Market Update 18 Sept 2012

As mentioned in our last Friday’s mail, once the euphoria of the asset purchase by the Fed is over and market focus back on other headlines such as slowdown in China and issues in Europe, risk appetite will turn again and we should see profit taking and defense trades come back into market, and true enough market’s risk-on is turning into risk-off again

The asset purchase announced by the FED last week caused a sell-off in USD but the 3% drop in the greenback’s value seems to have been a tad overdone as overnight we saw a wave of short Dollar covering and risk appetite turned lower.

On top of that, concerns in China and also potential rate cut from RBA (reserve bank Australia) later today has put the markets on the back foot. Market expects the RBA to cut another 25bps by year end as the demand for Iron and Coal from China is dropping and it is likely to spill over to the mass market.

AUDUSD pulled back towards the 1.0450 support while EURUSD headed lower to 1.3100     support.

USDMYR did not manage to close below the strong support of 3.0500 and we open today higher at 3.0600 as I suspect some of the short USDMYR got caught, expect the range of 3.0500-3.1000 to hold still for the week while we await the central banks and political announcements.

The Dow was down 0.30% to 13,533.10 while the S&P500 dropped 0.31% to 1,461.19, in general most indexes fall last night in NY trading session and we expect Asia to carry the momentum and likely to be trading on light volumes.