Currency Pair Overview

Overall: Some of the major pairs started to trend in the European session, despite the currency market coming to a standstill during the Asian trading hours. The dollar and the yen are stronger as the entire market is in risk aversion mode, closely following the developments in the equity markets. Stocks were volatile after the day's data indicated the economy was sinking into a deeper recession and information regarding a possible bail-out package for Detroit's automakers came to light.

In U.S. economic news, the index of leading U.S. economic indicators fell in October for the third time in four months. The Conference Board's gauge dropped 0.8%, more than forecast, after rising 0.1% in September. The Philadelphia Fed said its index of current manufacturing activity decreased from -37.5 in October to -39.3 in November after falling a dramatic 41 points last month, its lowest level since October 1990. Meanwhile, the Labor Department said there were 542K new claims for unemployment benefits last week, an increase of 27k from the previous week's revised figure of 515,000 and the largest amount of new claims in 16 years.

The Euro (Eur/Usd) moved in a tight range overnight, but managed to post a small gain since the close of Wednesday's U.S. session. The euro's trading range was 50 pips overnight, trading between Wednesday's close and the 20 day simple moving average. The pair declined in N.Y. once it became clear that a bail-out deal for the automakers would be delayed

The German PPI was released at 0.0% for the month of October, deviating from the market's expectations of -0.6%. However, the year-over-year read still stands at 7.8%. The largest upward pressure came from energy products in the prior months, but now this trend seems to be reversing

The Pound (Gbp/Usd) tumbled almost 150 pips in the European session after trading in a channel for most of the Asian session. During its downtrend, the pair broke below the 1.49 level, which acted as an important swing point in the last few days. The pair was looking to finish near session lows as stocks sold off in the afternoon.

Retail sales in U.K. declined slightly in October, coming in at -0.1%. Last month's number, for September, was revised higher, from -0.4% to -0.5%. In October, the M4 rose by £42.9 billion, or 2.3%, much more than what analysts had predicted. Year over year, the M4 growth rate is standing at 15.1%. The long-run average of the M4 annual growth rate is approximately 13%. M4 lending rose by £39.1 billion in October, seasonally adjusted.

The Aussie (Aud/Usd) fell 100 pips overnight, totaling a little more than 200 pips lost in the last two days of trading. Right now, the pair is trading just below TheLFB S1 (0.6285), an area that acted as strong support in the past. As with the euro and pound, the pair declined after investors sold stocks.

The international environment has weakened considerably. The Bank's forecasts incorporate a projection that average growth in Australia's major trading partners will slow sharply from around 3.75 percent in 2008 to around 2.25 percent in 2009. This compares with average growth of 5.25 percent in 2006 and 2007. The forecasts for the domestic economy are based on the technical assumption of a cash rate of 5.25 per cent throughout the forecast period to June quarter 2011. Growth in non-farm GDP is expected to slow from 2.50 percent over the year to the June quarter 2008 to around 1 per cent over the year to the June quarter 2009.

The Cad (Usd/Cad) traded without much direction or momentum during the Asian, but started to strengthen, as the European session got underway. The pair gained 30 pips during the European session, extending gains made on Tuesday and Wednesday. The pair rose sharply in N.Y. as crude made nearly a 9% decline.

The Swissy (Usd/Chf) moved sideways during the overnight session in a very tight channel. However, the pair feebly attempted to break higher in the European session but could not muster the momentum to sustain the move. That changed in N.Y., and the pair rose sharply as stocks declined.

The Swiss trade balance surplus rose in October from one month earlier. Compared with the estimated number, the trade balance was released higher, 1.84B compared with 1.30B. The report for September was revised slightly higher from, 1.44B to 1.46B. Even though the monthly trade balance still recorded a surplus, the number for October is smaller than the June and July data, when the Swiss trade balance reached record highs. The emerging economies are responsible for a large bulk of orders.

The Yen (Usd/Yen) traded in a tight range after the Asian session opened but broke lower mid session, continuing the downside trend that started during Wednesday's U.S. session. The pair broke below the crucial 95 level, as stocks were sold after lawmakers failed to agree on an immediate loan package for Detroit's big three automakers.

Japan has unexpectedly posted a trade deficit of 63.9 billion yen in October. This is well below market expectations for a 73.6 billion surplus. Imports grew by 7.4 percent year over year. Meanwhile exports were down by 7.7 percent. Seasonally Adjusted, the trade balance was -175.6 billion yen, which is much lower than Septembers 33.0 billion deficit.

Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com

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