Fundamental Analysis Reports Euro and Pound Whipsaw Ahead of Lehman Announcement As Market Remains Nervous
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Euro and Pound Whipsaw Ahead of Lehman Announcement As Market Remains NervousA very whippy night in the currency markets as EURUSD initially rose in European trade boosted by firmer oil prices and better economic data out of France only to give up its gains by the start of North American session as risk aversion once again gripped the market. All eyes in FX will be fixed on the Lehman announcement due 11:30 GMT in which the company promised to release its earnings and offer a public conference call on the state of it business affairs. Overnight a melee of rumors swirled about in the markets from those speculating that Goldman Sachs would take over the troubled investment bank to the idea that Korea Development Bank remained interested in doing a deal with Lehman. By early morning however KDB stated that it ”ended negotiations at this time due to differences in transaction terms with Lehman and in consideration of the domestic and international financial market situation.” The news sent euro and cable tumbling as fears escalated that Lehman may soon face bankruptcy unless a quick resolution to the crisis is produced. It is perhaps more than ironic that problems in the US financial system would send currency traders flocking to dollars as a safe haven trade, but that is in fact the market dynamic in play at the present time. As risk aversion and deleveraging have become the dominant themes in capital markets the flow has been to the dollar despite the fact that current financial problems that have precipitated these moves bode badly for future US economic growth. We, believe that the move into the dollar is overdone. As the EURUSD approaches the 1.4000 level and becomes grossly oversold, conditions are ripe for viscous short covering rally as focus shifts away from the slowdown in the EZ economy to the far more serious systemic risk in the US financial sector. Today’s reaction to Lehman news may tell the story. If EURUSD manages to hold the 1.4000 handle a near term bottom may be in place. FX UpcomingCurrency GMT EST Release Expected Prior USD 12:15 8:15 USD MBA Mortgage Applications (SEP 5) 7.5% CAD 12:30 8:30 CAD Labor Productivity (QoQ) (2Q) 0.3% -0.3% Boris Schlossberg DISCLAIMER: This forum and the information provided here should not be relied on as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this column for your general information. The views of the author are not necessarily those of Global Forex Trading, its owners, officers, agents or employees. In addition, any projections or views of the market provided by the author may not prove to be accurate. Global Forex Trading and Cornelius Luca will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this column. Global Forex Trading and Cornelius Luca do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.              |
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