Possible Automaker Bankruptcy Boosts US Dollar & Chart Analysis EUR/USD

Tuesday, March 31, 2009


The Dollar rallied on Monday as news of possible bankruptcy at US automakers, General Motors and Chrysler sent investors into the currency markets seeking the safe-haven USD and Japanese Yen. When times get tense in the financial world it is common for investors to pull their money from higher yielding, higher risk investments and pick up the US and Japanese currencies – viewed as more stable and resistant to losses as other investments.

At 5PM GMT, the Dollar was up 1.08% to the Euro at 1.3142, up 1.14% to the Pound to 1.4157, up 1% to the Canadian Dollar to 1.253, up 2.18% to the Australian Dollar to .6788 and up 1.7% to the Kiwi to .5602.


The Euro was down broadly as news emerged that Spain was forced to take over a regional bank once thought to be stable. This added to the selling already underway as investors braced for another interest rate cut by the European Central Bank, a move that is expected to bring the core rate down to 1%.

At 5:10 GMT, the Euro was down .1% to the Pound at .9271, down 2.15% to the Japanese Yen to 127.26, down ¼% to the Canadian Dollar to 1.6464, down ½% to the Swiss Franc to 1.5144 and up 1% to the Australian Dollar to 1.933.

Background to Mondays Market Action

President Obama surprised the markets today by denying the US Automakers, General Motors and Chrysler’s, request for additional funding after demanding the resignation of the GM Chief Executive. It was widely expected that Obama would grant their request for an additional 21 Billion Dollars, however as the G20 summit approaches, it seems as if Obama is interested in publicly denouncing his “spender” label. Obama and British Prime Minster Gordon Brown are trying to garner support for a 1.7 Trillion Dollar “Global New Deal” as their counterparts in many European and Asian countries are questioning their tendency to spend blindly on bailing out companies that are failing – termed “Zombie” companies.

The G20 meets Wednesday in London.

Chart Analysis: EURUSD

EURUSD is slicing lower on the new bout of risk aversion to open the week and ahead of a possibly dovish Trichet on Thursday. Online forex sees a key level comes in just above 1.3100, the 100-day moving average (not an important MA recently, but was very influential in recent years), and also the 50% retracement level for the recent rally to north of 1.3700. Below that, the psychologically important 1.3000 level looms.


About This Blog

Get the latest Forex online news and updates right here at one place.