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Video for March 21st, 2008 (3 min 41 sec): Weekly Recap: The Dollar Rebounds as Fed is Busy; Oil and Gold Fall & Carry Trade Unwinds Good Friday Lowers Liquidity Today was Good Friday, so movements in markets were subdued as countries around the world were celebrating the holiday. Stocks were closed in the US and in UK. In a quiet session, the Dollar managed to hold onto its gains from earlier in the week. Fed Moves to Calm Markets On Monday, the Dollar started weaker pressured by record prices in commodity markets, and turmoil in financial markets as Bear Stearns needed to be saved from collapsing. The Federal Reserve made several moves to calm markets. Last week it made $200 billion available to banks and said that it would swap Treasuries for mortgage-backed securities. When the Bear Stearns news hit over the weekend, it made an emergency move to cut rates that it charges banks to borrow and lent $28 billion to US securities firms in its first extension of credit to non-banks since the Great Depression. Finally it cut its benchmark rate by 75 basis points on Tuesday to 2.25%. EUR/USD - Dollar Falls From Record High as Week Progresses:
After being pummeled throughout February and March, the Dollar will post its first weekly advance in a month against the Euro. It also fared well against most of its other rivals this week. The Euro-Dollar pair had reached a record high of 1.59 on Monday following the news of the sale of Bear Stearns. Since setting that high, the pair has swung down almost 450 pips and was trading near 1.5440 by the end of Friday. The moves by the Fed, better than expected earnings reports from other US investment banks, and a fall in oil and gold prices helped to strengthen the Dollar. It remains to be seen if this will turn into a new downtrend with the possibility of hitting 1.50, or if prices will consolidate around this range. USD/CAD - Loonie Falls As Oil and Gold Prices Sink:
As oil and gold markets fell, countries that are tied to exporting commodities such as Canada, Australia and New Zealand saw the value of their currencies decline. The US Dollar-Canadian Dollar pair saw a change of 370 pips this week, with most of it coming in two days. In this daily chart, we see that it is approaching its old peak set on January 22nd which will be an important resistance level.
AUD/USD - Aussie Falls After Double Top:
The Australian Dollar-US Dollar pair formed a double top pattern and dropped 500 pips from its multi year high of .9500. If the pair falls below .89, it may have a chance to correct further and test its old support near .85.
AUD/JPY - Ausse Falls 100 Pips Off Its Peak One Month Ago:
In the Aussie-Yen pair, we see a continuation of a downtrend started 4 weeks ago after it set a peak near 101. It is now 1000 pips lower, with about 400 pips of that fall coming this week. The Yen is gaining as financial markets have become more risk-averse and carry trade continues to unwind. The New Zealand Dollar had similar movements against the greenback and yen. GBP/JPY - Steep Losses For Pound Since New Years:
The Pound-yen pair, another favorite of carry trade, slipped as much as 1700 pips since its high three weeks ago. It's the first time that the pound has dropped below 200 yen. Since the start of the New Year, the pair is down an impressive 3000 pips. Next Week The beginning of next week will again see low liquidity as some countries observe Easter Monday. Important releases during the rest of the week include US existing and new home sales along with new orders for durable goods. Canada will unveil retail sales for January while Germany and the Euro-zone post their IFO measures of business sentiment. |
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