Major Pairs Advanced Overnight, Now Looking At The U.S. Open

Overall, the currency market has been active overnight, as most major pairs gapped at the start of the new trading week. In the early Asian session, when the futures market was trading slightly in the red, the dollar was showing some strength in the currency market. However, as the futures market turned into positive territory, the majors started to post strong gains against the greenback. The economic calendar is light today and the only thing left for the currency market to wait on is the U.S. session open, which sometimes reverses trends set earlier.

The Euro (Eur/Usd) managed to find a bottom in the early trading hours near the Sunday open price, and since then the pair has moved higher. At this point in time, the pair has gained 130 pips, but has started to move sideways ahead of the U.S. open.

The euro-area trade deficit was released at 5.7B in September, the same as one month earlier (revised from -6.1B) and in-line with analysts’ expectations. In September 2008 compared with August 2008, seasonally adjusted exports rose by 2.2% and imports by 2.1%.

The Pound (Gbp/Usd) bounced between the neutral pivot point (1.4785) and the 1.4650 area, where the pound bottomed, during the Asian session. During European trading hours, however, the pair surged higher breaking above the neutral pivot point, and moving close to the 1.49 area.

The Rightmove house price index for the month decreased to negative 2.9 percent, month over month in November. This is following Octobers 1.0 percent decrease. House prices in the U.K. have decreased by 6,712 pounds to an average price of 222,979 pounds for the month. In annual terms, the average price of a house in the U.K. has decreased by 7.1 percent. House prices in London have fallen by 5.4 percent yearly, and 1.3 percent for the month.

The Aussie (Aud/Usd) gained a little more than 100 pips since the new trading day started and is now trading near the neutral pivot point. In the last period, the aussie traded between very well defined support and resistance areas, unable to break decisively above or below those established levels.

Australian retail turnover in the third quarter, adjusted for inflation, rose 0.1 percent in the third quarter. This is sharply lower than the 0.4 percent that analysts had been expecting. Retail sales for the second quarter were revised to show a decrease to 0.2 percent from the initial 0.6 percent fall.

The Cad (Usd/Cad) fell 100 pips overnight, after it tested the 1.24 area at the beginning of the Asian session. The cad failed to break through this same resistance area in the last few days. Right now, the cad trades above the neutral pivot point (1.2280), 60 pips above the 20-day moving average.

The Swissy (Usd/Chf) bounced from the 1.20 area in the early Asian session and since then has fallen 60 pips. The swissy keeps trading in tight channels lately, most of the day just bouncing between the resistance and support areas.

The Yen (Usd/Yen) closed the Sunday gap and posted some strong gains in the overnight session, after it had bottomed near TheLFB S1 (96.05). During the European trading hours, the pair failed a test at the 20-day moving average, again, which has held firm lately

Japanese growth contracted by 0.1 percent during the third quarter, which was below market expectations for a 0.1 percent increase. On an annualized basis, the GDP for Japan fell by 0.4 percent in spite of expectations of a 0.1 percent increase. In nominal term, the GDP contracted by 0.5 percent, quarter over quarter. The GDP deflator also saw a decline to 0.6 percent, despite expectations for it to come in at a 0.5 percent drop. Japans tertiary industry activity index decreased 0.6 percent for September. This was in line with analysts’ expectations for the month

European Markets Open Cautious After G20 Meeting

Current Futures: Dow +93.00, S&P +11.90, NASDAQ +13.75

European Trade: Asian shares traded mixed during the overnight session, and European markets are currently trading in the same fashion, after the G20 disappointed the financial world by failing to come to a common decision to stem the credit crunch effects. U.S. futures advanced in the overnight session, despite trading slightly below the break-even line, earlier in the session.

The Japanese Nikkei, surprisingly, traded higher in the overnight sessions. The Japanese index rose, despite a report showing that the economy is now in a recession. This would be the first recession in Japan since 2001, when the IT bubble burst. The Nikkei gained 60.19 points (0.71%) to 8,522.58. In Australia, the S&P/Asx fell 95.10 points (2.54%) to 3,653.00. European shares opened cautiously, as the Dax gained only 2.40 points (0.05%) to 4,712.64, while the Ftse fell 2.55 points (0.06%) to 4,230.42.

A survey taken by the National Association for Business Economics shows the U.S. economy will contract by 0.2% in 2009, while the Euro-area, U.K., Canada and Japan’s economies are already in a recession (or are on the verge). Some economists foresee the unemployment rate rising to 7.5%, even though, just one month earlier, the same analysts saw a 6.4% rate. With the construction sector and the stock market in a continued state of decline, it is no surprise the unemployment rate will rise in the coming year. In an economy that relies on spending, above anything else, the drop seen in the construction sector and in the stock market would equate to a full-blown slowdown.

Crude oil extends the declines seen in the last few months, on demand concerns. Crude oil for December delivery fell $1.06 (1.86%) to $55.98.

Gold posted a small gain, even though was trading lower earlier in the session. Bullion for immediate delivery gained $2.40 (0.32%) to $744.90.

Previous Asian trade: Asian shares opened the trading session much lower, after two reports saying the Japanese and Hong Kong’s economies are back in a recession. The Nikkei opened the new week in the red, but it now seems the market recovered and trades above the break-even line. The equity markets were also dragged lower by the G20 hesitation to choose a measure to help the world’s economy revive.

If the developed countries are in near a recession, some other countries are near bankruptcy. Pakistan is just the latest nation on the list of countries looking for an IMF loan. Pakistan is currently in talks for a $7.6 billion loan, to help the economy revive, as investors fear that Pakistan will have to default on their debt. It now cost $2.5 million dollar to protect from default a $10 million bond issued by the Pakistan’s Government. The sum needed for default protection is a few times bigger than the amount needed to protect junk corporate debt in Europe or the U.S.

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

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