Market Enters U.S. Session Virtually Flat Despite Strong Moves Overnight

Overall, the dollar strengthened during the Asian session after most pairs gapped against the U.S. currency at the open, but gave up most of the gains during the European session. Most currency pairs have moved an impressive number of pips, passing the long-run daily ATR a couple of times.

The Euro (Eur/Usd) moved in a 200-pip range, trading between the first resistance level (1.3615) and the neutral pivot point (1.3440). During the Asian session, the euro struggled to close the new trading week gap but almost succeeded. During the European session, the pair gave back every pip lost earlier, and even advanced a little trying to establish a base above Friday's high.

The Pound (Gbp/Usd) is trading near the high of Friday's session and continues to try to break higher. The pound traded in the same fashion during the Asian session, but failed to move higher and tumbled almost 280 pips, closing the gap seen at the open. The U.K. economy shows signs of deflation at least when it comes to producer's input and output prices. Input prices, the price at which producers and manufacturers buy materials and fuel, fell in September by 1.2% from one month earlier. Output price, the prices at which manufacturers sell, also fell in September from one month earlier, declining 0.3%

The Aussie (Aud/Usd) started the new trading week with a huge gap to the upside, which was unable to be closed during the overnight session. The aussie fell 250 pips, up to the neutral pivot point (0.6550), but could find additional momentum to push any lower. During the European session, the pair moved higher and now is trading virtually flat in relation to the Asian session open.

The Cad (Usd/Cad) gained as much as 130 pips during the Asian session, but as the European session approached, the pair moved lower. For the moment, the cad is trading below the Asian session opening price, and has traded in a range of 180 pips in a period when the pair usually moves less than 30 pips.

The Swissy (Usd/Chf) posted gains during the Asian session, closing the Sunday gap and testing the low of Friday's session, but the pair moved lower as the European session approached. The pair traded in a 130-pip range during the overnight session, moving between the 1.1270 support area and 1.1400 resistance level. The Producer Price Index in Switzerland decreased in September by -0.5%. The Swiss PPI shows deflation for the time being, after producer inflation reached a new record previously in Switzerland. This is the second consecutive month in which the inflation rate has slowed.

The Yen (Usd/Yen) fell during the overnight session, despite S&P Futures posting impressive gains indicating a strong open on Wall Street this morning. The pair fell as much as 150 pips, near the neutral pivot point (99.75) during the overnight session. However, the yen recovered some of the lost ground and is now trading 50 pips below the Asian session open price.

From Record Declines to Record Gains

Current Futures: Dow +353.00, S&P +46.10, NASDAQ +58.25

European Trade: Equity traders seems to have completely erased the memory of last week's trading, when global markets posted the biggest weekly declines in decades, and are actively buying equities.

The story of the last few days has been record declines, which now seem to be heading for record gains, after the world's most influential leaders and central bankers decided to take strong measures to protect banks (and thus the world economy) from the credit crunch. Any news regarding the sub-prime and the world recession sparked erratic moves during the last few days, which saw the MSCI World Index losing 20%. Recent volatility reached a critical point, as the Vix Index, also known as the fear index, reached an all-time high of 76.94, five times more than in normal market conditions.

Today, the world markets opened the trading session in positive territory, with banking shares posting the biggest gains (something not seen for a while). The German Dax rose 295 points (6.50%) to 4,839.69, while the U.K. Ftse gained 251.38 points (6.39%) to 4,183.44. In Asian trading, the Australian S&P/Asx rose 220.00 points (5.55%) to 4,180.70. The Nikkei was closed for the Bank Holiday

Crude oil is posting gains for the first time in a few days. Crude oil for November delivery rose $3.18 (4.09%) to $80.88

Gold posted small gains during the overnight session, reflecting the dollar's trading pattern. Bullion for immediate delivery gained $4.00 (0.47%) to $863.00.

Previous Asian trade: In the last few days, large swings in sentiment took place in the global equity markets. In the last few weeks, the major indexes posted record declines, now the Asian markets opened with strong gains, while the U.S. Futures are currently posting toward a strong start down Wall Street.

This comes after a weekend, which Euro-area and Asian leaders said they will take every possible measure to protect the local banks, and even use tax-payers money to assure the bank's liquidity and its deposits. Up until now, the financial system accounted for the biggest declines in almost every trading session, today banks and other financial entities are posting strong gains. So far, the Australian S&P/Asx advanced 174.00 points (4.39%) to 4,134.70, whereas the Nikkei is closed today. The S&P and the Dow Futures have already gained 3%

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

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