Euro Extends Slide Before U.S. Session Despite G-20 Pledge

Fundamental Headlines

• Dow Heads For Worst Weekly Drop since 2008 – Bloomberg

• ECB Ready to Act Next Month if Outlook Worsens – Bloomberg

• Greek Default Talk Gathers Pace – Reuters

• Economic Signals Heighten Worries of a Double-Dip – WSJ

• Moody’s Downgrades 8 Greek Banks – WSJ

European Session Summary

As equity markets head towards fresh lows on the year, there has been a significant move away from risk across the globe. While the carnage is not as evident in the United States, where equity markets had been floating higher before this week, major exchanges in Europe have painted a different picture. Headed into today, the three major U.S. indexes were down between 10 and 15 percent for the quarter; the five major European exchanges were down as much as 35 percent.

In light of worries of a double-dip recession by policymakers, the G-20 finance ministers released a statement last night promising to act together to tackle “renewed” challenges faced by the global economy. The statement said that policymakers are “committed to a strong and coordinated international response.” Although the statement was intended to ease investor fears, futures were barely changed on the move. In fact, headed into the hours ahead of the North American session open, the major Asian and European equity markets were all significantly in the red. It’s clear that words no longer suffice as a method of soothing fears of another global economic slowdown, and until substantial coordinated policy is set forth, worries will continue to grow.

AUD/USD 5-minute Chart: September 23, 2011

Charts created using Strategy Trader– Prepared by Christopher Vecchio

Trade was choppy in the currency markets, which saw multiple currencies, including the Australian Dollar and the European Euro, set multi-month lows against the U.S. Dollar ahead of the North American session open. However, within an hour before trading in New York began, risk saw some bids higher as equities’ futures turned higher. In fact, at the time this report was written, the Aussie had turned positive on the day against the U.S. Dollar. With no significant events on the economic docket, trading volume and price action should thin out after Europe closes.

Thus far, on Friday, the Dow Jones FXCM Dollar Index is relatively unchanged, trading at 9923.43, at the time this report was written, after opening at 9924.03. The index has traded mostly higher, with the high at 9991.99 and the low at 9911.02.

24-Hour Price Action

Key Levels: 12:40 GMT

Written by Christopher Vecchio, Currency Analyst

To contact the author of this report, please send inquiries to: cvecchio@dailyfx.com

Follow Christopher Vecchio on Twitter: @CVecchioFX