Market Crashes on Slowing Recovery Fear

Written by Anthony Darvall

U.S. Dollar Trading (USD) surged higher throughout the day as safe haven flows helped out the world's reserve currency. Stock markets around the world fell back 2% on a combination of US growth downgrades and renewed Eurozone banking concerns. Junes Trade Balance blew out to 49bn vs. 42bn previously. In US stocks, DJIA -265 points closing at 10378, S&P -31 points closing at 1089 and NASDAQ -68 points closing at 2208. Looking ahead, Weekly Jobless Claims are forecast at 465k vs. 479k previously.

The Euro (EUR) was the worst hit currency in the market falling 3 big figures as news emerged that some Irish banks that had passed the stress test would need capital from the Irish Government. Combined with heavy EUR/JPY selling the Euro was sold for most the of the day with little reprieve. EUR/USD traded with a low of 1.2828 and a high of 1.3162 before closing at 1.2880. Looking ahead, June Industrial Production is forecast at 0.7% vs. 0.9% previously.

The Japanese Yen (JPY) USD/JPY broke to fresh 15 year lows under Y85 last night as heavy cross selling and risk aversion supported Yen strength. EUR/JPY broke below Y110 and GBP/JPY fell below Y134 under heavy selling. Japanese August Machine Orders at 1.6% vs. 5.5% forecast. Overall the USDJPY traded with a low of 84.71 and a high of 85.49 before closing the day around 85.20 in the New York session.

The Sterling (GBP) heavy selling on Tuesday was backed up on yesterday with risk off selling and a downgrade of economic growth forecasts from the Bank of England. UK employment growth was solid however with July Claimant Count falling further to -3.8k and June Unemployment rate holding at 7.8%. Overall the GBP/USD traded with a low of 1.5612 and a high of 1.5836 before closing the day at 1.5670 in the New York session.

The Australian Dollar (AUD) the risk sensitive currency was sold aggressively throughout the day breaking back below 0.9000 and running stops to the lower 0.8900 levels. AUD/JPY fell back below Y77 supports and is heavily correlated with global stock markets. Overall the AUD/USD traded with a low of 0.8931 and a high of 0.9125 before closing the US session at 0.8950. Update July Employment Change +23.5k vs. +20k forecast, Unemployment Rate jumps to 5.3% vs. 5.1% previously.

Oil & Gold (XAU) was better supported then most currencies against the greenback as the precious metal received its own support as a safe haven asset. Overall trading with a low of USD$1192 and high of USD $1208 before ending the New York session at USD$1200 an ounce. Crude Oil fell sharply as commodities in general fell for a 5th day on global growth and demands concerns. WTI Oil Closed -$2.23 at $78.02 a barrel.

TECHNICAL COMMENTARY

CurrencySup 2Sup 1SpotRes 1Res 2
EUR/USD1.25231.27771.28851.31871.3334
USD/JPY83.5084.7085.0086.6688.12
GBP/USD1.54001.55821.56651.58611.5999
AUD/USD0.87380.88960.89450.92220.9389
XAU/USD1157.001190119812111218.00
OIL/USD75.007777.507880.00

 

Euro - 1.2885

Initial support at 1.2777 (38.2% retrace of 1.1877-1.3334) followed by 1.2523 (July 13 low). Initial resistance is now located at 1.3187 (August 11 high) followed by 1.3334 (August 6 high)

Yen - 85.00

Initial support is located at 84.70 (August 11 low) followed by 83.50 (June 1995 low). Initial resistance is now at 86.66 (August 3 high) followed by 88.12 (July 28 high).

Pound - 1.5665

Initial support at 1.5582 (23.6% retrace of 1.4231-1.5999) followed by 1.5400 (July 26 low). Initial resistance is now at 1.5861 (August 11 high) followed by 1.5999 (Aug 6 high).

Australian Dollar - 0.8945

Initial support at 0.8996 (July 23 high) followed by the 0.8738 (July 22 low). Initial resistance is now at 0. 9222 (Aug 6 low) followed by 0.9389 (April 12 high).

Gold - 1198

Initial support at 1190 (Aug 10 low) followed by 1157 (July 28 low). Initial resistance is now at 1211 (Aug 6 high) followed by 1218 (July 13 high).

Oil - 77.50

Initial support at 77.00 (Intraday Support) followed by 75.00 (Intraday Support). Initial resistance is now at 78.00 (Intraday Resistance) followed by 80.00 (Intraday Resistance).