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Monday, 15 November 2010 12:02

EURUSD: Stay Short as Down Move Gains Momentum

Contributed By: DailyFx

Last week, I sold EURUSD at 1.3762 on a brief upward retracement following a break out of a rising channel established from early October. The pair is now testing below 1.3636, the 38.2% Fibonacci retracement of the 8/24-11/4 advance, and I will look for a daily close below this juncture to open up the next leg of the down move to the 50% Fib at 1.3436. A stop-loss will be activated on a daily close above 1.40. Overall, my initial target for the trade is at 1.3310.
Published in Forex News
Monday, 15 November 2010 09:13

UFXBank Forex Outlook: Crude Oil Drops Nearly 3.5%

USD Dollar (USD) – Friday saw the Dollar slightly weaken against most of the majors to bring an abrupt halt to the entire week’s gains in Forex trading. The consumer sentiment data came out better than expected at 69.3 vs. an estimated 69.00. The G20 meetings created discord within the markets as the rift between United States and China regarding currency rates seemed to widen, no solid agreement was reached through the summit and traders were left with “indicative guidelines" to be discussed in the new year. The NASDAQ and the Dow Jones declined   by -1.46% and -0.80%, respectively. Friday saw commodities plummet, as Oil and gold each fell by nearly 3% while copper, wheat, silver and sugar fell even farther. Crude lost -2.9% closing at $84.88 a barrel, while Gold (XAU) lost -2.7%, closing at $1365.50 an ounce. Today retail sales data will be released and is expected at 0.7 vs. 0.6 previously. NY Empire State Manufacturing Index is also to be released and is expected at 11.70 vs. 15.70 prior.

Euro (EUR) – Friday saw the Euro rebound from a six week low (of 1.3573) against the dollar after finance ministers in the euro zone issued a joint statement regarding the EU’s debt situation. German Prelim GDP came out at 0.7% vs. 0.8% and did not affect the market. Although the pair is still below the moving average the trend seems slightly bullish. Overall, EUR/USD traded with a low of 1.3681 and with a high of 1.3711. No major economic data is expected today.

EUR/USD – Last: 1.3672







British Pound (GBP) – Although the Pound dropped on Friday, slightly below 1.6000 levels against the dollar, the day ended with little change and the Pound strengthening slightly against the dollar. Europe’s poor Fiscal strength also influenced the GBP, as investors’ fears of the region’s exposure to Irish debt, caused them to flee to safer currencies. The GBP/USD is still extremely oversold and confirms a slightly bearish trend. The pair has a strong daily resistance at the 1.6170 levels which will be tough to break. Overall, GBP/USD traded with a low of 1.6115 and with a high of 1.6152. Today, no major economic data is expected.

GBP/USD - Last:  1.6105









Japanese Yen (JPY) – Friday saw the yen continue to gain against the dollar and little change was seen last night as investors adopted a cautious stance after uncertainty from the G20 summit. During last night’s session prelim GDP q/q came out better than expected at 0.9% vs. 0.6%, but despite this, the pair remained unchanged.  The pair formed a tight triangle toward the end of the week on the daily chart and remained well above the moving average. Overall, USD/JPY traded with a low of 82.35 and with a high of 82.53. No economic data is expected today.

USD/JPY-Last: 82.73







Canadian dollar (CAD) – The Canadian Dollar weakened significantly against the US dollar as crude prices decreased by almost 3%. Chinas claim to increase borrowing costs, and the speculations of Irish debt reduced demand for assets related to economic growth and added to the negative momentum. The strengthened commodities support a strong Canadian dollar. The USD/CAD is very choppy on the daily chart, but the trend still seems to be positive for the pair as long as it trades above parity. Overall, USD/CAD traded with a low of 1.0099 and with a high of 1.0128. No economic data is expected today.


USD/CAD - Last: 1.01176











Published in Forex Articles

USD Dollar (USD) – The Dollar gained versus the major currencies on a choppy and volatile session as Banks were closed in observance of holiday and illiquidity characterized the markets. The Stock Markets in U.S closed negative with Dow Jones lose -0.65% and the NASDAQ falling by -0.90%. Crude Oil touched its highest level at 88.59 but reversed at the Asian session and back to trade near the 86.5$ a barrel. Gold (XAU) also reversed and fell below the 1400 approaching to test the 1380$ an ounce. Today, The Michigan Consumer Sentiment Index is expected at 69 vs. 67.7 previously.

Euro (EUR) – The Euro was crushed for another day of Forex trading versus the dollar approaching the 1.36 area continuing its sixth day of decline on concern that some European countries will have difficulty paying their debt hence investors demand more safety currency. Trading below the 1.38 resistance level holds the pair under pressure for farther decline. Overall, EUR/USD traded with a low of 1.3601 and with a high of 1.3820. Today, The German GDP is expected at 0.8% vs. 2.2% previously. The GDP is expected at 0.5% vs. 1% previously. The Industrial Production is expected at 0.5% vs. 1.1% previously.

EUR/USD – Last:  1.3613







British Pound (GBP) – The Pound traded almost unchanged versus the dollar in a tight range still holding firmly although dollar gained against most of the currencies. The Nationwide Consumer Confidence came out 52 worse than expected 55. Breaking the 1.61 support area might push the pair lower to 1.6 zones. Overall, GBP/USD traded with a low of 1.6079 and with a high of 1.6177. No major economic data is expected today.

GBP/USD - Last: 1.6085







Japanese Yen (JPY) – The Dollar traded in a tight range against the Yen still holding firmly above the 82 levels. Breaching the 82.8 resistance level might push the pair to higher levels. Overall, USD/JPY traded with a low of 82.03 and with a high of 82.59. No economic data is expected today.

USD/JPY-Last: 82.35







Canadian dollar (CAD) – The U.S. Dollar gained against Canada's dollar as risk aversion ruled the markets today on a choppy and volatile session as Banks were closed in observance of holiday and illiquidity characterized the markets. The momentum remains positive for the pair as long as it trades above the parity. Overall, USD/CAD traded with a low of 0.9976 and with a high of 1.0077. No economic data is expected today.

USD/CAD - Last: 1.0080








Published in Forex Articles

Contributed By: DailyFx

Forex markets will be paying close attention to the Australian employment figures that are set to be released within the next hour. Job growth in the month of October is expected to have slowed substantially from the robust rate experienced in September. The consensus is for a 20K increase, down from the 49.5K increase in the month before. But even with the slowdown, the unemployment rate is anticipated to dip to 5 percent from 5.1 percent.

All indications are that the Australian economic recovery remains on track, fueled by swift growth in the resource sector. A 5 percent unemployment rate would be a post-recovery low and the lowest since January 2009. Incidentally, the all-time low for Australian unemployment was 4 percent back in 2008.

Nevertheless, the Australian Dollar remains at extremely elevated levels, having accounted for these strong economic fundamentals. Any indication of a hiccup in the nation’s economy may lead to a pullback in the currency. On the other hand, an upside surprise would likely send expectations for future interest rate hikes higher, bolstering the Aussie. Indeed, last month expectations were also for a 20K increase in jobs; once the actual 49.5K figure was released, the Aussie spiked significantly higher:

AUD/USD reaction to last month’s employment figures:



Ahead of the release, AUD/USD is hovering just above parity, which acted as resistance before a recent breakout:

AUD/USD Daily Chart:


Published in Forex News

Contributed By: DailyFx

 The latest unemployment data out of Australia is very interesting to us, as it is not that often that you see Australian data disappoint, and even less often that you see the data disappoint by so much (we realize that there was some silver lining with better employment change numbers but this is not our focus here). Analysts had been looking for a 5.0% unemployment rate on Thursday, but instead, the data series produced a much higher and very concerning 5.4% print. There has been a very strong inverse correlation between the unemployment rate and Australian Dollar (see below; orange line is Aussie and white line is unemployment rate), and this latest jump in the unemployment rate could very well warn of a shift in the trend.


We have warned that we see risks for significant downside in the Australian Dollar over the coming months, with the single currency trading by record highs and looking very stretched on a cyclical basis. All of the fundamental drivers of the Aussie strength look to be approaching exhaustion and we believe that things will not be sustainable from here. RBA monetary policy has been extremely aggressive in the face of a global slowdown to produce attractive yield differentials, while booming commodity prices and a flourishing Chinese economy have also helped to propel the antipodean. However, at this point, we see the RBA starting to slow down with its tightening bias while other central banks play catch up, commodities prices rolling over sharply in favor of a much needed and sizeable corrective pullback (recent actions at the CME to up margin requirements could help fuel the pullback), and the Chinese economy cooling off as the government takes measures to curb growth and fight inflation.

With this in mind, we have gone ahead and established a fresh short Aussie position on Thursday. We have chosen to short the Aussie through the Euro instead of the Dollar as we believe it is a safer play from here and also could offer a more attractive risk/reward play. We are long Eur/Aud at 1.3725, with an open objective and stop in place by 1.3575. The cross sits at 20 year lows and by the bottom of a major range. Monthly studies are severely oversold (very rare) with the RSI by 25 and in desperate need of a healthy bounce. We contend that this latest unemployment data gives us a good excuse to enter the position, and we believe that the cross could very mount a significant rally from here.


Up to this point, the Eur/Aud cross has been somewhat inversely correlated to the Eur/Usd, particularly in periods of Eur/Usd strength. When the Euro rises, markets have taken this as a risk positive and the higher yielding Aussie then rallies even more on the favorable yield differentials. Meanwhile, when the Eur/Usd sells off, the markets have been inclined to take this as a risk negative and in turn look to liquidate the higher yielding Aussie more aggressively.

At this point however, we see the Australian Dollar at risk even in the event of more broad based USD depreciation. The basis for our argument is that with the Australian economic data finally starting to show a dent in its armor, the attractive yield differential in periods of USD weakness will no longer be as attractive, with market participants starting to price in a slowdown in the local economy. We like the idea of playing the short Aussie position through the Euro, as at this point, USD exposure seems a little more risky, and as we have argued above, this cross could very well head higher no matter what the direction of Eur/Usd.


Published in Forex News
Thursday, 11 November 2010 09:54

Fibonacci Basics

Contributed By: DailyFx

We put Fib levels on a chart so a basic determination can be made as to the point which a currency pair is likely to retrace after a strong move.Take a look at the chart below. A bullish move is shown on the chart so the Fib line would be drawn from the bottom of the move (Swing Low) to the top of the move (Swing High)…the opposite would be true in a move to the downside.

Having done this, the three major Fib levels will be appear on the chart…38.2%, 50.0% and 61.8%. A trader will then wait to see if one of the levels holds…that is, price action stalls at that level. Should one level hold, a long position can be taken back in the direction of the original move with a stop below the lowest wick that penetrated the Fib level that held.


Published in Forex News

Contributed By: DailyFx


AUD/USD: Clear signs of another short-term top emerging with the market stalling out by fresh post-float record highs at 1.0185 on Friday, and then reversing course on Monday to end a sequence of consecutive daily higher lows. Tuesday’s break back below Monday’s low and bearish close encourages reversal prospects, and we look for an acceleration of declines back towards the 0.9900 area at a minimum over the coming sessions. Back above 1.0185 negates.

Published in Forex News

Contributed By: DailyFx


EUR/CHF: Despite the latest setbacks, we retain a constructive outlook with the market in the process of carving out a major base. There is some very solid internal range support in the 1.3200’s and we would expect to see any additional declines very well supported ahead of 1.3200. Ultimately, only a close back below 1.3200 would give reason for concern. Look for a break back above 1.3455 over the coming sessions to confirm bias and accelerate gains.

Published in Forex News

Contributed By: DailyFx


EUR/JPY: The market has done a very good job of holding above the daily Ichimoku cloud to suggest that we could be on the verge of a material shift in the structure in favor of significant upside over the medium and longer-term. Daily studies are however in the process of consolidating, so the preferred strategy is to look to buy into dips rather than on upside breaks. The latest pullback to 112.00 could now present an attractive buy opportunity, with the market seen well supported by the cloud top.

Published in Forex News

Contributed By: DailyFx


EUR/USD: Wednesday’s break back below 1.3695 is significant, with the market potentially looking to roll over in favor of deeper setbacks. However, as we mentioned in our commentary from the previous day, a close below 1.3695 would ultimately be needed to force a shift in the structure. Until then, the focus remains on the topside. Key levels to watch over the coming session come in by 1.3890 and 1.3670.

Published in Forex News
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