Morning forex report
A wild and wooly session in Asian trading so far, with the USD under the cosh and stocks tumbling as the Fed lowered the discount rate to 3.25% from 3.50% while allowing prime dealers to access this lending facility. The Fed also increased the duration of the loans from 30 days to up to 90 days, and will allow banks to use ‘investment grade’ paper as collateral, more recycling help? The bailout of Bear Stearns (Friday) turned into a fire sale, with JP Morgan snapping the big bond broker up for a song. The FX market is taking the view that Bernanke will cut faster and deeper to try and help the economy out, but again, this is not a ‘cut rates and hope’ crisis, but rather bank officials are trying to bolster their balance sheets, so lending will take a turn in sentiment, not lower rates, in order to pick up (and time will help…). Still, the EUR/USD hit $1.59+ and the USD/YEN pushed to the Y95.70 area, key 76.4% retrace that will be interesting to see if this holds. The CHF is well and truly through 1.00, which will make skiing hols in the Rockies quite cheap for ‘gnomes’. The trend is your friend, $1.60 for $1.70 and then 1.80 is the risk in the EUR, Y90 for Y80 is the risk in the yen, but watch out as the AUD and the NZD are not firming, true, carry trades being whacked, but early warners of USD bottom fishing ahead? Hmm.. Use the $1.5680 area as supp. in the EUR/USD for 1.55 on a break, Yen is tempting sell on the ‘blink’ at 95.70, upticks through 101.40 will confirm a turn, miles away but… EUR/GBP through 0.78 leaves 0.80 and higher open, use 0.77 as the turn point here. Cable? Flat, blink at 2.04 was key…
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