Daily Market Update 07/04/2008

London Session
Published: April 7, 2008 5:02 AM

Traders participating in the opening London Session of the week may need a neck brace following the early hours of a whipsawing market. In the midst of a thin environment, currencies have been easily pushed around by large FX players that dictated the direction and flow of trading. In the absence of external forces such as economic data and global news headlines, those that fit the bill of ''size traders'' seized the opportunity to impose their will on the US dollar. On the open, the Greenback displayed power, crushing other currencies in a continuation of the Asia theme. In an instant, however, the US currency faltered and found itself on its heels. The result thus far has been very large ranges, yet very little net changes.

Short-term charts painted a picture of consolidation heading into European trading. Asia gains for the dollar were hefty, so a pause was to be expected. Once the moves were digested, London traders attacked in the same fashion, pummeling EURUSD from 1.5680 to a low around 1.5630, solidifying a downside break of the multi-hour trading range. USDJPY found a greater move, ascending through 102.50 to peak near 102.85, propping EURJPY modestly higher in the process. Upon EURUSD hitting the aforementioned 1.5630 zone, the pair immediately spiked in the opposite direction and plowed higher. Shorts were forced to cover their positions, fueling the rally to 1.5700. EURJPY accelerated its momentum higher and rocketed north of 161.00, aided by a very resilient USDJPY (which appeared to have a clean breakout to the topside in a pattern that mildly resembled a ''bull flag''). As of this writing, the dollar remains a winner of the day, yet the movement for the London Session has thus far been benign.

The week ahead is full of important economic data and events. The primary focus will be upon those that make the interest rate decisions for each country. First off, the minutes from the US Federal Open Market Committee (FOMC) meeting of March 18th will be released. The next session will bring an interest rate decision from the Bank of Japan, which is widely expected to maintain the 0.50% interest rate. On Thursday, both the Bank of England and the European Central Bank will also announce decisions on interest rates. As of today, the market consensus is for a quarter-point cut by the BoE (to 5.00%), while the ECB holds rates at 4.00%.