Market Snap-shot

Written by Research | 20 September 2009

GBP/USD Reacts 

Cable weakness across the board remains intact. GBP/USD fell to 1.6230 posting a fresh intra-day low. During the American session the pair plunged more than 100 pips. At 1.6320 Cable has a key support, in case the pair falls below Greenback could gain momentum. The next support lies at 1.6200. Cable is heading toward a weekly loss of more than 400 pips and has fallen in the last four days.

The report that even the worse deficit reached 127 billion pounds in August from a year ago, and the steady rise suggests that the shortfall may breach Chancellor of the Exchequer Alistair Darling’s full-year forecasts for a deficit of 175 billion pounds.

The Swiss Franc ended slightly down on Friday against the Dollar but with strong gains for the week. USD/CHF tested 1.0275 during the American session but failed to break below. For the first time in five days the pair did not reach fresh lows for the year. In the last two weeks Greenback has fallen more than 300 pips. On the upside, USD/CHF has a resistance zone at 1.0320 and above at 1.0365. On the other side, below multi-month lows support lies at 1.0220.

Franc is also stronger against the Yen and Cable. GBP/CHF plunged form 1.6950 to 1.6715, posting a fresh 4-month low. The pair has fallen in the last five day accumulating a decrease of more than 550 pips. To the Yen, the Swiss rebounded in a daily uptrend line and rose for four consecutive day ending with a weekly gain of 150 pips. CHF/JPY is consolidating above 88.00.

EUR has gained over 50 pips against GBP, recording intra day high at 0.9039. RSI on the 60 minutes chart rings an alarm bell of overbought condition as that could be a first sign of reversal. Support are seen at 0.9000 ,0.8970 and 0.8935, while resistances are seen at 0.9055, 0.9080 and 0.9010

The US Dollar has failed to hold below 1.4700 and lost previous gains to the Euro. The pair ended down for the day but during the week gain more than 100 pips, accumulating an increase of 400 pips for the current month. The dollar was able to relieve the pressure of suffering its worst trend on recent record by clawing out the first bullish close in eleven consecutive trading days; but that does not mean the burdened currency is necessarily primed for a true reversal. While this currency is arguably oversold on a fundamental basis; the same drivers that ushered it to its yearly low last week are still in play. The pace of the economic recovery, growing financial concerns and a Fed struggling to keep pace are all prominent concerns when gauging the long-term health of the dollar; but all of that is overshadowed by the immediate and market-wide preoccupation of risk appetite.

A survey of investors found that the market was the most bearish on the dollar in 18 months. Where does this speculative grade come from? The economy is still dealing with an economic recovery and government deficits are a genuine concern; but most of the world’s largest economies are suffering with the same dilemma. The real weight on the dollar is the steady revival of risk appetite over the past six months. Following the necessary period of consolidation after the worst of the financial crisis, capital started to slowly work its way back into the speculative arena.

USD/JPY moved sideways during the American session between 91.00 and 91.50. Greenback failed to break above 91.60 and remains near multi-month lows. The Euro rose only a few pips against the Yen on Friday. EUR/JPY rose everyday of the week rising from 131.00 to 134.80

Markets in the U.S. ended Friday with moderate gains. The Dow Jones Industrial Average rose 0.35% on Friday and more than 2% form last week. Main stocks indexes also finished close to the highest level since October of 2008