Stock Rally Stalls Then Free Falls, USD Regains Strength

Daily Forex Fundamentals | Written by Easy Forex | Oct 15 08 01:25 GMT |

U.S. Dollar Trading (USD) was initially on the back foot as large equity gains around the world (+14% Nikkei) led to reversal of safe haven buying which had supported the Dollar previously. The losses were mild though and as US stocks reversed direction from highs the USD strengthened. With little economic data yesterday, focus turned to weak earning outlooks and the Dow slipped up to 800 points from highs. The latest banking crisis bailout news concerned the US treasury’s $250 capital injection into the banking system. In the U.S. share markets, the NASDAQ was down 65 points (-3.54%) and the Dow Jones was down 76 points (-0.82%). Crude Oil closed down -$2.56 ending the New York session at $78.63 per barrel. Looking ahead, September PPI expected at 0.2% and Retails sales are seen negative for the 3rd month in a row at -0.7%. The Euro (EUR) gained as Oil and stocks surged during the Asian and European sessions. A very weak German ZEW survey in October was largely ignored because it took place mainly last week during the stock crash. Gains were pared as US stocks reversed. Overall the EUR/USD traded with a low of 1.3609 and a high of 1.3768 before closing the day at 1.3650 in the New York session. Looking ahead, EU September CPI is expected at 0.3%. The Japanese Yen (JPY) continued to add to losses yesterday as the Nikkei had a record gain and risk appetite continued to recover. The recovery was put on hold as the Dow fell heavily from highs. USD/JPY remained relatively well bid. Overall the USDJPY traded with a low of 101.53 and a high of 103.05 before closing the day around 102.00 in the New York session. Looking ahead, Japanese Industrial Output for August previously at -3.5%. The Sterling (GBP) made large gains yesterday pushing the recovery enveloped further as it tracked the EUR higher and took advantage of the weaker USD. In a sign of the very illiquid conditions in the FX markets, when the US equities reversed the GBP crumbled. CPI was slightly stronger than expected at 5.2%Y/Y rate. Overall the GDP/USD traded with a low of 1.7394 and a high of 1.7629 before closing the day at 1.7400 in the New York session. Looking ahead, Claimant count seen at 35K in September and the Unemployment rate in August expected to tick higher to 5.6% from 5.5%. The Australian Dollar (AUD) continued to be very well supported as stocks headed higher. With a remarkable correlation the AUD tracked the US stocks down late in the day. Initially the Aussie found support from the rebound in commodities and extremely buoyant Asian Stock market. Also of note yesterday was the release of the Australian $10 billion stimulus package to help the economy through the credit crisis. Overall the AUD/USD traded with a low of 0.6938 and a high of 0.7236 before closing the US session at 0.7000. Gold (XAU) recovered early in Asia but came off as Oil fell below $80 in the US session. Risk aversion fell yesterday as Interbank lending rates lowered for the first time in weeks. Overall trading with a low of USD$832 and high of USD$852.50 before ending the New York session at USD$837 an ounce. Easy Forex http://www.easy-forex.com Easy-Forex makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites and the information contained does not take into account your personal objectives, financial situation and needs. Therefore you should consider whether these products are appropriate in view of your objectives, financial situation and needs as well as considering the risks associated in dealing with those products