Daily Report: Nervous Markets after Fed’s Emergency Discount Rate Cut
The global financial markets are extremely nervous as the week starts,. The Japanese yen is sharply higher across the board, with steepest fall in carry trade pairs like AUD/JPY and NZD/JPY, following another round of sell off in global stock markets. USD/JPY dives to as low as 95.77! EUR/JPY and GBP/JPY tumbles to as low as 152.08 and 192.62 respectively. Dollar dives to new record low against Euro at 1.5902, against Swiss Franc at 0.9634. However, Aussie and Sterling are both dragged sharply lower by respective yen crosses too.
In an emergency meeting on Sunday, Fed lowered the discount rate by 25bps to 3.25% to "lowers the spread of primary credit rate to 1/4 percent point, and increased the maximum maturity of primary credit loans from 30 days to 90 days. Also, Fed voted to authorize New York Fed to create a lending facility to "improve ability of primary dealers to provide financing to participants in securitization markets." The move by the Fed is clearly an indication that Fed is increasingly concerned about the deepening of credit market problems which, will be intensified by further housing market contractions. Markets are nervous that there will be another Bear Stearns, which was sold to JPMorgan Chase over the weekend.
Note that while some retracements are seen as markets enter into European session, there is still not sign of even a short term top in yen and swissy, no any sign of top in EUR/USD yet. A number of economic data from US will be released today, including Q4 current account, empire state index, TIC capital flow, industrial production and NAHB housing market index. But impact from the data will probably be mild as focus remains on news relating to the credit markets problems.
GBP/JPY Daily Outlook
Daily Pivots: (S1) 198.47; (P) 201.81; (R1) 203.71; More
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GBP/JPY tumbles sharply to as low as 192.62 as the week starts today. 200 psychological level was firmly taken out without looking back. Mentioned 100% projection of 213.48 to 203.47 from 207.97 at 196.96 was also taken out firmly too. Recovery from 192.62 suggests that an intraday low might be in place but still, as long as 198.34 resistance holds, further decline is still expected. Break of 192.62 low will indicate fall has resumed to next important medium term support zone of 190 psychological level, which is close to 161.8% projection of 251.09 to 219.32 from 241.35 at 189.94
In the bigger picture, an important medium term top is formed at 251.09 after completion of a medium term head and should top pattern (ls: 241.47, h: 251.09, rs: 241.35), with the medium term trend line support taken out too. In other words, the whole up trend from 148.19 should have ended at 251.09 already and deeper medium term decline could be seen towards the rising trend line support (now at 174.16).
On the upside, above 203.47 support turned resistance is need to indicate that GBP/JPY has made a short term bottom. Some sideway consolidation could be seen with risk of rebound to 213.48 resistance or above. But still, medium term outlook remains bearish as long as upside is limited there.
Forex News Digest
Dollar Doomsayers Draw Growing Evidence From Bernanke Drive to Lower Rates
Dollar Slumps Most in 8 Years Against Yen on Widening Credit-Market Losses
Canada’s Dollar Declines on Concern That Credit-Market Losses Are Widening
Swiss Franc Rises to Dollar Parity for First Time as Investors Avoid Risk
Asian stocks and dollar sink on Bear rescue and Fed cut
Mon, 17 Mar 2008 04:46:00 GMT from ABC News
Dollar weakens in volatile trade
Mon, 17 Mar 2008 04:36:00 GMT from Sydney Morning Herald
U.S. dollar decline intensifies
Mon, 17 Mar 2008 04:22:00 GMT from Malaysia Sun
Oil Hits Record $111 as Dollar Slumps
Mon, 17 Mar 2008 04:17:00 GMT from CNBC
Dollar’s plunge pushes eurozone past U.S., Goldman Sachs says
Mon, 17 Mar 2008 04:17:00 GMT from China Post
Dollar torment could match earlier crises, analysts say
Mon, 17 Mar 2008 04:17:00 GMT from China Post
Dollar plunges to fresh lows against euro, yen
Mon, 17 Mar 2008 04:12:00 GMT from Philippine Daily Inquirer
More Forex News
Economic Indicators Update
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 23:50 | JPY | Japan Tertiary industry index Jan | 0.70% | 0.70% | -0.60% | |
| 5:00 | JPY | Japan Leading indicators Jan | 36.40% | N/A | 30.00% | |
| 8:15 | CHF | Swiss Retail sales Y/Y Jan | 2.70% | 1.20% | ||
| 10:00 | EUR | Eurozone Employment Y/Y Q4 | N/A | 0.30% | ||
| 10:00 | EUR | Eurozone Employment Y/Y Q4 | N/A | 1.90% | ||
| 12:30 | USD | U.S. Current account (usd) Q4 | -184.2B | -178.5B | ||
| 12:30 | USD | U.S. Empire state mfg Mar | -5 | -11.7 | ||
| 13:00 | USD | U.S. Net LT TIC flows Jan | 50.0B | 56.5B | ||
| 13:00 | USD | U.S. Foreign treasury buys Jan | N/A | 1.44B | ||
| 13:15 | USD | U.S. Industrial prod’n M/M Feb | -0.10% | 0.10% | ||
| 13:15 | USD | U.S. Capacity utilisation Feb | 81.30% | 81.50% | ||
| 17:00 | USD | U.S. NAHB housing mrkt index Mar | 20 | 20 |
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