Week ending 5 December 2008: Massive rate cuts by multiple central banks around the world had little effect on forex trading markets as risk aversion remains investors’ main concern. More fundamental signs of the severity of the economic downturn were also ignored, with many currency pairs settling or remaining in well-marked ranges.

The RBA cut rates by 100bps, as widely expected, to 4.25% as 3Q2008 GDP printed at 0.1% m/m and 1.9% y/y. October’s trade balance surged to AU$2.95Bn and 3Q2008 current account deficit narrowed to −AU$9.73Bn, while October retail sales held at 0.2%. AUD/USD twice respected support at 0.6340, with short-term resistance at 0.6600 and long-term at 0.6850.

The U.S. unemployment rate ticked up to 6.7% with 533K non-farm jobs eliminated in November, the largest loss in 34 years, and ISM PMI printing at 36.2 manufacturing and 37.3 non-manufacturing. Mortgage applications for the week ended 28 November surged 112.1%. Three-month U.S. Treasury rates remained at 0.1% for a third day due to safe-haven demand.

The ECB cut rates by 75bps on Thursday, more than forecast, to 2.5%, as Eurozone 3Q2008 GDP printed −0.2% q/q and 0.6% y/y. November PMI printed at 35.6 manufacturing and 42.5 services. October PPI sank −0.8 m/m and printed 6.3% y/y, while retail sales fell −0.8% m/m and −2.1% y/y. The leading indicator of German factory orders collapsed to an historic low of −17.3% y/y. EUR/USD found short-term support at 1.2560 with longer-term at 1.2400, with short-term resistance at 1.2800 and longer-term at 1.3100.

The BoE cut rates by 100bps to 2%, the lowest level since 1951. November PMIs printed at 34.4 manufacturing, 31.8 construction, and 40.1 services, and Nationwide consumer confidence hit 50 with 100 being the median. As testimony to the credit crunch, October net lending for dwellings sank to GB£0.5Bn, one-third the previous figure. GBP/USD remains volatile within a 1,000-pip range between 1.4500 and 1.5500, while EUR/GBP set new historic highs at 0.8725, a loss of 5%, before closing the week on profit-taking at 0.8626.

Canadian September GDP printed 0.1% m/m and 3Q2008 at 1.3% annualised. Unemployment in November ticked up to 6.3%, with −70.6K jobs lost, almost triple the expected figure, and PMI readings collapsed to 40.2 from 52.2 previous as crude oil fell 24% in the week. USD/CAD for the third time respected resistance at 1.3000, with 1.2125 serving as the bottom of the range, closing the week at 1.2706 on profit-taking. AUD/CAD broke above its established range on the Canadian job-loss news, climbing to new resistance at 0.8285, with 0.7890 as the current resistance level.

The RBNZ cut rates aggressively by 150bps to 5% and November commodity prices dropped an additional −7.2% after −7.4% previous. NZD/USD remained within its established range between 0.5200 and 0.5575, generally holding beneath 0.5375 for the week, and AUD/NZD continued its five-week uptrend, spiking mid-week above resistance at 1.2160 to close at 1.2108.

Japanese vehicle sales in November are down −27.3% y/y and 3Q2008 capital spending fell −13.0%. USD/JPY continued its downtrend, testing beneath 92.00 and closing at 92.98, while EUR/JPY trades within a tightening bearish pennant formation, best seen on daily charts. AUD/JPY remains volatile on lowering volume, again testing beneath 58.00 and closing at 60.24.