Market Session Recaps
London Session
Fri, Nov 27 2009, 11:28 GMT
by Forex.com Research Desk
The market is taking a breather. Volatility had soared in early hours after the risk trade headed for the exits in thinned liquidity. It is likely to take at least a few days before the implications of the impact of a possible default from Dubai are properly digested but for the present it seems that the market is seeing this negative news as a blow to the global recovery but not one that will push it off course.
USD/JPY had dropped as low as 84.91 in Asian hours sparking talk of possible intervention from the Japanese government. Finance Minister Fujii said that he would make contact with European and US officials ''if necessary'', though he denied any knowledge of the MOF checking prices as had been rumoured in the market overnight. While intervention cannot be ruled out, in view of the unwelcome nature of currency strength in a country which is suffering deflation, the promises from the Federal Reserve that US interest rates will remain low for ''an extended period'' suggests there is a risk that trying to boost the value of the USD may be futile. This weekend, ECB President Trichet leads a contingent of Euroarea and EU officials to China. No doubt Japanese official will be watching closely to see if the Europeans can draw any further reassurances from the Chinese government over a move towards a revaluation in the CNY.
This would relieve some of the pressure on the EUR and the JPY caused by USD strength.
That said, given that Obama failed earlier this month to draw any promises from the Chinese, the market is coming to terms with the fact that China will drag its feet on this issue until external demand strengthens.
As the markets regained their poise in European hours and EUR/USD clambered back above 1.4900, cable bounced from a low at USD1.6273. Strong selling in GBP/JPY since yesterday has dragged cable significantly lower. Similarly AUD/USD had been forced lower by AUD/JPY. AUD/USD has turned higher this morning though fears that safe haven plays could re-emerge are likely to undermine the strength of any rally in the AUD for now.
Eurozone confidence data was better than expected this morning with economic confidence rising to 88.8. While this suggests that the recovery remains in place, the market was not in the mood to pay much attention to economic news this morning.
Gold and oil were among the markets to fall heavily overnight before a recovery in European hours. Both have been subjected to speculative inflows over the past few months and both are motivated by the price of the USD. A close for the Brent contract below the 76.00 area would weaken the technical picture.
Canadian Nov current account data are due this afternoon. There are no US data releases scheduled.
Published on Fri, Nov 27 2009, 11:31 GMT
London Session
Fri, Nov 27 2009, 11:28 GMT
by Forex.com Research Desk
The market is taking a breather. Volatility had soared in early hours after the risk trade headed for the exits in thinned liquidity. It is likely to take at least a few days before the implications of the impact of a possible default from Dubai are properly digested but for the present it seems that the market is seeing this negative news as a blow to the global recovery but not one that will push it off course.
USD/JPY had dropped as low as 84.91 in Asian hours sparking talk of possible intervention from the Japanese government. Finance Minister Fujii said that he would make contact with European and US officials ''if necessary'', though he denied any knowledge of the MOF checking prices as had been rumoured in the market overnight. While intervention cannot be ruled out, in view of the unwelcome nature of currency strength in a country which is suffering deflation, the promises from the Federal Reserve that US interest rates will remain low for ''an extended period'' suggests there is a risk that trying to boost the value of the USD may be futile. This weekend, ECB President Trichet leads a contingent of Euroarea and EU officials to China. No doubt Japanese official will be watching closely to see if the Europeans can draw any further reassurances from the Chinese government over a move towards a revaluation in the CNY.
This would relieve some of the pressure on the EUR and the JPY caused by USD strength.
That said, given that Obama failed earlier this month to draw any promises from the Chinese, the market is coming to terms with the fact that China will drag its feet on this issue until external demand strengthens.
As the markets regained their poise in European hours and EUR/USD clambered back above 1.4900, cable bounced from a low at USD1.6273. Strong selling in GBP/JPY since yesterday has dragged cable significantly lower. Similarly AUD/USD had been forced lower by AUD/JPY. AUD/USD has turned higher this morning though fears that safe haven plays could re-emerge are likely to undermine the strength of any rally in the AUD for now.
Eurozone confidence data was better than expected this morning with economic confidence rising to 88.8. While this suggests that the recovery remains in place, the market was not in the mood to pay much attention to economic news this morning.
Gold and oil were among the markets to fall heavily overnight before a recovery in European hours. Both have been subjected to speculative inflows over the past few months and both are motivated by the price of the USD. A close for the Brent contract below the 76.00 area would weaken the technical picture.
Canadian Nov current account data are due this afternoon. There are no US data releases scheduled.
Published on Fri, Nov 27 2009, 11:31 GMT