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Monday, 01 November 2010 10:41

Market Conditions Continue to Favor Regional Strength

Contributed by: DailyFx

OVERVIEW – With the USD Dollar back under pressure across the board and commodities well bid on dips, we are once again seeing fresh bids emerge in the regional currencies, which continue to outperform in the current market environment. The SEK has been the big gainer of late, with the currency finding some relative bids on the back of yet another rate hike from the Riksbank in the previous week. Interest rate differentials have been aggressively swaying back in favor of Sweden relative to Norway, as the Norges Bank scales back and is standing aside for now. Looking ahead, Monday sees the release of some key PMI data in both Norway and Sweden, while in Denmark, retail sales are set for release. Also out later in the week are Norwegian unemployment and industrial production.



Eur/SekAlthough the overriding trend is still intensely bearish, the market looks to have finally found some form of a base by 9.09 after triggering an inverse head & shoulders pattern. From here, look for additional upside back towards a measured move objective by 9.50 over the coming days. Ultimately, only back below 9.13 would delay and give reason for concern.

Eur/Nok Overall price action remains quite choppy with the market confined to a well defined range over the past several weeks between 7.80 and 8.20. The latest rally attempts have once again stalled out just over the 8.20 range resistance, and the risks from here are for range trade resumption back towards the 7.80 area over the coming sessions. Only a close back above 8.20 would negate outlook.

Usd/SekThe latest rally attempts have once again stalled out and any hopes for the formation of a material base by 6.50 are looking less and less likely. The underlying trend remains intensely bearish and a break below 6.50 will solidify this fact and open the door for the next major downside extension. At this point, only a break back above 6.83 would negate outlook and give reason for pause.

Usd/Nok The latest rally attempts have once again stalled out and any hopes for the formation of a material base by 5.70 are looking less and less likely. The underlying trend remains intensely bearish and a break below 5.70 will solidify this fact and open the door for the next major downside extension. At this point, only a break back above 5.96 would negate outlook and give reason for pause.

Gbp/NokOverall price action remains quite choppy with the latest sharp sell-off being very well supported ahead of psychological barriers by the 9 handle. From here, we will use the 9.50 level as a gauge for directional bias. While the market holds below, we would expect to see downside pressures persist, but back above will relieve downside pressure and potentially open some fresh upside back towards the 10.00 handle.

Nok/JpyRemains confined to a multi-day range broadly defined between 13.25 and 14.50. The market has most recently stalled out by the range highs, and as such, the preferred strategy is to look to sell in favor of a continuation of the prevailing range trade. Ultimately, a close back above 14.50 would be required to negate.

Published in Forex News
Monday, 01 November 2010 10:39

US Dollar Convictions Being Tested; Euro Should Find Offers Above 1.4000

Contributed by: DailyFx

The US Dollar starts off the new week and new month under pressure, after the market had been well offered in the final trading day of October. Our bias over the past couple of weeks has been net USD bullish and the latest moves are certainly threatening this outlook. Still, despite the latest USD slide, we retain our bias into Wednesday and ahead of the highly anticipated Fed rate decision, with the very basis for our outlook stemming from the expectation that the Fed will be much less aggressive with its approach to a second round of quantitative easing than the markets have been anticipating.

Technically, despite the Greenback selling over the past few sessions, it is worth noting that the Euro still closed lower against the buck on the week and is only just in the process of consolidating ahead of the next major move. While any gains above 1.4000 should be well offered on Monday, ultimately, only a clear break back above 1.4160 would negate our outlook and open the door for additional Euro gains towards some critical falling trend-line resistance in the 1.4500 area.

As we highlighted in our analysis in the previous week, the theme in the FX market has been very much driven off of broad based sentiment towards the US Dollar. Although most of the major currencies have already taken out some critical levels over the course of the multi-week USD slide, there is still one currency which has been holding out, that could be preventing the Greenback from really being able to mount a meaningful recovery. The Yen is eyeing a retest and break of its 1995 record highs against the USD, and we suggest that once this level is finally taken out, it may offer a good excuse for the markets to finally say that there is effectively no good reason left to sell USDs over the short-term and thereby trigger a significant short-term USD rally. The level in Usd/Jpy comes in by 79.75 and it looks as though we could see the barrier taken out over the coming sessions.

Price action on Monday thus far has seen some more USD selling, with the Yen the key standout currency from a price action standpoint. Any time we see a sharp Yen sell-off that is not confirmed by any official action, we can expect to see the single currency rally quite sharply back to initial levels and beyond, and this is precisely what we have seen in early Monday, with Usd/Jpy spiking before sharply reversing course to trade to fresh multi-year lows below 80.40. Risk sentiment has also been quite healthy in the early week, with some much better than expected China PMI data helping to fuel additional currency buying. Also on the data front, the UK hometrack house survey deteriorated from the previous print, while the Aussie house price index was slightly better.

Looking ahead, the European economic calendar is quite light, with Swiss SVME-PMI (59.3 expected) due at 8:30GMT, followed by UK PMI manufacturing (53.0 expected) at 9:30GMT. US equityfutures and commodities prices are well bid into the European open.

Published in Forex News

USD Dollar (USD) – The Dollar traded mixed with the majors currencies today. The GDP came out as expected at 2.00% and the Chicago PMI came out at 60.60, better than the expected 57.50. The Stock Markets in the U.S. closed mixed with the Dow Jones rising 0.04% and the NASDAQ unchanged. Crude Oil fell against the dollar and closed below $82 a barrel. Gold (XAU) advanced by $19.87 and closed at $1362 an ounce as investors chose to turn back to a safe haven, gold. Today, the price index is expected unchanged at 0.10% and the ISM Manufacturing Index is expected at 53.60 vs. 54.40 previously.

Euro (EUR) – The dollar fell for a third day against the euro in Forex trading on speculation that the Federal Reserve will take more credit-easing measures amid signs of a stagnant recovery in the world’s largest economy. The Dollar did, however, strengthen to 1.3900 with the opening of the Asian market at 08:03 Tokyo time. Holding above the support level of 1.3930 keeps the momentum positive for the pair. Overall, EUR/USD traded with a low of 1.3957 and with a high of 1.3983. Today, no economic data is expected.

EUR/USD – Last: 1.3993







British Pound (GBP) – The Pound closed at almost the same rate as it had opened (last Friday). However, during the night it fell below the support level of 1.6000 and returned to trade around 1.6050 levels. Holding the rate above 1.6050 will keep the momentum bullish for the pound. The net lending to individuals came out 0.40B, worse than the expected 0.90B. Overall, GBP/USD traded with a low of 1.6022 and with a high of 1.6060. Today, the Manufacturing PMI is expected at 53.00 vs. 53.40 previously.

GBP/USD - Last: 1.6055







Japanese Yen (JPY) – The Japanese Yen weakened versus the Dollar with the opening of the market in Asia, earlier today. The Yen declined 0.8 percent reaching 81.40 per Dollar. Trading above 80.50 will keep the momentum bullish for the Dollar. Overall, USD/JPY traded with a low of 80.23 and with a high of 81.43. No economic data is expected today.

USD/JPY-Last: 80.52 







Canadian dollar (CAD) Canada’s dollar gained for a second consecutive month after the   Federal Reserve said that it  will spur global growth. The GDP came out at 0.30%, as expected.  Overall, USD/CAD traded with a low of 1.0180 and with a high of 1.0197. Today, no economic data is expected.

USD/CAD - Last: 1.0166








Published in UFX Bank Daily Review
Friday, 29 October 2010 13:13

UFXBank Forex Outlook: Euro at 1.39...for now

USD Dollar (USD) – The Dollar lost gains across the board in Forex Trading as investors preferred to invest in higher yielding assets in a volatile trading session as traders expect to FED's monetary policy meeting next week. The Initial Jobless Claims came out 434k better than expected 455k. The Stock Markets in U.S. closed mixed with Dow Jones losing -0.11% and the NASDAQ advanced by 0.16%. Crude Oil closed with no significant change from yesterday at 82$ a barrel. Gold (XAU) gained and jumped back to 1343$ an ounce as investors choose to turn back to safe haven gold. Today, the GDP is expected at 2% vs. 1.7% previously. Chicago PMI is expected at 57.5 vs. 60.40 previously. The Michigan Consumer Sentiment Index is expected at 68 vs. 67.9 previously.

Euro (EUR) – The Euro jumped up again to the 1.39 zone, covering previous 2 days loses. The fluctuation is still valid till some fresh news will cause the pair to break through to new prices. Holding above the support level of 1.3880 keeps the momentum positive for the pair. Overall, EUR/USD traded with a low of 1.3763 and with a high of 1.3944. Today, the CPI is expected at 1.7% vs. 1.8% previously. The Unemployment Rate is expected unchanged at 10.10%.

EUR/USD – Last: 1.3900








British Pound (GBP) – The Pound gained versus the dollar and attempting once again to approach the 1.6 area. More optimism was seen for the Sterling as speculations that BOE will delay another round of asset purchases. The Nationwide HPI came out -0.7% worse than expected -0.3%. The CBI Realized Sales came out 36 worse than expected 40. Holding above the support level of 1.59 keeps the momentum positive for the pair. Overall, GBP/USD traded with a low of 1.5760 and with a high of 1.5977. Today, the net lending to individuals is expected at 0.9B vs. 1.5B previously.

GBP/USD - Last: 1.5945








Japanese Yen (JPY) – The Japanese Yen gained versus the Dollar and the pair fell again to the 81 area from 82 on speculation that the FED will keep supporting the stimulus and by that reducing the demand for U.S. assets. The Interest Rate Decision came out unchanged as expected at 0.1%. The Tokyo Core CPI came out -0.5% better than expected -0.8%. Breaking the support level of 80.40 might push the pair to new lows. Overall, USD/JPY traded with a low of 80.82 and with a high of 81.76. No economic data is expected today.

USD/JPY-Last: 80.58







Canadian dollar (CAD) – Canada's dollar gained versus the U.S. dollar as weakness of the greenback was seen across the board but still the pair is supported by the 1.02 zone. Holding above the 1.0160 support level might rebound the pair back to 1.03 zones and push it higher. Overall, USD/CAD traded with a low of 1.0180 and with a high of 1.0285. Today, the GDP is expected at 0.3% vs. -0.1% previously.

USD/CAD - Last: 1.0212








Published in Forex Articles
Saturday, 30 October 2010 07:02

Euro May be on Verge of Major Reversal

Contributed by: DailyFx


EURUSD – Sharp swings in EURUSD sentiment warn that the Euro may reverse or enter a period of consolidation through upcoming trade. The ratio of long to short positions in the EURUSD stands at -1.25 as nearly 56% of traders are short. Yesterday, the ratio was at 1.00 as 50% of open positions were long. In detail, long positions are 11.8% lower than yesterday and 13.4% stronger since last week. Short positions are 10.3% higher than yesterday and 6.6% weaker since last week. Open interest is 0.8% weaker than yesterday and 5.9% below its monthly average. The EURUSD SSI ratio flipped to net-long yesterday for the first time since the pair traded near 1.26. A more sustained swing to net-long would give clear contrarian signal to go short the EURUSD.

Published in Forex News
Saturday, 30 October 2010 07:02

Stocks Flat Despite GDP and Consumer Sentiment Data

Contributed by: DailyFx

U.S. Session Key Developments

* GDP Grew at Annual Rate of 2 percent
* Reuters/University of Michigan Confidence Report Fails to Meet Expectations

Stocks Flat Despite GDP and Consumer Sentiment Data

U.S. Markets fluctuated between gains and losses throughout much of the day, but ended the session closing slightly higher. The DJIA experienced the best October since 2006, gaining 3 percent throughout the month. The S&P 500 was up 3.7% for October, the best performance since October 2003. The October rally in the markets was sparked by investors’ speculation that the US Federal Reserve will pursue further quantitative easing in order to stimulate the economy. Data released Friday indicated that the economy expanded in the third quarter at a slightly faster pace compared to the previous quarter, but growth remains too weak to cut unemployment any time soon. GDP, the value of all final goods and services produced in an economy, rose at an annual rate of 2 percent after climbing 1.7 percent in the previous quarter. Economists had expected a 2 percent growth. Also, consumer sentiment data from Reuters/University of Michigan showed the consumer mood darkened at the end of October, while the Chicago Business Barometer edged up from September and topped expectations.

DJIA 30 / 11,118.49 / +4.54 / +0.04%

The DJIA held onto a strong gain at the end of the trading session on Friday. Chevron fell 2.9 percent after the oil major’s third quarter earnings and revenue significantly missed analysts’ expectations. Merck dropped 2.2 percent as the company’s earnings excluding items topped estimates, but revenue fell short of forecasts. Microsoft was among the Dow’s best performers, with a 1.7 percent rise. The company’s first quarter profit rose 51 percent, benefiting from strong demand for Windows 7. Microsoft is also the Dow’s best performer this month, up 9.1 percent over the period.

S&P 500 / 1,183.26 / -0.52 / -0.04%

The S&P 500 closed flat at the end of the day. Among stocks in focus, Genworth Financial tumpled 9 percent. The life insurer’s operating earnings unexpectedly fell as stronger international operations could not offset weakness in life and mortgage insurance. S&P Equity Research cut its target price on Genworth’s shares following the report. Monster Worldwide surged 25 percent. The employment website operator reported stronger than expected forecast in its third quarter. The company has experienced growth in revenue, bookings, and deferred revenue since early 2008.

NASDAQ / 2,507.41 / +0.04 / +0.00%

The Nasdaq Composite Index closed in positive territory, as basic materials lead the advance with a 1.36 percent gain. 8 out of the 10 sectors rose at the end of the trading session. Health Care and Oil & Gas were the two sectors that declined, with a 0.34 percent and -1.18 percent fall respectively.

Published in Forex News
Saturday, 30 October 2010 07:02

It's Hunting Season for Traders Next Week

Contributed by: DailyFx

The US GDP report was disappointing. I wasn't banking so much on a certain direction as I was just looking for a sharp increase in volatility. If we were able to generate significant price action; it would have been possible to force necessary breaks (dollar, S&P 500, treasuries) early. That would lead us to a much more dynamic devolopment in next week's trend development. As it turns out, the crowd is far too enthralled with the wave of event risk next week - with a particular interest in the FOMC rate decision. This means that we are more likely to see an explosive breakout and aggressive trend development. We need to be ready for this possibility. Given the dense round of risk; I don't want to map my expectations out in too fine a detail; but I think there are a few scenarios that are worth thumbing through in my head. Focusing on the Fed's decision, I think a stimulus program that meets or exceeds the popular consenus ($100 billion injection per month for 5 or 6 months), will lead to follow through on dollar selling and perhaps an advance in risk appetite. That said, the magic of stimulus advancing capital markets will likely wear off quickly; and the S&P 500 will eventually correct. For the most dramatic effect, we'll look for a program below expecations or no program at all. Risk appetite will fall apart and people will have to cover their dollar shorts wholesale.

For my positions heading into next week, I have been knocked out of my pound trades. With the BoE scheduled to meet next week (and seen holding steady), there has been a boost in relative fundamental strength. This lead my reduced-EURGBP range setup to be stopped at 0.8675 and I won't consider flipping this as a reversal until next week. My half-size GBPUSD short was also stopped at 1.6020 as the pair eyes 1.60 as a possible major breakout going forward - with the right encouragement. From my other positions, I am still holding exposure to next week's festivities. My the remainder of my EURUSD short is still in place; but my stop has been trailed to break even after taking the first half. My have to redevelop this one with a bigger trend development (same with GBPUSD). The rest of my positions were Aussie based and peformed well. EURAUD hasn't really put any progress; but it already took its first target and the rest is icing. My AUDCAD was deep in the green in the morning before it retraced. There is obviously a have push to get this thing moving into its reversal - let's just hope the RBA decision and Canadian jobs figures doesn't turn things around. And, my small AUDNZD short has proven to be the best position of the group.

Looking at opportunities next week, the combinations are boundless. For the dollar's volatilty and potential trend, my interests run from EURUSD and GBPUSD to USDJPY and USDCHF. May even look to NZDUSD early next week as it makes a double top (though that can easily fall victim to a false break). There are many crosses that are peaking my interest as well; but the only thing on par to a major dollar breakout is CADJPY.

Published in Forex News

Contributed by: DailyFx


British Pound Rally To Gather Pace As BoE Maintains Current Policy

Fundamental Forecast for British Pound: Bullish

* U.K. 3Q GDP Tops Forecast
* Lending Activity In U.K. Unexpectedly Improves
* US Dollar Crowd Sentiment Underlines Risk of Reversal

The British pound made another run at 1.6000 heading into November, and the U.K. currency may continue to trend higher over the following week as market participants scale back speculation for another round of quantitative easing. The Bank of England is widely expected to maintain its current policy next week as the economic recovery in Britain slowly gathers pace, and the central bank may drop its dovish tone as inflation continues to hold above the government’s 3% limit for price growth. As a result, we may see the GBP/USD make its way towards the 23.6%Fibonacci retracement from the 2009 low to high around 1.6220-30 in the coming weeks, and the pound-dollar may continue to pare the decline from earlier this week as it maintains the upward trend from May.

A Bloomberg News survey shows 38 of the 40 economists polled forecast the BoE to hold the benchmark interest rate at 0.50% and maintain the asset purchase target at GBP 200B, while investors are pricing a 4% chance for a 25bp rate hike according to Credit Suisse overnight index swaps. As speculation for further easing subsides, the British Pound could show a bullish reaction to the rate decision even if the central bank refrains from releasing a policy statement and we expect board member Andrew Sentance to push for another 25bp as the economic outlook improves. However, MPC board member Adam Posen may spark a three-way split within the central bank as he maintains a highly dovish outlook for future policy, and market participants will certainly look towards the BoE minutes due out on November 17. However, as the central bank is scheduled to deliver its quarterly inflation report on the 9th, comments from Governor Mervyn King could take some steam out of the minutes as investors weigh the prospects for future policy. Nevertheless, the BoE minutes should be able to carry its own weight as we look forward to the vote count, and a three-way split within the MPC could bear down on the recent rally in the British Pound as the central bank stands ready to move monetary policy in either direction.

However, currency traders may show little reaction to the BoE interest rate decision given the slew of heavy event risk scheduled for the following week, and the GBP/USD may hold steady ahead of the highly anticipated FOMC interest rate decision as investors expect the Fed to expand quantitative easing further. At the same time, U.S. non-farm payrolls are forecasted to increase for the first time in five-months, with market participants projecting employment to increase 60K in October, and the release could harbor a comprehensive outlook for future price action as investors weigh the outlook for global growth.

Published in Forex News

Contributed by: DailyFx


Japanese Yen: Will The Currency Finally Reach Its Peak This Week?

Fundamental Forecast for Japanese Yen: Bearish

* Yen Little Changed as Bank of Japan Details Asset-Buying Plan
* Yen Strength Leaves Some Scratching Their Heads

The Japanese yen continued to benefit from its safe haven status this week amid uncertainty in the global economy, but the advance in the currency may begin to lose momentum as governments and central banks aim to take the necessary steps to stabilize their economies. JPY traders will now shift their focus to the Bank of Japan interest rate decision. With interest rates already in the range of 0 to 0.1 percent, the central bank is running out of options. Looking ahead, the BoE and FOMC rate decision in conjunction with the nonfarm payrolls releases next week may be the catalyst needed for the Japanese yen as the strengthening currency continues to weigh on the country’s exports.

The yen is considered a safe haven because the current account surplus reduces Japan’s dependence on borrowing from abroad. It is important attribute and note the yen’s rally to its safe haven appeal because once major economies begin to stabilize; the yen will rapidly depreciate. From a fundamental basis, consumer spending is likely to remain at depressed levels on the back of a weak labor market and deflation. At the same time, businesses will remain reluctant to add onto their payrolls so long as uncertainty remains, and in turn, households will continue to save rather than spend. Consumer confidence in the region is now at their lowest level since March of this year, and will keep downward pressure on consumer prices.

For this upcoming week, the economic docket in the world’s third largest economy is relatively light; however, JPY traders will place the spotlight on the Bank of Japan interest rate decision. At last month’s meeting, the central bank introduced a 5 trillion yen asset purchase program in order to “encourage the decline in longer-term interest rates and various risk premiums to further enhance monetary easing.” This emergency stimulus is an addition to the 918 billion yen package in September. At this upcoming meeting, traders are pricing in a zero percent chance that policy makers will hike rates twenty five basis points, according to the credit Suisse overnight index swaps. This assumption is accurate as the policy board recently pledged to maintain a virtually zero interest rate policy until annualized inflation climbs back into the range of 0 to 2 percent. Not to overlook, labor cash earnings and vehicle sales are on tap, but the FOMC and BOE rate decision may dictate yen price action this week and into the subsequent week due to the fact that the yen is rally on the back of weakness in some of the major economies.

Taking a look at price action, specifically the USDJPY, the pair is looking to test the key 80.00 level, with a break below exposing the record low of 79.70. Upside risks remain capped by the 20-day SMA, and until we see a clear break and close above this level on the back of positive U.S. fundamentals, I do not rule out further downside.

Published in Forex News

Contributed by: DailyFx


Fundamental Forecast for Gold: Neutral

* Gold vs FX Correlations Fade But NZD Relationship Holds Strong
* Breakout, Momentum Trading Strategies Favored for Gold Exposure

Gold re-coupled with the risky asset side of the sentiment dichotomy in October. Indeed, prices now show a 0.81 correlation reading with the MSCI World Stock Index – a benchmark for risk appetite – on 20-day percent change studies. This seems to make sense: the central issue driving risk over recent weeks has been the likelihood that the Federal Reserve was preparing another round of quantitative easing. Such an outcome is supportive for shares given the overwhelming evidence of a broad-based economic slowdown through the end of 2010; it is supportive for gold given the metal’s store-of-value properties, making it an attractive hedge should the central bank’s policies overshoot and let loose undesirable inflation.

Looking ahead, this puts the spotlight on the FOMC monetary policy announcement due Wednesday. The whisper number circulating around the markets seems to be $500 billion in additional asset purchases. This much has likely been priced in already and may not prove market-moving as a standalone outcome. Rather, should this materialize, the focus will fall on the language of the Fed statement will prove most market-moving as traders size up how much more (if anything) the central bank plans to do and what parameters it is watching to guide its thinking. A dovish-leaning statement hinting the Fed is on standby with more firepower promises to boost gold along with the spectrum of risky assets; alternatively, should Ben Bernanke and company come off as uneasy or reluctant about QE, the opposite result can be expected. Needless to say, the same range of outcomes applies in the event that the asset purchase amount is more or less than is expected.

Published in Forex News
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