Friday, August 10, 2012

Market Update: US Banks Told To Fend For Themselves

Coming Up Today
  • UK PPI Input/Output
  • Canadian Unemployment Rate
  • US Import Prices

US regulators told five leading banks, which included BofA and Goldman Sachs to start preparing plans to prevent them from collapsing. The regulators are basically letting the banks know that they will have to fend for themselves and not to expect government help in the event of them experiencing financial problems. While the regulators weren’t specifically indicating that they believed a collapse was around the corner, the fact that they are out warning the US’s biggest banks has triggered a risk selling environment this morning. Charts to Watch  EURUSD: After falling below its 1.2325 support level yesterday, the EURUSD made a quick drop of 75 pips to around 1.2250. We mentioned on Wednesday that the EURUSD has hit a consolidation phase after its run-up from last Friday. The question on Wednesday was whether the pair’s weakness that morning was simply profit taking, or were Forex traders ready to dump the Euro again. With the the pair failing to hold its initial support level of 1.2325, it appears that Forex traders are once again not taking any long term chances with the weak Euro. As such, the pair is vulnerable to further selling pressure if early morning support of 1.2250 fails.  
USDJPY : We were “hot & heavy” about the chances of the USDJPY moving higher following last week’s better than expected Non Farm Payrolls report. Even though it hasn’t had the type of rally we had expected, we are seeing demand begin to become more aggressive as the pair’s support level is steady rising from its 78.00 base. Currently, we are in a rising channel formation (see chart). As such, the increase in demand could be setting up the USDJPY for an upside breakout if it breaks above its upper channel line.

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