Majors Hovering Above The Current Lows

Overall, the low yielding currencies continue to make the rules in the last day of trading. Markets are crippled by fear, something that empowers the dollar and the yen from reverse money flows. Most of the majors are trading just a few pips above the current lows, and chances are these lows will be tested before seeing some upside action. Any upside moves will have to come only with the support of positive stock markets, but this does not look probable right now.

The Euro (Eur/Usd) struggled almost all day long to post some gains, but as the markets were heading towards the close of the U.S. session, the euro started to move lower. At the closing bell, the euro declined a limited 30 pips. The downside move was probably limited because the euro is trading just above an important support area, which holds the pair from making any new record lows.

The Pound (Gbp/Usd) closed the trading day, shedding a little more than 200 pips. Unlike the other majors, the pound started to move lower early in the European session. If the pound falls another few pips, it will test the 1.46 area, which is the low of the current year. In the Asian session, the pound traded virtually flat.

The Aussie (Aud/Usd) posted some very strong declines yesterday, as the high yielding currencies were liquidated. Sources say the decline would have been much stronger, if the RBA would not have intervened to support the currency's value. Both the cad and the aussie are heading towards the high and the low of the current year, respectively.

The Cad (Usd/Cad) tumbled in the U.S. session yesterday, even though in the earlier sessions the pair had barely moved. At the end of the day, the pair gained 420 pips, running out of pivot points by the closing bell. In the Asian session, the cad gave back a very small number of pips.

The Swissy (Usd/Chf) moved in the overnight session in a very tight channel, and only during the late European session, the pair managed to break higher. The swissy closed the day advancing 115 pips, after it tested earlier TheLFB R2 (1.2275).

The Yen (Usd/Yen) tested the 93.50 area yesterday, and plunged more than 200 pips. However, the pair posted some small gains ahead of the closing bell and closed the last day only 170 pips down. In the Asian session, the yen traded side-ways, waiting for the BoJ interest rate decision.

The Bank of Japan decided unanimously to keep the Overnight Call Rate at 0.30%. This comes after the BoJ had cut rates at the last meeting from 0.50% to 0.30%, while the market expected a full 25 basis points cut. With the lowest rate amid industrialized countries, economists argue that the low interest rate will not provide strong enough relief to the Japanese economy, and that the central bank has mostly depleted its powers to influence the business cycle by using monetary policy. The Bank of Japan announced tonight that they are planning to expand their collateral base (the financial assets banks pledge for short- term loans) to also include corporate bonds.

Asian Shares Drop For A Fifth Day

Asian trade: Asian shares are down for the fifth consecutive day on concerns the global recession will last much more than expected. U.S. markets extended the declines seen in the last few days, touching a multi-year bottom.

The U.S. equity market continued to decline yesterday at a very strong pace. The S&P 500 touched an 11-year old bottom yesterday, after it had plunge during the trading session 54.15 points (6.17%). In the same time, the Dow fell 444.99 points (5.56%). Even though the declines were widespread in both the U.S. and Asian markets, the biggest declines were seen in the commodity stocks, as oil touched the lowest value since mid 2005. In the Asian session, the Nikkei tumbled 170.93 points (2.22%) to 7,532.11. In Australia, the S&P/Asx fell 91.50 points (2.73%) to 3,261.40. So far this year, Asian stocks shed more than 50% of their value.

Yesterday, a report showed the U.S. weekly unemployment claims approach a 26-year old high. The report said that 542.000 new persons were looking for unemployment benefits in the week to Nov 8. There were 4.012 million staying on benefits, and this number is expected to increase in the coming months. A report showed that manufacturing in the Philadelphia region reached an 18-year low. Because of these very poor releases, investors flew to the safety of treasuries, sending the longer-term yields to record low levels.

Crude oil fell to the lowest level since mid 2005, on concerns about demand. Crude oil for December delivery fell $0.20 to $48.48.

Gold posted some small gains in the Asian session. Bullion for immediate delivery gained $2.30 to $747.35.

Previous Wall Street trade: Democratic Congressional leaders sent Detroit's big three automakers home without a deal, but left the door open to future discussions based on Detroit's ability to craft a detailed business plan which would satisfy lawmakers.

'The executives of the auto companies have not been able to convince the Congress or the American people that this government bailout will be its last,' Senate Majority Leader Harry Reid said at a news conference.

'Until they show us the plan, we cannot show them the money,' House Speaker Nancy Pelosi added.

She and Reid said Congress would return to work in early December to vote on legislation if General Motors, Ford Motor and Chrysler produce an acceptable plan. 'We're prepared to come back into session the week of Dec. 8 to help the auto industry,' Reid said. 'But only if they present a viable plan.'

Stocks rose earlier in the session as rumors saying the automakers would receive a deal today surfaced but the brief rally collapsed after it became apparent that would not be the case, at least for now.

'A deal for the automakers is not likely to make a huge difference to the market because it's all about earnings now,' said Matthew Carniol, chief currency strategist at TheLFB-forex.com.'Earnings declined 50% in the 2001 downturn so it's reasonable to believe they will fall as least that much now. The P/E ratio could go to 10 and with earnings sitting at $40-$45, there's your 400 to 450 on the S&P. That's really what we're looking at.'

Previous European trade: In Europe, markets opened in the red, having bank and financial companies leading the declines. The German Dax fell 126 points (2.91%) to 4,227.39, while the U.K. Ftse slipped 73.82 (1.84%) to 3,931.86

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

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