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Fear, uncertainty and illiquid market conditions leads to large moves.

Written by Sam Coxhead on October 5th, 2011.      0 comments

9:35 AM (NZT) The tiring nature of the current financial market environment continues. The intra-day swings continue to be large with lower levels of liquidity apparent as participants grow weary of the ongoing volatility.
 
The news to hand that EU officials are organizing a plan to provide bank aid has seen a rapid return to risk assets in the last half hour and seen the equity, interest rate and commodity markets rise. The Australian and New Zealand dollars have reacted accordingly. Such a rapid bounce indicates to me that “sold investors” are starting to get a little nervous with their positions, and we could well be in for a little consolidation in the coming sessions.
 
This news came after FED Chairman Bernanke again re-iterated that the FED have further tools at their disposal should the economic growth concerns increase and that a uncontrolled Greek debt default would be very unsettling for sentiment.
 
In markets such as we are currently experiencing, it is best to simply pick levels that suit, and stick to them. Attempting to pick extremes will prove difficult and frustrating. Dollar cost averaging is also a valuable strategy in markets with such large daily ranges.
 
In the coming sessions we have Australian retail sales numbers (11.30am AEST), and then the BOE and ECB tomorrow ahead of the US employment numbers on Friday.
 
    Last 24 hours trade
  Current level Low High
NZD/USD 0.7627 0.7470 0.7630
AUD/USD 0.9587 0.9388 0.9597
NZD/AUD 0.7958 0.7881 0.7976
AUD/NZD 1.2566 1.2538 1.2689
NZD/GBP 0.4927 0.4863 0.4927
NZD/EUR 0.5710 0.5657 0.5739
NZD/YEN 58.65 57.35 58.68
NZD/CAD 0.7960 0.7906 0.8032
 

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