Federal Reserve cut discount rate by 0.50% to add more liquidity. Eyes on BoJ this week.
CURRENCY TRADING SUMMARY –19 AUGUST 2007 (00:30GMT)
- U.S. Dollar Trading (USD) ended its recent gains across the board following the Federal Reserve’s decision to cut its discount rate, charged on direct Fed loans to banks, sighting risks to the U.S. economy have increased. Following a week long rally on the back of USD demand as a safe haven investment in a market of falling global stock prices, the USD declined to end the week as the Central Bank decided to decrease the discount rate by 0.5% in an attempt to increase liquidity whilst keeping a close eye on market conditions. On the data front, the Michigan Sentiment survey was released lower than expectations but failed to have any initial influence on the currency. In
U.S.
- The Euro (EUR) regained some of its recent losses following a broadly weaker USD. Overall the EURUSD traded with a range of a low 1.3370 and a high of 1.3548 in the
New York
- The Japanese Yen (JPY) was the most volatile currency on Friday in a choppy market. With plenty of attention recently being placed on Equity markets to measure risk appetite, a rebound in stock prices ensured that investors returned to carry trades, although hesitantly. As a result the Japanese Yen suffered moving away from recent lows against the USD. In other news, reports suggested that the BoJ will avoid increasing rates in the coming week, keeping rates unchanged at 0.50%, whilst expectations of any rate hike diminished to less than 10%. Overall the USDJPY traded with a low of 111.60 and a high of 114.92 before closing the day at 114.00 in the
New York
- The Sterling (GBP) rose on the back of other majors in a rebounding market. Much of the move was attributed to the Federal Reserve cutting their discount rate by half a per cent, providing more stability to the markets. In other news, the sterling Pound also rallied against the Euro and the Japanese Yen. Overall the GBPUSD traded with a range of a low 1.9653 and a high of 1.9938 before closing the day at 1.9800 in the
New York
- The Australian Dollar (AUD) rebounded on Friday ceasing its recent sharp sell off through out the week. Once again the AUD benefited from the Fed’s decision to add more liquidity to the markets. Overall the AUDUSD traded with a range of a low 0.7677 and a high of 0.8008 and a high of 0.7931 in the
New York
- Gold (XAU) also moved on the Federal reserves decision on Friday, pushing the precious metal sharply higher by Mid New York session. XAU traded with a low of 646.30 and a high of 663.50.
TECHNICAL COMMENTARY
| Currency | Sup 2 | Sup 1 | Spot | Res 1 | Res 2 |
| EUR/USD | 1.3305 | 1.3360 | 1.3480 | 1.3548 | 1.3628 |
| USD/JPY | 111.32 | 111.60 | 114.35 | 116.76 | 117.67 |
| GBP/USD | 1.9544 | 1.9652 | 1.9810 | 1.9937 | 1.9974 |
| AUD/USD | 0.7614 | 0.7674 | 0.7985 | 0.8011 | 0.8133 |
| XAU/USD | 640.00 | 642.45 | 657.80 | 668.90 | 676.80 |
- Euro 1.34
Initial support at 1.3360 (Aug 16 low) followed by 1.3305 (Jun 15 low). Initial resistance is now located at 1.3548 (Aug 17 high & 38.2% retracement of the 1.3853 to 1.3360) followed by 1.3628 (Aug 14 high).
- Yen 114.35
Initial support is located at 111.60 (Aug 17 low) followed by 111.32 (Jun 2, 2006 low). Initial resistance is now at 116.76 (Aug 16 high) followed by 117.67 (Aug 15 high).
- Pound – 1.9810
Initial support at 1.9652 (Aug 17 low) followed by 1.9544 (Mar 30 low). Initial resistance is now at 1.9937(Aug 17 high) followed by 1.9974 (Aug 15 high)
- Australian Dollar – 0.7985
Initial support a 0.7674 (Aug 17 low) followed by 0.7614 (Nov 13 2006 low). Initial resistance is now at 0.8011 (Aug 17 high) followed by 0.8133 (38.2% retracement of the 0.8875 to 0.7674 decline)
- Gold – 657.80
Initial support at 642.45 (Aug 16 low) followed by 640.00 (Jun 26 low). Initial resistance is now at 668.90 (Aug 16 high) followed by 676.80 (Aug 8 high)
