Forex Analysis - 17/09/2008: the fate of AIG today
As expected, the US FOMC held rates steady and barely changed the policy statement today leaving the markets to sort themselves out as traders continue to debate direction of the economy and the health of the financial sector. Massive speculation continues to be both positive and negative regarding the fate of AIG today; traders note the stock has dropped under the $3.00/share area for most of the day with its fortunes intraday resting largely on which rumor you listen to. As focus was largely on equities today almost no one noticed the fall in oil prices; dropping to under the $92.00/BBL for most of the day before finishing slightly higher. With all the focus on banking and equities the USD was largely left to play follow-the-leader today as the Greenback continued to trade cautiously and on very light volumes traders say. Despite economic news from overseas suggesting better conditions in the EURO-zone and stable conditions in the UK the USD continued to gain against both EURO and GBP today with both rates pressing to lows after the release of the FOMC rate announcement. Lows in GBP under Monday’s lows were bought back hard leaving the rate well off the lows into the close but traders say lack of liquidity is exaggerating the moves. Low prints today at 1.7734 before rallying back to near the 1.7900 handle. EURO fell to 1.4072 before seeing bids again after holding above the 1.4200 handle for most of the day; volatility was high again and traders expect more the next day or two but with today’s long buying wicks in EURO and GBP the lows for the week may be in. USD/JPY fell to a low print of 103.53 leaving the really big stops under the 103.50 area intact for now and after the release of FOMC rallied two full handles for a high print at 106.01 before dropping back. Most of the action in Yen crosses has kept the rate pressured today and more losses in USD/JY is expected but with s close above the 105.50 area the analysts will get confused as volumes were light; look for more whipsaw near-term. In my view, the Fed doing nothing was likely the wrong move and I think with no signal from the Fed either it shows a potentially unresponsive Fed. Expect the criticism for Bernanke’s leadership to grow moving forward. In my view, the USD has had no real benefit for an advance today; poor economic news today and more due tomorrow. Expect the USD to weaken overnight and into the end of the week.
Forexpros
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09-17-2008, 04:12 AM
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