Latest news on Asian Morning Update 9th May 2008
| Yesterday the Euro low provided the largest correction lower since November 2005 European Releases overnight: March Forecast Actual The ECB and BOE announced no change in interest rates.
Some attribute the move to comments from the U.K.’s Financial Times which reported that both European and American officials were concerned that the currency markets have been paying too much attention to short-term economic weakness and market stress in the US, and not enough to the medium-term prospects for the US and Europe. The report said that policymakers on both sides of the Atlantic want to avoid a situation in which the dollar falls too far, before snapping back as investors realize the US is not heading for a depression and Europe’s economy is starting to soften. Europe quite rightly reversed the Dollar’s gains on such comments which really have no tangible power. That markets overshoot themselves is a factor that has always existed and always will. These excessive moves, as has been proven this time, are fueled by unreasonable fears that have moved to extreme levels. If they study markets this has always been the case and when those fears are proven to be unfounded the markets naturally unwind. This type of move occurs in different time frames and is probably occurring now as the Dollar has gained more in this recovery against the Euro than it has since the 1.1640 low in November 2005. We either saw the low in the Euro yesterday or there may be one more low close to 1.5150 before we move back into a period of corrective consolidation. Given that today’s release calendar is particularly quiet with only the French industrial production numbers that holds any influence we should be heading for a peaceful end to the week… However, in the longer term the Dollar has broken important resistance levels that indicate the downtrend is over. We may just see a period of correction before additional gains but with the improvement in traders’ nervous twitches we can expect a more two way view of the market as we await more positive news from the States. On the correction we will probably see longer term short Dollar holders begin to unwind and possibly reverse their positions.
The following releases are due from Asia due today: Japan March Leading Economic Index (P) 20.0% The RBA are due to publish their quarterly monetary policy statement See Also
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