Forex Market Issues and Risks

Federal Reserve cut interest rate by 50bp to 1%, the lowest since 2004

News and Events:

The Dollar posted a large fall on Wednesday, with the Federal Reserve delivering an interest-rate cut, easing investor concern about the world economy and reducing the need to repatriate Dollars from riskier markets. On another hand, the Yen and the Swiss franc rose against the Dollar as market sentiment remained fragile against a deteriorating global economic backdrop.

The Federal Open Market Committee lowered its key interest rate by a 50bp to 1%, the lowest level since 2004, in a move to prevent a widening financial market crisis from tipping the US economy into a prolonged recession. US stocks market ended slightly lower, after a huge gain on Tuesday, and a slide to a five year low earlier this month. The Fed is expected to lower benchmark interest rates further in the months ahead given a downbeat economic outlook in the Fed's policy statement on Wednesday. Interest-rate futures contract prices reflect another 25bp rate cut at the December Fed meeting, which would take the federal funds rate to 0.75% for the first time since 1958, with an outside chance that rates could be cut to 0.50%.

Yesterday EurUsd was up 1.28& at 1.2958. EurJpy rose 0.51% to 126.42, well above Monday 6-year 113.63 low. UsdJpy was down 0.65% at 97.57, having gained 5.49% on Tuesday. UsdChf dropped 1.61% to 1.1328. GbpUsd rose 1.73% to 1.6366. GbpJpy rose 1.07% to 159.68.

Today Key Issues:

• 08:45 EUR September French Producer Price -0.4% vs -0.5% (mom)
• 09:30 DKK September Unemployment 1.6% vs 1.76%
• 09:00 EUR October German Unemployment rate 7.5% vs 7.6%
• 10:00 NOK September Retail sales -0.4% vs 0.6%
• 10:00 EUR October Euro zone Business climate -1 vs -0.79
• 10:00 EUR October Euro zone Consumer sentiment -20 vs -19
• 10:00 EUR October Euro zone Economic sentiment 86 vs 87.7
• 10:00 EUR October Euro zone Industrial sentiment -14 vs -12.7
• 10:00 EUR October Euro zone Services sentiment -2 vs 0
• 12:30 USD Q3 Core PCE prices adv. 2.5% vs 2.2%
• 12:30 USD Q3 GDP advance -0.5% vs 2.8%
• 12:30 USD Q3 GDP deflator 4% vs 1.3%
• 12:30 USD Q3 GDP sales advance -1.9% vs 4.4%
• 12:30 USD weekly Initial claims 475k vs 478k
• 12:30 USD Q3 PCE price index 5.4% vs 4.3%
• 12:30 CAD September Producer prices -0.4% vs -0.2%
• 12:30 CAD September Raw materials prices -0.4% vs -0.2%
• 19:15 USD 19:15 USD Fed's Yellen speaks in Berkeley, California

The Risk Today:

EurUsd Market dropped as low as 1.2330 early this week. On the downside, further weakness will open the way down to trendline support 1.2208. Next long-term support holds 1.1640 November 2005 low. Further support holds 1.0739 September 2003 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 14th October high.

GbpUsd Market hit 1.5265 low last Friday. This move was following previous 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. Strong support holds 1.5279 Monday low. Initial support holds 1.5939 yesterday low. Deep 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 1.7144 (38.2% retracement of 2.0158 – 1.5265 3-month drop). Further resistance holds 1.7144 (50% retracement).

UsdJpy Market broke down the lower trendline on September-October downtrend accelerating drop to 90.91 on Friday. Further pressure might open the way down to 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. 15th August high.

UsdChf Market posted new high 1.1749 last week. Further advance may open the way to 1.1895 October 2007 high and strong resistance. On the downside, recent weakness below 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.

ACM FOREX

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