Markets stabilize ahead of FOMC. All eyes on US interest rate decision

Tue, Mar 18 2008, 05:47 GMT
by Easy Forex Team

Easy Forex

Markets stabilize ahead of FOMC. All eyes on US interest rate decision

U.S. Dollar Trading (USD) recouped some losses against the majors as traders expect the Federal Reserve to slash rates to bolster the ailing US Financial system. The New York Empire State Manufacturing index fell to a record low of -22.23pts in March. In U.S. share markets the NASDAQ and Dow Jones staged an amazing late rally resulting in the NASDAQ finishing down by 35 points (-1.6%) whilst the Dow Jones finished higher by 21 points (0.2%). Crude oil also traded lower by US$4.53 a barrel to end at US$105.68, the biggest percentage decline in 7 months. Looking ahead, the FOMC end their two day meeting today with the market expecting a 0.5% cut in rates. Also, housing starts and PPI are due out for release.

The Euro (EURO) reached a new record high after the Bear Sterns and Federal Reserve announcements before giving up its gains. The Euro was buoyed by an increasing sentiment that that the Federal Reserve will look to cut interest rates by more than 50 bps on Tuesday the 18th of March. Overall the EURUSD traded with a low of 1.5658 and a high of 1.5903 before closing the day at 1.5729 in the New York session.

The Japanese Yen (JPY) traded at fresh multi-year year lows versus the dollar following the Bear Sterns fire sale. Overall the USDJPY traded with a low of 95.77 and a high of 99.30 before closing the day at 97.44 in the New York session.

The Sterling (GBP) weakened versus the weakening US dollar, as concerns arose that credit losses will reduce the appetite for high interest yielding currencies. Overall the GBPUSD traded with a low of 1.9994 and a high of 2.0238 before closing the day at 2.0021 in the New York session. Looking ahead, UK CPI and the Retail Price index are due for release.

The Australian Dollar (AUD) was weaker in the overnight session; as a result, the high yielding currency fell on market jitters trading with a low of 0.9131 and a high of 0.9446, before closing the day at 0.9171 in the New York session. RBA minutes released today signaled the growing concerns that credit issues are a growing problem and that there is some initial signs of a slow down in domestic demand. RBA officials however did question whether recent monetary policy moves were sufficient.

Gold (XAU) was slightly stronger after falling against the USD from its meteoric rise to just over USD$1030/oz. XAU traded higher by $3.10 an ounce to close at US$1002.60.

TECHNICAL COMMENTARY

Euro – 1.5750
Initial support at 1.5654 (Mar 17 low) followed by 1.5523 (Mar 13 low). Initial resistance is now located at 1.5904 (Mar 17 low) followed by 1.6 (Psychological round number resistance).

Yen – 97.20
Initial support is located at 95.77 (76.4% retracement of the 79.75 to 147.6 advance) followed by 95.0 (Round number support). Initial resistance is now at 99.28 (Mar 17 high) followed by 101.16 (Mar 14 high)

Pound – 1.9990
Initial support at 1.9993 (Mar 16 high) followed by 1.9875 (Former resistance Feb 27). Initial resistance is now at 2.0231 (Mar 17 high) followed by 2.0398 (Mar 14 high)

Australian Dollar – 0.9190
Initial support a 0.9147 (Mar 17 low) followed by 0.9122 (38.2% retracement of the 0.8513 to 0.9499 advance). Initial resistance is now at 0.9449 (Mar 17 high) followed by 0.9473 (Mar 13 high)

Gold – 998
Initial support at 991.0 (Mar 14 low) followed by 981.80 (Mar 13 low). Initial resistance is now at 1032.5 (Mar 17 high) followed by 1048.16 (Open this week + (range last weeks range * 0.618))