Grace Cheng
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Thursday’s picture of the forex markets is a different one from the day before. The US dollar had rebounded yesterday against major currencies such as the Euro, Swiss franc, Japanese yen and the British pound after a fall Tuesday, but then with the media’s crowded coverage of the soon-to-be-worthless mortgage giants Freddie Mac (FRE) and Fannie Mae (FNM), and the rebound of oil prices Thursday, bullish USD sentiment faded and downside stops were triggered when forex trading entered the US trading session.
EUR/USD rose at least 150 pips from a low of 1.4740 to around 1.4900, and Euro bulls may aim for 1.4950-60. A decisive break above 1.5000 could see the currency pair target 1.5050. As for USD/CHF, it fell by the largest amount (at least 140 pips) since a month ago. Its nearest support is around 1.0820-30. Meanwhile, the British pound is having the luck of a better-than-expected UK retail sales data on its side, and it gained at least 170 pips from1.8610 to 1.8785. USD/JPY fell to a two-week low of 108.10 as traders took the opportunity to sell the carry pair in the environment of risk avoidance.
So far we have experienced quite a choppy market, and that’s also partly due to low trading volume this month, not to mention the up and down movement of crude oil prices.
Want another reason for the sudden USD decline today? Blame it on the rising oil prices.
Nymex crude oil for October delivery nervously jumped more than $6.00 in Thursday’s trading to more than $121.00 a barrel- the highest price reached since August 4. A number of factors are contributing to this oil jump, and the main reason is the renewed geopolitical tensions between the US and Russia. Russia is not happy at all (which is an understatement) that the US and Poland had signed a deal Wednesday to construct an American missile defense base in Poland, warning Poland last week that it would face the risk of a possible nuclear attack by Russia if it builds the US base.
Big bully Russia isn’t playing pretty, and with its violent war-like attacks on Georgia, traders are having concerns that oil supply to Europe could be disrupted, and hence to the US. Oil is also propped up by speculation that Saudi Arabia may restrict its oil production so as to stop the recent decline of oil prices, as suggested by the U.S. Energy Information Administration said in its weekly review of the oil market.
Confidence may be evaporating again in the financial markets, but the week isn’t over yet. Friday US morning, Fed chief Bernanke will be speaking on financial stability at Jackson Hole, Wyoming, so keep on top of that.
Economic Calendar For Friday:
UK GDP 0830 GMT
Fed’s Bernanke speaks on financial stability at Jackson Hole 1400 GMT
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This article has 4 comments:
- EUARTE
- 52 Comments
Aug 22 09:24 AMFor the US the answer is drill, drill and drill.
For the EU, it was warned by US, many years ago, not to depend on Russia for energy.
- David Martin
- 91 Comments
Aug 22 09:49 AM- OldLimey
- 140 Comments
Aug 22 11:16 AM- Georealist
- 430 Comments
Aug 25 07:12 PMEnjoy the drop we've had because interesting times are coming again to a theatre near us all.