Of swine and writedowns

The markets got spooked by the swine flu yesterday. Stock markets from Asia to NY were invariably sold off, pulling higher yielding currencies and the yen crosses down with them.

Today, risk aversion stayed but the attention has shifted over to the results of the US banks' stress test results.

WSJ reported that the Fed will try to get Boa and Citi to raise capital to buffer further writedowns in the future.

I guess uncertainties will linger until a resolution is confirmed related to the stress tests. The Dow futures stayed in negative territory throughout the Asian trade on the news as the familiar sense of banking worries came flooding back.

To think of it, these 2 banks seem to be the more probable 'victims' of the stress tests judging from the gigantic amount of loan/real estate assets on their b/s which risk non-performance.

The Fed also added results will be out in the 7 May week, not revealing the exact time of the release.

EURUSD got a pounding yesterday as ECB's Nowotny said the ECB might consider implementing some form of QE.

If you look at the EURUSD daily chart, you can see it trading in a downward channel. I expect it continue to trade within this channel where 1.2840 will provide some real support.

That is a support line that stretches all the way from earlier in the decade, with prices having bounced up and down from here. The market has extraordinary memory as it re-visits previous support/resistance lines and I trust this will be no different.

Unless of course, the ECB does QE, Rambo style.