The dollar rose against the yen on strong stock market demand
The euro moved higher around 1.36 level versus the US dollar on Monday as the US government announced that it will take equity ownerships in some US banks to help stimulate lending to consumers and companies and restore confidence on the interbank lending market. This is the first time the US government has done this since the Great Depression. The common currency gained ground on news that European governments plan to inject billions into troubled banks and guarantee bank borrowing. Germany’s plan involves a €500 billion package while as whole the rescue package in EU might reach 1.35 trillion dollars.
The yen continued to depreciate against the dollar as US major indexes rose more then 11%. US dollar tested offers around the 102.00 level and was supported around the 99.55 level. Traders are paying close attention to reports that Japan’s Mitsubishi UFJ Financial Group may purchase 21% of US investment bank Morgan Stanley.
The British pound appreciated against theUS dollar as the cable tested offers around the 1.7440 level. Cable extended the late-day gains it realized on Friday following a report that it will inject up to ₤37 billion in three major UK banks, namely Royal Bank of Scotland, Lloyds TSB, and HBOS. Data released in the UK today saw September factory gate inflation decline for a second consecutive month in September with output prices off 0.3% and the annual rate lower at 8.5%. Similarly, input prices fell 1.2% m/m and were up 24.5% y/y.
EUR/USD
The short term picture remains unchanged as the euro consolidates in a narrow range around last week’s consolidation. The negative risk is still in effect as far as the pair is positioned below the key resistance at 1.3840, which is 50.0% retracement of the 1.1640- 1.6035 rise. If 1.3440 is broken successfully, next target will be the key support at 1.3310, which is 61.8% retracement of the mentioned movement followed by 1.3060. We witness an attempt for slow recovery of the upward movement and the oscillators indicate oversold levels, which might be a signal that a mid-term bottom has been reached. On the upside resistance is seen at 1.3680, followed by the key level 1.3840, and 1.4270.
EUR/USD (chart, table)
USD/JPY
The dollar advanced versus yen as the pair consolidates in a narrow range previous sessions near the support level at 98.50, which might turn to be a mid-term bottom as the oscillators indicate oversold levels. During the next days we may witness a neutral trading and on the upside resistance is seen at 102.50, which is 23.6% retracement of the 124.12-95.75 drop, followed by 103.80 and 106.55. On the downside, below 98.50 support is seen at 95.70 and 93.30.
USD/JPY (chart, table)
GBP/USD
The sterling reversed frombottom established around 1.6800 levels as reached levels around 1.7450. If the pair remains below 1.7500 levels, next targets will be the supports at 1.6790 and 1.6570. The downside risk remains in effect, but in the next days we will probably witness more neutral trading. Oscillators indicate oversold levels, which might be a signal that a mid-term bottom has been reached. On the upside resistance is seen at 1.7590, followed by 1.7800 and 1.7860, which coincides with the 26-days SMA.
GBP/USD (chart, table)
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FX daily review 14.10.2008.pdf, 646 Kb
