A Sluggish European Session

Overall, the dollar strength that shaped the Asian session lost its grip during early European trading. There have been limited economic reports this morning and coupled with the U.K. being on holiday, the European session has so far been sluggish.

The Euro (Eur/Usd) fell 90 pips at the opening of the Asian session on strong volume. Since then, the pair has recovered some ground but continues to trade just under TheLFB S1. The daily chart shows the pair is trading at a substantial distance from any moving average.

The Pound (Gbp/Usd) broke the low of the previous session and fell 100 pips until TheLFB S1. 1.8400 held as support. Today, the London session is closed but lately, when a region has been closed, strong moves have occurred. It would be wise not to ignore the pair today.

The Aussie (Aud/Usd) tested the 0.8610 area overnight, but the pair held firm and remained above that level. The support level has held the pair for 9 days, rejecting any attempts to break lower. The aussie has tumbled 1000 pips in 4 weeks.

The Cad (Usd/Cad) found limited strength in the early Asian session, breaking higher, but the pair soon returned to the normal pattern of trade during the overnight session: moving sideways without any real momentum. Since the new trading session begun, the pair advanced less than 30 pips, while crude oil, the commodity that backs this pair, traded flat.

The Swissy (Usd/Chf) made a quick test of the 1.1030 area during the Asian session, but the lack of liquidity kept the pair from breaking higher. The daily chart shows the relative strength index still remains very close to the overbought line, while the pair is trading 250 pips above the closest moving average, the 20 day.

The Yen (Usd/Yen) traded in a 50-pip range during the overnight session, unaffected by the strong gains in the equity markets during the Asian session. After a quick breakout to the upside, the yen started to move lower and is now trading virtually flat, at the same level as the Asian session open.

European Session Overview Shares in Europe extending a two week loss

Current Futures: Dow -31.00, S&P -4.60, Nasdaq -5.75

European Trade: European shares opened the first trading session of the week in the red, after the biggest decline in the oil market caused commodity stocks to appear overvalued. At the same time, Asian shares closed the trading session recording the biggest gain in recent weeks, after the decline in oil shed some worries about inflation running amok. The weakening Japanese yen, together with cheaper crude oil, which reduces shipping costs, have made Asian exporter stocks rise.

The Asian shares advanced as investors saw companies posting profits in the coming quarters. The Nikkei advanced 212.62 points (1.68%) to 12,878.66, posting gains for the first time in a week. The Australian S&P/Asx advanced 83.50 points (1.69%) to 5,014.90, the biggest gain in the last three weeks, with banks the biggest winners.

In Europe, commodity stocks, especially energy companies, suffered the biggest losses. The German Dax declined 24.95 points (0.39%) to 6,317.47. The U.K. FTSE will be closed today in observance of the summer Bank Holiday. European equities have been trading lower for almost two weeks, as credit crunch concerns continues to erode investors' confidence.

Gold fell for the second day on the strength the dollar posted during the overnight trading session. Bullion for immediate delivery fell $9.20 (1.10%) to $824.30.

Crude oil is trading flat as the market sees the supply disrupted by political tensions. Crude oil for September delivery declined $0.33 (0.29%) to $114.26

Previous Asian trade: The strength the dollar posted lately has had some varied effects. One of them was to send crude oil valuation much lower and now, global equities are certainly enjoying it. Asian shares rose on speculations that companies will have a much better balance sheet following the decline in oil prices. Lower oil prices usually means a lower input for the production prices, raising the companies' profit margin. At the same time, cheaper oil means a bigger purchasing power for the consumer. The rumor that Lehman Brothers Holdings Inc. will get a cash infusion and ultimately will be saved made the financial sector advance in the Asian session. Some analysts say Lehman will follow Bear Stearns' fate, and go into bankruptcy; however, the money market signals that the credit crunch is far from over, and things are heading for worse it seems.

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