Independant Analyst: Lena Manousarides 17th October

publication date: Oct 17, 2008

Week Ends With Dollar and Yen Strength…

What a rollercoaster this week has been for global markets what with US, European and Asian markets one day up 700 points, the next down almost a thousand and then up again! At times when fear and uncertainty are the main drivers for any kind of moves, traders are trying to make their own conclusions as to what the future will bring.
Yesterday we saw a slightly more positive sentiment in the markets, with DOW JONES up 400 points and NIKEI following in the same footsteps. The reason for the relief rally was better results from Google and other technology companies, together with some earning results from Banks and a new profound hope that things might start to get better in the coming days. After a very hard week in the global markets and especially the currencies, we see finally some calm today and if that continues we even might see some sanity returning.
EUR/USD is still trading within 1.3350-1.3530 and only a clear break will show us the next move. It is interesting how the pair kept this close range for some time now and today the last day of the week traders might want to break finally this range. We favor the upside ONLY and if the stock markets continue the rally as lately the correlation between dollar and DOW JONES is very close. When dollar roses, DOW JONES seem to be selling off, due to risk aversion, which is the latest close friend of the greenback.
Today’s calendar offers us very few important releases, with Building permits out of US and also consumer sentiment. Both data are expected lower than previous, however as we said before, these days traders are merely spectators when it comes to data and they usually ignore them.
Crude oil made an impressive move yesterday, when it dropped sharply to multi month low below $70 per barrel due mainly to risk aversion. However it rebounded quickly form those lows, as renewed speculations from market participants were raised that OPEC might be forced to cut supplies due to the recent fall.
It will be very interesting to see how the markets will close for the week and if market sentiment will remain a bit more optimistic as it done in the few days. Don’t forget that the risk of a global recession always weighs in investors’ minds and therefore in order to see a change in sentiment, we need first to see some kind of stability back in the markets. Until that happens the best way to trade is to just follow the sentiment. What we have witnessed in the last days after all is that gains and optimism does not last long in the current environment…