Majors Flat Around Important Price Areas

After an active Asian session the currency market moved back to the break-even area during early European trading hours, and as the U.S. market approached the major pairs started retracing the ground gained earlier in the session. Most pairs are lacking a clear direction or trend.

Over the last few days of trading the dollar index has been in a clear uptrend, helped by positive macroeconomic data coming from the U.S. economy. This forced to the market to revalue the strength of the dollar index, something that will continue until fair value is found off the economic calendar this week.

The euro (Eur/Usd 1.4650) swung around the 100-day moving average in Monday morning trade, but so far the pair has failed to move decisively either way. Over the last two weeks of trade the euro has been showing a bearish momentum, which has driven the pair nearly 500 pips lower. This was triggered by Greek bond downgrades and by strong signs of economic change coming from the U.S. economy.

The pound (Gbp/Usd 1.6250) has spent the last four days trading in a 150-pips range, lacking a clear direction. Today was no exception, with the pound testing the 1.6200 and 1.6350 areas, the swing points of the last few sessions. If the pound can follow (the downbeat) sentiment seen in the market lately, the pair might break below the 1.6200 support area, which could bring a strong wave of sell-orders into the market.

The aussie (Aud/Usd 0.9105) lost 50 pips throughout the Asian session, at a time when the other major pairs were trading flat or actually advancing. On the daily chart, the aussie is trading above the 0.9000 area, which has been holding the market for almost a month now. A break below this level will probably send the aussie much lower, but this can only happen on a wide-sell off, which will include equities and commodities going lower.

The cad (Usd/Cad 1.0635) is currently trading in the 1.0650 area, near Friday's close and near a trend-line that has been holding the market since early September. A break above this price point will be a major event for the Canadian dollar, and will signal that the pair is in a bull run. However, as with the aussie, a break above this area can only come on broad-dollar strength, especially coming from the commodity market.

The swissy (Usd/Chf 1.0320) saw thin trading volumes overnight, which allowed the pair to follow the market, and nothing more. On the daily chart, the swissy is trading just below the 100-day moving averages, the same place where it topped in Friday trade. However, the real test will come in the 1.0400 area, near the swing point low formed on Dec 2008. If the dollar index can continue the uptrend seen lately, it is very likely that the swissy will test the 1.0400 area a number of times.

The yen (Usd/Jpy 88.55) is heading lower once again, as deflation is the main word in the Japanese economy. Since the day trading started, the yen lost 70 pips, and managed to break below the intra-day trend-line that has been holding the market over the last two days of trading. From a fundamental point of view, the yen's direction of trading is mixed, because deflation fears pus downside pressure on the Usd/Jpy Around these low values, some say the BoJ is likely to intervene rather soon.

Dubai World Bailout Lifts Markets

Equity Futures: Dow +54.00. S&P +8.80. NASDAQ +10.00. Japanese Nikkei -30.00. German Dax +9.00.

European Trade: The news that Dubai World received a $10 billion bailout from Abu Dhabi had a strong effect in the overnight markets. It helped global equity futures jump to a new yearly high, with S&P futures breaking above the 1110.00 area for the first time in 4-weeks.

The same positive momentum was seen during the European open, helping the regional indexes advance for a third consecutive day. Since the session started, Germany's Dax advanced 1.10%, France's CAC 40 index rose 0.80%, while Switzerland's SMI gained 0.44%. In Eastern Europe,  trading volumes were subdued with the emerging market shares rising on average 0.45%, less than their Western counterparts. One exception was the Greek stock market, which advanced 2.10% on the Government's plan to reduce the fiscal deficit. Last week, Greece's bonds were downgraded following the Government's inability to pursue a responsible fiscal policy.

Overnight, news emerged that Abu Dhabi will provide $10 billion to Dubai World, in order for the company to meet its current financial obligations, including the $4.1 billion bonds issued by Nakheel, that are set to mature today. Previously, Dubai World said it was looking to delay payments on approximately $26 billion bonds, including the debt issued by the property developer Nakheel.

Sector Moves: Other than the healthcare companies, each of the sectors represented in the European markets advanced in Monday morning trade. The news that Dubai World received a $10 billion bailout had a positive influence among European companies, especially among the ones that have a high exposure to UAE.

The London Stock Exchange company, 20.6% which is owned by Borse Dubai and 26.1% by Qatar Investment Authority, surged 6.80%, and was the best gainer in the U.K. FTSE. Following the London Stock Exchange was Standard Chartered, which advanced 3.95% and HSBC. Standard Chartered is one of the banks with the biggest credit exposure in the Middle East.

Economic Moves: Clear

Crude oil was recently trading at $69.50 per barrel, lower by $0.35

Gold was recently trading higher by $1.30 to $1121.20.

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

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