Overall, it looks like the currency market is again in risk-aversion mode. The dollar and the yen strengthened against every other major currency, while the equity markets were sold heavily overnight. The majors moved on very strong momentum since the new trading week began, but there were a few exceptions. Ahead, the economic calendar is light in the U.S. session, but traders will remain focused on any possible news regarding GM’s bankruptcy.
The Euro (Eur/Usd) rose 60 pips during the Asian session, and closed the weekend gap. However, once that was accomplished, the pair started to move lower, and fell to TheLFB S1 (1.3165) during the European session. Later this week, the ECB is expected to reduce the interest rate by 50 basis points.
Consumer confidence in the Euro-area fell to -34, the lowest read since the index first started. The very poor read points to a very clear contraction in the Euro-area. The last time the euro-area consumer confidence report was above the zero benchmark, pointing to an optimistic feeling among consumers, was at the end of 2000. In addition, almost every indicator gauging the overall sentiment in the Euro-area dropped to a record low, or close to it
The Pound (Gbp/Usd) fell 90 pips since the Sunday open and managed to break below the 50 and 20-day simple moving averages overnight. During the last four days of trading, the pound has lost 550 pips, as the government seems unable to fund a second stimulus plan.
Net lending to individuals increased slightly in February. The number came in at £1.3B, as analysts’ expected. The number released for the month of January was also revised higher, to £1.2B. At the same time, the report showed that the number of loans approved for home purchase rose in February, to 38K.
The Aussie (Aud/Usd) fell 120 pips during the overnight session, as risk-aversion and a falling commodity market dragged the pair lower. Currently, the aussie is struggling to break back above the 0.6800 area which is now acting as resistance since being broken overnight.
New home sales have increased by 3.9 percent in February. This is the second consecutive monthly increase according to the survey that is published by the Housing Industry Association in Australia. Meanwhile, pre-contract sales of apartments and homes fell for a fifth consecutive month as a result of leery investors who are concerned that the credit crunch may constrain activity.
The Cad (Usd/Cad) traded between the 50 and the 100-day simple moving averages in the overnight session. The cad opened near the 100-day SMA, the resistance area of the last few days. Since then, the pair rose 100 pips until it hit the 50-day SMA and the 1.2500 area.
The Swissy (Usd/Chf) moved strong during the first few minutes of the Asian session, but the pair lost some of its steam soon after. The swissy fell 50 pips from the Sunday open, closing the weekend gap, but then rose again during the European session.
The Yen (Usd/Yen) plunged 190 pips during the overnight session. The pair broke with ease below the 20-day simple moving average, and at the same time below the 97.00 support level. Looking ahead to the U.S. session, if equities continue to fall the outlook for the pair will remain to the downside.
Industrial production for February has risen slightly from the lows achieved in the previous month. Economists had been expecting a -9.1 percent decline when in fact the report was released slightly worse off, at -9.4 percent for the month of February. The index is still off by 38.7 percent from one year ago. The industries which contributed to the decline were transport equipment, general machinery, and electrical machinery.