3.3% y/y. 'The housing market is on its knees and will remain so until financial institutions address the disastrous state of the mortgage funding markets,' Rightmove commercial director Miles Shipside said. Asia-Pacific Bank of Japan policy board members said they were concerned about the health of global banks, August meeting minutes showed. 'Members shared the view that global financial markets remained unstable due mainly to concerns about further losses that U.S. and European financial institutions might incur,' according to minutes of the August 18-19 meeting released today. 'The possibility of a further slowdown in the global economy' has also caused instability, the BOJ members said. Japanese supermarket sales fell 1.0% y/y in August, following a 0.9% y/y increase in July, the Japan Chain Store Association said. The most protracted declines were seen in clothing sales, which fell 7.5% y/y, and services, which lost 4.2% y/y. Japanese convenience store sales rose 5.3% y/y in August on a same store basis, after gaining 11.7% y/y in July, the Japan Franchise Association reported. Total convenience store sales rose 7.5% y/y in August, while the number of stores increased 1.5% y/y. FX Strategy Update EUR/USD USD/JPY GBP/USD USD/CHF USD/CAD AUD/USD EUR/JPY Primary Trend Negative Neutral Negative Neutral Negative Neutral Neutral Secondary Trend Negative Negative Negative Positive Positive Negative Neutral Outlook Neutral Neutral Neutral Neutral Neutral Neutral Neutral Action Profit Taken Sell Profit Taken None None None None Current 1.4780 105.49 1.8552 1.0740 1.0356 8440.0000 155.90 Start Position 1.5312 109.45 1.9790 N/A N/A N/A N/A Objective N/A N/A N/A N/A N/A N/A N/A Stop 1.4840 111.90 1.8620 N/A N/A N/A N/A Support 1.4300 104.00 1.8000 1.0600 1.0300 0.8000 148.00 1.4000 101.00 1.7500 1.0300 1.0100 0.7800 144.00 Resistance 1.4900 108.50 1.8700 1.1000 1.0500 0.8500 157.00 1.5500 110.50 1.9400 1.1400 1.0800 0.9000 160.00 Hans Nilsson Capital Market Services, L.L.C. www.cmsfx.com ©C2004-2005 Globicus International, Inc. and Capital Market Services, L.L.C. 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