Forex Market Technical and Fundamental Recap

Today’s Forex Analysis summary.

During this global outbreak of Swine Flu, traders are likely to exhibit extreme risk aversion and may show an extraordinary demand for the safety of lower-yielding assets. While other significant news may be released throughout the week, these stories are likely only to limit but not totally erase gains in both the Japanese Yen and the U.S. Dollar.

On Monday the EUR USD weakened considerably and traded through two handles as traders dumped the Euro for the safety of the U.S. Dollar. The break was related to the weakness in the global equity markets. At first traders thought the declines were triggered by negative news regarding the preliminary bank stress reports but now it has become clear that the selling pressure was associated with the outbreak of Swine Flu.

Pressure was on the GBP USD throughout the day as weakness in the equity markets, triggered by trader fears over the outbreak of Swine Flu, led traders to seek the protection of the Dollar.

Sellers hit the Canadian Dollar hard all day. Risk averse traders bought the U.S. Dollar for protection in anticipation of lower equity and commodity markets.

The Japanese Yen was the lone Forex gainer versus the U.S. Dollar on Monday. Weakness in the stock market fueled a reversal of the carry trade as investors sought safety in lower yielding currencies.

The Swiss Franc traded under pressure all day as traders became more averse to risk following the decline in the equity markets due to the outbreak of Swine Flu.

Forex markets that rely on both demand for equities and commodities were hit hard on Monday by traders seeking safety and liquidity in the U.S. Dollar. This included both the AUD USD and the NZD USD. The concern is these two economies will have a major setback because of lost revenue caused by a potential Swine Flu pandemic.

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