Market Optimism Fades into Afternoon
Any positive follow through and increased appetite seen early on from the news of more government intervention and an increased interest in Citibank, has been totally wiped out, with the Euro not only giving back the gains from the overnight surge but also trading to fresh intraday lows.
MIDDAY SNAPSHOT & ANALYSIS OF SELECTED CROSS RATES
Lack of any material event risk in the US on Monday leaves the market trading on broader fundamentals. Any positive follow through and increased appetite seen early on from the news of more government intervention and an increased interest in Citibank, has been totally wiped out, with the Euro not only giving back the gains from the overnight surge but also trading to fresh intraday lows. The selling in the Euro has been exacerbated by heavy cross related offers in Eur/Gbp this morning. US and global equities have come back under intense pressure and investors are again well reminded of the state of the global economy. Also seen weighing on the Euro has been a downbeat assessment from Deutsche Bank on the state of the German economy. President Obama has been on the wires discussing the stimulus plan and announcing that $15B in federal money will be distributed to states to help pay medical costs. A recent Gallup poll on the US job market shows a record 90% of those polled saying that it is a bad time to find a new job. This is the highest rate since inception of this particular question in the poll. The NABE panel of private economists has released its outlook for the US economy. While the group does concede recession through 2009, the outlook is considerably upbeat with the group expecting the S&P 500 to rise some 8% by year end. US bank regulators have issued a statement on stress testing (to begin February 25) and bank access to capital from the government. Finally, in Canada, retail sales data was horrible coming in at -5.4% after analysts had been looking for a -2.7% reading. Looking ahead, Fed Lockhart and Fisher are due to speak at 15:30 GMT and 17:40 GMT respectively. Talk of London fix related demand for Usd/Jpy has been attributed to the bounce over the past hour.
Usd/Mxn - The market is starting to look stretched with daily studies confirming. The daily RSI is just under overbought while the stochastics are already in overbought territory and look to be on the verge of rolling over. While the underlying trend remains grossly bullish, Monday's break back below Friday's low ends a string of consecutive daily higher lows and could be just the catalyst needed to spark a more significant corrective pullback. Friday's price action was indeed very bearish with the shooting star formation suggestive of a short-term top. Look for a break back below today's low at 14.69 to confirm and open deeper drop back towards the 20-Day SMA by 14.46. Only back above 15.00 negates.
Eur/Try - Has been confined to a very well defined range trade over the past several months with the cross reaching as high as 2.25 back in December but largely capped ahead of 2.20 on multiple attempts. Recent price action has been no exception with the market one again reversing course after testing the latter on Friday and Monday but quickly pulling back. Look for a break back below Friday's low to once again confirm the range and open a deeper drop back towards the recent range lows in the 2.10 area.
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