Fed decision begins take course on the FX market. Cautious return to carry trades.
CURRENCY TRADING SUMMARY –21 AUGUST 2007 (00:30GMT)
- U.S. Dollar Trading (USD) was flat against a number of currencies as equity markets in general stabilized on Monday. Analysts have cautioned investors with views that the credit crunch was not over ensuring that the USD remained in tight range against a basket of currencies. In other news, US short- term rate futures were strongly higher today as the cash federal funds rate dropped below the Federal Reserve’s target rate and yields for short-dated U.S government debt fell sharply. Futures show the chances of a 50 basis points rate cut in September. In
U.S.
- The Euro (EUR) was flat against the USD, trading in a tight range. With little data out of both markets, the currency pair traded in technical ranges. Overall the EURUSD traded with a range of a low 1.3460 and a high of 1.3508 before closing the day at 1.3481 in the
New York
- The Japanese Yen (JPY) gave up more of its previous week’s gains as some traders returned to risk following the Fed decision to cut the funding rate on Friday. Overall the USDJPY traded with a range of a low 113.68 and a high of 115.51 before closing the day at 114.91 in the
New York
- The Sterling (GBP) traded on the back of currencies, whilst also benefited from a return to risky carry trades. Overall the GBPUSD traded with a range of a low 1.9772 and a high of 1.9900 before closing the day at 1.9881 in the
New York
- The Australian Dollar (AUD) rebounded on the reversal of safe haven flows for the USD. The AUD like all high yielding currencies was able to benefit from the carry trade returning, although be it hesitantly. Overall the AUDUSD traded with a range of a low 0.7899 and a high of 0.8091 before closing the day at 0.8068 in the
New York
- The South African Rand (ZAR) fell over 1% against the dollar today, after a fairly quiet session, as
Rand was at 7.4075 to the dollar after it reached levels of 7.3335 on Friday
- Gold (XAU) was extremely volatile on Monday rallying in the Asian session. XAU traded with a low of 653.30 and a high of 660.50.
TECHNICAL COMMENTARY
| Currency | Sup 2 | Sup 1 | Spot | Res 1 | Res 2 |
| EUR/USD | 1.3305 | 1.3360 | 1.3465 | 1.3548 | 1.3628 |
| USD/JPY | 111.60 | 113.67 | 114.75 | 116.40 | 116.76 |
| GBP/USD | 1.9544 | 1.9652 | 1.9855 | 1.9937 | 1.9974 |
| AUD/USD | 0.7674 | 0.7891 | 0.7995 | 0.8011 | 0.8133 |
| XAU/USD | 640.00 | 642.45 | 657.50 | 668.90 | 676.80 |
- Euro 1.3465
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 114.75
Initial support is located at 113.67 (Aug 20 low) followed by 111.60 (Aug 17 low). Initial resistance is now at 116.40 (38.2% retracement of the 124.17 to 111.60 decline) followed by 116.76 (Aug 16 high).
- Pound – 1.9855
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 – 0.7995
Initial support a 0.7891 (Aug 20 low) followed by 0.7674 (Aug 17 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 – 657.50
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)
