Monday, August 8, 2011

Market Afternoon Overview - August 8, 2011

Previous session overview
The dollar solidifies its broad rally as DJIA tumbles nearly 2% at the opening bell. EURUSD hits intraday low, while ICE Dollar Index, which tracks the greenback's performance against a trade-weighted basket of currencies, hits an intraday high, up about 0.5% on the day. 

S&P's downgrade of US hasn't so far reduced the safe-haven appeal of the dollar, which is broadly higher against its rivals, save for fellow safe havens CHF and JPY, against which the dollar has slipped.

In early U.S. trading, the euro tumbled to session lows at USD1.4161, more than two cents from its offshore trading highs.

Earlier cheer about the European Central Bank's plan to buy distressed Italian and Spanish sovereign debt appeared to evaporate amid widespread gloom about the global economy.

The Canadian dollar slipped to a five-week low against its U.S. counterpart early Monday, in line with the fall in other higher-yielding currencies, as the markets absorbed the impact of S&P downgrading U.S. 

The U.S. dollar was at CAD0.9882 a level not seen since June 27 from CAD0.9821 late Friday.

The Canadian dollar held up well in the face of intense selling pressure arising from the drop in commodities prices, managing to avoid the sharp selloff seen in the New Zealand dollar and the Australian dollar.
Market expectation
Analysts say that plunging global equity markets in the wake of Standard & Poor's downgrade of the U.S.'s sovereign debt rating was taking an additional toll on an already fragile market. That triggered a shift out of high-yielding assets and into safety instruments.

For AUDUSD on the upside, according to technical analysts, the pair should return above USD1.1078 to ease the current bearish pressure: Alternatively, while the pair still maintains its long term uptrend (clearly seen on the weekly chart), it must break and hold above its 2011 high at USD1.1078 to end its present bear threats and activate further gains towards the USD1.1100, its psycho level followed by the USD1.1200 level.