Dollar and Yen are surging as investors sharply reduced riskier assets

Daily Forex Fundamentals | Written by AC-Markets | Oct 24 08 10:33 GMT |

Forex Market Issues and Risks News and Events: The Dollar was lower on Thursday, after earlier climbing to a fresh two-year high against the Euro and a basket of currencies, after aggressive Dollar selling by Brazil's central bank helped lend some stability to emerging market currencies, analysts said. Brazil's central bank twice intervened on the spot market to offer Dollars and said it was ready to sell Dollar swap contracts up to a hefty $50 billion. Emerging markets have been hit by the global financial crisis in recent weeks as Dollar investors offloaded assets in these markets and repatriated the funds. Analysts were skeptical that the calm would be sustainable, with investors wary of a sharp global economic downturn and a poor corporate profit outlook, but investors on Thursday loosened their faith in reserve currencies. Trouble in emerging markets has compounded worries about the outlook for the global economy, with countries such as Hungary and Argentina taking desperate measures to shore up their ailing economies. Such developments have helped the Dollar maintain a safe-haven bid in recent weeks. Both the Dollar and the Yen have surged against higher-yielding currencies this week as risk demand has sharply reduced. Extreme low liquidity has led to severe volatility in most markets, and analysts said currencies remained vulnerable to erratic moves. The Yen has shot up drastically versus the Euro and other high yielders such as the Australian and New Zealand Dollars as investors dumped positions that had used the low-yielding Japanese currency to buy assets in higher-yielding ones. Yesterday, EurUsd was last up 1% at 1.2902, after briefly racing to 1.3006 high. On Wednesday, it hit to a two-year low of 1.2728. EurJpy was last up 0.84% at 125.92, having touched a fresh six-year low of 123.15. UsdJpy was 0.14% down at 97.94 after falling to a 7-month low of 95.94. GbpUsd fell 0.16% to 1.6180, after tumbling to a 5-year low 1.6043. GbpJpy dropped 0.31% to 157.93, having hit 154.54 low. UsdChf was 0.27% lower at 1.1622. Today Key Issues: 07:00 EUR Q3 Unemployment survey 11.3% vs 10.4% 07:00 EUR October French Markit Mfg PMI 40.8 vs 43 07:00 EUR October French Markit Services PMI 48.8 vs 50.1 07:30 EUR October German Markit Services PMI 49.7 vs 50.2 07:00 EUR October German Markit Mfg PMI 43.3 vs 47.4 07:30 DKK October Consumer confidence -16.6 vs -11.1 08:00 EUR October Euro zone Markit comp Flash PMI 44.6 vs 46.9 08:00 EUR October Euro zone Markit Mfg Flash PMI 41.3 vs 45 08:00 EUR October Euro zone Markit Services Flash PMI 46.9 vs 48.4 08:30 GBP Q3 GDP prelim -0.2% vs 0% (qoq) 08:30 GBP Q3 GDP prelim 0.5% vs 1.5% (yoy) 10:45 EUR ECB'b Gozalez-Paramo speaks in Madrid 11:00 CAD September CPI BoC Core 0.3% vs 0.3% (mom) 11:00 CAD September CPI BoC Core 1.7% vs 1.7% (yoy) 11:00 CAD September CPI Inflation 0% vs -0.2% (mom) 11:00 CAD September CPI Inflation 3.4% vs 3.5% (yoy) 14:00 USD September Existing home sales 4930k vs 4910k The Risk Today: EurUsd Market dropped as low as 1.2530 this morning. On the downside, further weakness will open the way down to strong support 1.2490 Trendline. Next long-term support holds 1.1640 November 2005 low. On the upside, only a return over 1.4000 (former trendline support) and 1.5000 will release actual pressure and may put key resistance 1.6000 into focus. Resistance holds 1.4002 former trendline support. Initial resistance holds 1.3769 last week high. GbpUsd Market dropped nearly 10% this week around 1.5500 this morning. This move was following Tuesday break of the low triangle pattern (1.7000) which did open the way through 1.6568 November 2003 low and 61.8% retracement of 1.3682-2.1161 advances. Initial support holds 1.5471 August 2003 low. Following supports are 1.4560 trendline and 1.3682 March 2001 low. On the upside, strong resistance holds 1.7631 last weeks high ahead of 1.8304 former support. UsdJpy Market broke down the lower trendline on September-October downtrend accelerating drop to 92.77 low this morning. Further pressure might open the way down to 96.00 Nov 1994 and 79.70 April 1995 low. On the upside, only a recovery over 103 upper trendline and 105 pivot point will put focus again on 108 and 110.67 15th August high. UsdChf Market posted new high 1.1749 this morning. Further advance may open the way to 1.1895 October 2007 high and strong resistance. On the downside, only weakness below initial support 1.1489 early October high would undermine the current uptrend and reverse through 1.0692 22nd September low and down to 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low. EURUSD GBPUSD USDJPY USDCHF 1.5000 P 1.9363 S 105.00 S 1.2153 T 1.4867 S 1.8304 M 103.07 M 1.1895 T 1.3500 P 1.7631 S 100.00 P 1.1749 M 1.2660 1.5850 95.00 1.1735 1.2530 M 1.5500 M 96.85 M 1.1246 M 1.2490 T 1.5471 S 95.75 T 1.0692 S 1.1827 T 1.4560 T 92.00 M 1.0500 K S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.