Forex Market: Risk Aversion Intensification Breached To Panic Selling

Monday, May 24, 2010

In the past week there were two major developments are seen that is with the risk intervention in the Forex market the selling of EURO rebounds. After the German announcement of Stabilisation fund it was seen in the market that euro currency falls continuous and reaches below the 2008 low that is 1.214. In the last week the German government has taken another major step to ban the short selling of stocks. But the fall of US dollar and intervention helps the euro to rebound in the last week. In overall case it can be said that currency pair EUR/USD has found a bottom for only a short span of time and surely it gets recover early to reach to the high level in the market again. in last week the rumours of ECB's help is also heard in the market that also leads to a benefit for the EURO currency.

The intensification of risk aversion was the another important development shown in the market. As we have seen that the S&P was reached below the intraday low that is to the sixth of May panic selling. The crude oil tubles down the past week below the 70 level in the whole week. There was a sharp fall seen in the Aussie dollars that is it falls to 9.29 percent below where as there was a rise of 7.57 percent is shown in the EUR/AUD currency pair. Since this is due to the small rise in the euro currency in last week. The fall of currency pair AUD/USD to 6.29 percent. After the fall of Australian and Canadian Dollar, the RBA "pause" in June is confirmed and it the market aspirants are anticipating that the RBA pause is for the whole year.

Recent stock market weakness will also impacts the BOC's June hike, there was a possibility of cutting costs is increasing day-by-day. The past Friday's rebound in stock results in a contention of selling of stocks and also it was predicted about the combinations currency pair. In past week the economic data also not come up with any good news in the market. In US market there was seen a rise of jobless claims to 471K. After seeing this the market understands that the recovery in job market is still in weak point. There was a supress in inflation is shown due to the fact that the CPI results in moderated 2.2 perecnt yoy in the month of April along with the core CPI 0.9 percent dow yoy. Now the results about the manufacturing data outlook in US that was a jiffy mixed with Empire state index and fall sharply to 19.1 percent in the May month. Where as there was a recovery of 21.4 percent is shown in the Philly Fed index and a mixed outlook was seen in the housing data in past week.

Now the weekly outlook of Euro zone countires where a sharo fall is shown in the month of May in ZEW due to the financial crisis the investors lose their confidence in the currency investment. There was a decline shown in the quality in the climate of Ifo business. While the PMI services is still in strong phase of the market and it was anticipated that the PMI manufacturing will look ahead for the expansion in May. While UK CPI increased abruptly beyond the market expectations and reached to the 3.7 percent in April month. The good results shown in the Public sector borrowing and the fact is clear that the market focus is fixed on the emergency budget plan that will be announced in the month of June.

In Canada, the economic data is shown strong than expected along with CPI and results a high of 1.8 percent yoy in the April month. The retail sales results in 2.1 percent in the month of March that impressed the market and results in gain of USD/CAD's rise to 1.078 level. There was a fall shown in the S&P where as Dow managed its level. On Friday, there was a strong rebound is shown that results in temporary bottom in the EURO currency but it was expected that in this week recovery is shown in the stock market while the overall market remains clumsy and unchanged in this whole week.

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