London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Oct 06 08 12:08 GMT |

The downward pressure on euro continued into the London session on news that the credit crunch has intensified across the pond. Germany faces the potential collapse of a major property lender, whose previous rescue package was withdrawn. Moreover, several European governments are now moving to guarantee private deposits in an attempt to stave off bank runs.

Calls for coordinated intervention abound and these new concerns that the credit problems in Europe could be worse than the US have the common currency beaten down. EUR/USD extended losses and dropped another -40 pips into a close near the 1.3580 mark. The pair made a low near 1.3540 today and we’d expect the next trigger for further downside to be near the 1.3500 zone.

Carry trades continued to be pared as well as global confidence in equities continued to sink like a stone. Asian marts plunged about -4% while stocks in Europe were crushed more than -5% last we checked. Things don’t look any better in the US, with stock futures pointing to a whopping -240 point decline in the Dow Industrials and a -30 point drop in the S&P 500. The Dow is at risk of taking out the psychologically important 10,000 mark which could see things get very ugly.

As such, JPY crosses have been beaten down. EUR/JPY tumbled another -70 pips in London trading to a close near 139.90. Meanwhile, USD/JPY shed about -20 pips into the 103.00 area. Expect volatility in stocks to dictate the price action in JPY crosses some more in the NY session. Given the turmoil in global stock markets, emergency coordinated rate cuts could be in play. If global central banks step in and cut rates, this should see a “relief rally” in stocks and would take JPY crosses higher… at least initially. Stay tuned!

Upcoming Economic Data Releases (NY Session) Prior Estimate

* 9/29/2008 12:30 GMT US Personal Income AUG -0.70% 0.20%
* 9/29/2008 12:30 GMT US PCE Deflator (YoY) AUG 4.50% 4.50%
* 9/29/2008 12:30 GMT US Personal Spending AUG 0.20% 0.20%
* 9/29/2008 12:30 GMT US PCE Core (MoM) AUG 0.30% 0.20%
* 9/29/2008 12:30 GMT US PCE Core (YoY) AUG 2.40% 2.40%
* 9/29/2008 16:00 GMT AU Quarterly Wage Agreements 2Q 3.7 - -

Forex.com
http://www.forex.com

DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.