Euro consolidates at 1.4250 after fall to 1.4130 - 10th August, Forex Update

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by: fxsolutions
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Date: Thu, 25 Aug 2011 Time: 5:48 AM
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Chris Advincula, Chief Market Analyst at FX Solutions (http://www.fxsolutions.com/), provides a forex trading market overview on 10th August 2011, including news of consolidation for the Euro.

"The Financial markets in the past two days of trading were extremely volatile as everyone knows, since the S&P downgraded the U.S. sovereign debt rating by one notch to AA+ from AAA with a negative watch. Global equities were hit hard and fell anywhere from 3 percent to as much as 7 percent, as fears mounted of a full-blown global economic slowdown. In addition, markets must contend with inflation fears and all this is compounded by the debt problems in the Eurozone countries.

The central banks were swift to act in the currency markets, and they have intervened in a few cases anonymously and had kept everyone guessing when they will intervene. This uncertainty effectively prevented a free-fall of the Euro, Sterling, Dollar-Yen, Dollar-Swiss and their respective crosses. Japanese and Swiss government officials made several comments last night warning about their intentions.

The euro dollar yesterday stabilized at the 1.4150 level and has rebounded since to 1.4280.
Sterling Dollar has a similar movement to the euro where it rebounded from 1.6274 to 1.6390.
Dollar Yen had a temporary 50 pip spike on rumors that the Bank of Japan intervened at 77.10
Dollar Swiss appears well supported at 0.7490 and rebounded as well to 0.7590.

The FOMC is scheduled to meet today and there had been some speculation that the Fed may have to perform another Quantitative Easing operation (QE3) to aid the U.S. economy after this stock market crash. There was contention on this notion however, and Wall Street predicts that the Fed may refrain from QE3 after they have recently completed a $600 billion QE2 in June.

In addition to the sovereign downgrade, S&P also downgraded Fannie Mae and Freddie Mac. These two infamous companies are the primary underwriters of U.S. mortgages totalling almost $6 trillion in value, and they have become the new targets of the trigger-happy S&P. Their credit rating has been downgraded from AAA to AA+, which added to the negative sentiment in the global financial markets.

China's CPI came out today, and it wasg higher-than-expected, at 6.5% versus the estimated 6.4%.
Aussie dollar immediately sold off from 1.0050 to parity and broke this level to 0.9927, however it was well bid at that level as the Aussie yen rebounded and was the preference of they yield hunters or carry traders.

Nikkei is down 209.21 points to 8,888.35 (-2.30%)
Hang Seng is down 1,232 points to 19,258 (-6.01%)
S&P ASX is down 3.90 points to 3,982 (-3.90%)
Shanghai is down -17.04 points to 2,509.78 (-0.67%)"

Keep track of all forthcoming market announcements and dates with FX Solutions' Economic Calendar at http://www.fxsolutions.com/learning-tools/economic-calendar.asp

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