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Forex Daily News | Forex Articles | Forex Information

Contributed By: DailyFx

 Milton Friendman once said that inflation is always a monetary phenomenon. This statement is true in the longer run. In the short term, the relationship can be more complicated. Inflation in China has become a threat to social stability, the government is responding with a combination of monetary tightening and price controls. While these measures may calm inflation fears among the masses for the time being, the fear may come back with a vengeance if the measures fail to achieve the stated purposes.

China’s economy is inflation-prone. As a large developing economy, the need for money is constant. The system tends to accommodate such needs through monetary expansion. That is why China was full of high-inflation episodes in the 20th century. The impact of monetary expansion on inflation varies under different circumstances. Economists usually call this factor the velocity of money. However, it is more complicated in reality than just how fast money circulates, since money circulation can be biased towards or against consumer-price-index related goods and services.

China had an unusual deflation period from 1996-2004, labour surplus and low prices of natural resources, especially oil, were the key factors. The reform of the state-sector drove millions from it into the labour market, baby boomers from the 1950-70s continued to pour into the labour market and the productivity gains in the rural sector pushed the rural labour force into the urban and industrial sectors. The massive surplus of labour kept wages stagnant despite rapid labour productivity increases, triggering declining prices of manufacturing goods inside China and out. As mentioned above, it was the low and declining prices of natural resources that kept China’s manufacturing expansion from becoming inflationary during this period. The reason behind this drop in natural resource prices was due to falling demand from the ex-Soviet bloc in Eastern and Central Europe, Russia and Central Asia. Their economies were resource intensive and depended on trade within the Soviet bloc. It dissolution led to a sustained contraction in their demand for natural resources for the best part of a decade and a half. Their reduction in demand offset China’s increase in demand, which kept prices low.

When an economy is biased towards deflation, monetary expansion doesn’t lead to inflation in the short term. As mentioned, the velocity of money is low in such an economy. Furthermore, the money during this era circulated disproportionately into property, a property bubble emerged because the money supply was rising rapidly and didn’t go into CPI-related goods and services.

Around 2004/5 the situation changed and China’s labour market became balanced, pockets of labour shortages even started to appear, especially in the export sector. Coupled with rises in raw material prices as demand picked up in Russia and other former Soviet-bloc economies as their economies began to grow again. The market conditions became biased towards inflation, meaning that monetary growth would cause CPI inflation, leading to China’s serious inflation problem in 2007. The government decided to raise interest rates and resorted to price controls to contain inflation.

The global financial crisis interrupted China’s inflationary trend and many analysts interpreted the situation as proof that inflation was never a lasting problem and China was still deflationary due to overcapacity. Such thinking led to a massive 78% increase of money supply in three years. The financial crisis, in our opinion, was a temporary shock that decreased China’s inflation by reducing the prices of natural resources, as soon as the situation in the global economy stabilized in 2009, the trend of rising prices of natural resources and labour continued and because China added so much money in an inflationary economy, the current inflation problem is much bigger than in 2007, and it will take many years for the effects to burn off.

It is too late for China to try and push inflation back, what is needed now is action to safeguard stability during this inflation era. How high inflation averages over the next five years will be mostly determined by the rippling effects of huge monetary expansion. We will continue to watch the situation closely as Beijing attempts to implement policies which will try to maintain this stability.

Published in Forex News

Contributed By: DailyFx

 Talking Points

* Japanese Yen: Mixed Across the Board
* British Pound: U.K. Raises 2010 GDP, Cuts 2011 Growth Forecast
* Euro: EU Maintains Growth Projection For 2010, 2011
* U.S. Dollar: Dallas Fed Manufacturing on Tap

The U.S. dollar advanced against its major counterparts during the overnight session, and the near-term rally in the greenback may pick up pace going into the North American trade as fears surrounding the European debt crisis continue to weigh on market sentiment. The EUR/USD tumbled to a low of 1.3136 as the European Union held a cautious outlook for the region and expects the austerity measures to bear down on the economic recovery in the following year. Although, the group maintained its growth forecast for the euro-area as it sees GDP expanding 1.7% this year and 1.5% in 2011, but went onto say that the fundamental outlook remains clouded with high uncertainty as the governments operating under the fixed-exchange rate system struggle to manage their public finances.

As a result, EU Economic and Monetary Affairs Commissioner Olli Rehn said Portugal and Italy may have to take additional steps to meet their fiscal targets as their budget-cutting proposals remain “very ambitious,’ but said that the risks to the economic outlook are broadly balanced while speaking at a news conference in Brussels. The bearish sentiment underlying the single-currency may intensify going into December as European policy makers struggle to restore investor confidence, and the ongoing turmoil in the financial markets could lead the European Central Bank to keep its exit strategy on hold throughout the coming months as it aims to balance the risks for the region. As the exchange rate falls back towards the 38.2%% Fibonacci retracement from the 2009 high to the 2010 low around 1.3100-20, the euro-dollar may continue to retrace the advance from December, but the pair may consolidate in the days ahead as price action holds above the 200-Day SMA at 1.3130.

The British Pound fell back from a high of 1.5648 as investors scaled back their appetite for risk, and the flight to safety may continue to drag on the exchange rate as risk trends dictate price action in the currency market. As the GBP/USD breaks out of the upward trend from May, the pound-dollar may trend lower in the days ahead as it searches for support, but the pair could consolidate in the days as price action holds above the April highs around 1.5500. Meanwhile, the U.K. Office for Budget Responsibility sees GDP expanding 1.8% this year versus an initial forecast for 1.6% rise in GDP, while the group expects the growth rate to rise 2.1% in 2011 amid earlier projections for a 2.3% expansion next year. As policy makers in the U.K. see a risk for a slower recovery in the following year, the Bank of England may look to maintain the expansion in monetary policy throughout the beginning of 2011, but the stickiness in price growth could spur a growing split within the MPC as the central bank expects inflation to hold above target next year. As we head into December, speculation surrounding the outlook for future policy should play an increased role in driving price action for the GBP/USD, and the pair may trend sideways over the coming weeks as we expect to see another three-way split at the December 9 interest rate decision.

The greenback rallied against most of its currency counterparts, with the USD/JPY advancing to a high of 84.25, and the dollar may appreciate further as equity futures foreshadow a lower open for the U.S. market. As the economic docket remains fairly light for Monday, we should see risk sentiment continue to dictate price action for the major currencies, but there could be a small reaction to the Dallas Fed Manufacturing Activity index due out at 15:30 GMT as investors weigh the outlook for future growth. The gauge for manufacturing is expected to increase to 4.5 in November from 2.6 in the previous month, which would be the highest reading since April, and the data could spur a shift in market sentiment as the data encourages an improved outlook for the world’s largest economy.

Published in Forex News

Contributed By: DailyFx

 * Dollar Advance Increasingly Dependent on Euro, A Shift in Risk Trends is Needed
* Euro Continues its Decent as the Market Looks Beyond Ireland’s Problems to Europe’s Problems
* British Pound Declines as OBR Lowers Growth Forecasts and Housing Prices Slide
* Australian Dollar Under Pressure as the Countdown to 3Q GDP Wears
* Japanese Yen Shows Little Benefit through Risk Trends, BoJ Governor Wavers on Yen
* Canadian Dollar Traders Prepare for Tuesday’s 3Q GDP Reading

Dollar Advance Increasingly Dependent on Euro, A Shift in Risk Trends is Needed

If there was any doubt that the dollar was playing out a meaningful bullish swing, that disbelief should be quelled by now. However, suspicions for the greenback seeing at least a temporary correction in the near future should not be abandoned. While the single currency may have exhibited remarkable strength over the past three weeks, its fundamental drive may be built on very specific catalysts that could easily drop their support without the proper encouragement. In assessing the situation at the start of the new trading week, we should first establish that the trade-weighted Dollar Index marked a strong follow-up rally to Friday’s surprise surge to push the currency to a fresh two-month high. At this point, the Index has rallied 7.3 percent or 550 points since hitting a 2010-low back on November 4th. For the majors, this has translated into remarkable progress. EURUSD pushed to its own two-month low after taking out an important, rising trend dating back to the early June low (notably, this break happened in the expected holiday-lull last Friday). GBPUSD has similarly broken down from a channel that had slowly guided the pair higher for months. Even the high yield differential for AUDUSD has failed to keep the pair from a technical break in the dollar’s favor. However, there is a particular oddity between this performance and fundamentals: the lack of a risk aversion responsibility.

From a purely detached standpoint, the dollar may not represent a very appealing safe haven – debt troubles are deeply rooted, growth projections are rather anemic and US market volatility is high. However, in the FX market everything is relative. The US also represents a deeply liquid market, a government that is making a considerable effort to support investors and maintains a bearing of economic expansion. These encouraging qualities are the foundation for the greenback’s improvement these past weeks. In this overall mediocre picture of fundamental strength, we see the qualities that investment capital flooding out of the euro is seeking. Therefore, in the financial instability that is construed through European developments, we have seen the tap open directly through the US dollar and into US assets. As long as the shared currency continues to suffer from its own fundamental troubles, carry trades that were funded via US loans will be unwound and speculators will feed the selling effort. That said, this drive won’t last forever. Eventually, the bearish outlook for Europe will be fully saturated and prices reflect as much as speculation will allow. That does not mean that the dollar cannot sustain its advance when that inevitability comes to pass though. Circling back to our observation that risk trends have really not stepped in to support the greenback’s advance, we have a fully-charged catalyst to come in and pick up the slack. And so, we keep a watchful eye on the S&P 500 at 1,175 and the Dow around 11,000.

What is the best catalyst to send risk appetite and these barometers for sentiment tumbling? Speculation itself. Nothing is more effective at driving a market down than the spread of panic. That does not preclude, however, a fundamental jump start to get the markets moving in the meantime. We had a relatively light macroeconomic docket to start the week. More interesting were notes from the recent WikiLeaks exposure that China was growing tired of North Korea (perhaps opening the way for escalation of tensions in the area) and the suggestion that the next big release will be to expose a major US bank early next year. If we want to stick to the economic calendar; the listings fill out tomorrow. The Conference Board’s consumer sentiment survey is due out Tuesday along with speeches by the Fed’s Bernanke and Kocherlakota.

Euro Continues its Decent as the Market Looks Beyond Ireland’s Problems to Europe’s Problems

Shouldn’t details about Ireland’s bailout (how much, where is it coming from, when it will be delivered) encourage confidence in the euro? Probably not. The failed jump start from the initial announcement of 85 billion euros in support for the strained EU member wasn’t doubt that officials would follow through on its enactment, rather the selling seems to be the market moving on the next issue. With that we see that Portugal is under pressure to ask for a pre-emptive bailout and Spain has seen its borrowing costs jump the most since the euro’s inception. Investors are concerned that this is more a European issue than a Ireland or Greek issue. The euro’s appeal is dependent on the whole region.

British Pound Declines as OBR Lowers Growth Forecasts and Housing Prices Slide

It is important to note that the pound’s performance is heavily influenced by the health of its primary counterpart – the euro. Economic and financial troubles easily bleed through these open borders. That said, there was a specific drive for the sterling in the biggest drop in housing demand in nearly two years as well as a downgrade in 2011 / 2012 GDP forecasts from the Office for Budget Responsibility.

Australian Dollar Under Pressure as the Countdown to 3Q GDP Wears

Few countries retain their place at the top of the economic pile. And, while it may be a while before the Aussie dollar relinquishes its place, the data is certainly undermining its sense of superiority. Third quarter operating profit dropped 1.5 percent and the current account deficit ballooned after testing an eight-year low. Coming up soon: the 3Q GDP figures. Will risk aversion find a willing participant in an broad position unwinding?

Japanese Yen Shows Little Benefit through Risk Trends, BoJ Governor Wavers on Yen

To further our conversation that risk appetite trends have been absent from the recent developments in FX, we should note that USDJPY has moved relatively little. Furthermore, other yen crosses were little moved Monday. Aside from the first drop in Japanese retail sales in seven months, the most interesting fundamental development was Shirikawa’s even-handed suggestion that there are benefits to a high yen.

Canadian Dollar Traders Prepare for Tuesday’s 3Q GDP Reading

The Canadian dollar may have appreciated Monday; but that seems more the effort of counter-currency selling rather than specific loonie buying. For event risk, the third quarter current account deficit ballooned to a record C$17.5 billion as capital flows out of the economy. With that in mind, we have the third quarter GDP figures due Tuesday and employment numbers set for release Friday.

Published in Forex News

Contributed By: DailyFx

 Commodities – Energy

Crude Oil Back in Price Discovery Mode

Crude Oil (WTI) - $85.27 // $0.46 // 0.54%

Commentary: Crude oil continued to rally on Monday, buoyed by momentum established last week. The commodity rose $1.97, or 2.35%, to settle at $85.73 after reports of a strong start to the United States holiday shopping season. The latest move was extremely telling, for it took place on a day in which U.S. equity markets fell amid persistent concerns related to the European sovereign debt crisis. Indeed, Spanish 10-year bond yields hit their highest levels in eight years near 5.43%, as contagion fears mounted. And while U.S. equity markets would stage an impressive reversal- they recovered the vast majority of the 1.3% losses put in during the early part of the session- oil was solidly higher all throughout the day.

Oil is rebounding after successfully testing $80 support last week on four separate occasions. Prices are back in price discovery mode, and will likely soon surpass the 25-month highs set just under $89 earlier this month. As we have written previously, the European debt crisis has been an excuse for traders to lock in significant gains, but now the consolidation phase seems to be ending and more influential factors such as sizzling demand in emerging markets and the accelerating U.S. recovery are taking precedence-- as they should. Europe is an insignificant component of the global oil market and the risk of spillover impact from the sovereign debt crisis into key oil market players such as Asia and to a lesser extent, the U.S., is almost nonexistent in our view.

Technical Outlook: Prices have taken out resistance in the $83.27-$84.43 congestion region, with the bulls now positioning for a retest of support-turned-resistance at a rising trend line set from late September, now at $87.41. A break above that exposes the 11/11 swing high at $88.63. The aforementioned congestion area has been recast as near-term support.


Commodities – Metals

Gold Shrugs off Dollar Rally to Rise

Gold - $1364.80 // $1.52 // 0.11%

Commentary: Gold once again shrugged off a sharp rally in the U.S. Dollar to finish to the upside on Monday. The metal added $2.57, or 0.19%, to settle at $1366.32. Meanwhile, the dollar index rose 0.6%. The breakdown in gold’s correlation with the U.S. Dollar that we pointed to in last week’s Gold – FOREX correlations report seems to be continuing in the new week, as traders seek shelter from the debauchment of fiat, or “paper,” currencies in general.

Not many market participants believe that this advance in the U.S. Dollar is anything but a blip in a larger downtrend. And regardless, a rally versus a deeply troubled Euro currency is not necessarily an indication of monetary soundness. Versus the Australian Dollar, for instance, the dollar only rose 0.15% on Monday, well short of the 0.88% increase against the Euro. Gold traders and investors continue to treat gold as an alternative currency, or more precisely, an alternative store of value.

Until we see indication that monetary conditions will tighten in the U.S. and Eurozone, gold will likely stay well bid.

Technical Outlook: Unchanged from yesterday: “Prices have turned lower following a test of horizontal resistance at $1381.15, hinting gold may be forming the right shoulder in a Head and Shoulders top formation with a neckline at $1322.39, the 38.2% Fibonacci retracement for the 7/28-11/9 advance. A validation of this setup on a break through the neckline will see the bears aim for a measured target at $1220.46. Alternatively, a push higher through near-term resistance exposes the record high at $1424.60.”

Silver - $27.08 // $0.08 // 0.28%

Commentary: Silver rose $0.44, or 1.66%, to settle at $27.15, rebounding about half of Friday’s losses. We maintain our view that the tail is wagging the dog and silver is driving movements in the precious metals complex. As long as investment capital continues to flow briskly into silver via Exchange Traded Funds and the like, expect silver outperformance to continue.

The gold/silver ratio was steady at 50.4, up from recent lows near 49. (The gold/silver ratio measures the relative performance of the two precious metals. A higher ratio indicates gold outperformance, while a lower ratio indicates silver outperformance).

Technical Outlook: Unchanged from yesterday: “A bearish ‘outside day’ hints the bulls have lost initial momentum following a test of resistance at $27.82, the 23.6% Fibonacci retracement of the 10/22-11/09 upswing. From here, sellers target support at $26.87, the intersection of a rising trend line set from late August and the 38.2% retracement level. A break through this boundary exposes the 61.8% Fib at $25.33, while a reversal opens the door for another run at the 23.6% boundary.”

Published in Forex News

Contributed By: DailyFx

 After sliding some more in early Asian trade, currencies have recovered a bit with most trading back towards daily opening levels. The Euro managed to break below 1.3200, but soon found some solid bids to drive the pair well back above 1.3200. It was a very busy weekend in Europe, with several European officials holding an emergency telephone meeting to help along the Irish bailout details in an effort to mitigate the downside pressures in the Euro. The result was an expected Eur 85B for Ireland, with the IMF contributing Eur22.5B of the total sum. The average financing rate was said to be at 5.8%.

However, even with these latest efforts, there still remains a high degree of uncertainty over the passage of the Irish budget after the Irish government lost the by-election to an opposition party that is not so comfortable with the new budget proposals. Also over the weekend, European officials looked to pan out the details of the new European Stability Mechanism (ESM) which would have private bondholders share the burden of restructuring Eurozone sovereign debt bought after mid-2013 only on a case by case basis. Finally, on the topic of the Eurozone, it was announced that Greece would now receive an extra 4.5 years to repay its emergency loans from the EU and IMF in an effort to match the 7.5 year term allotted to Ireland.

Moving on, the latest volatility in the markets has inspired some fresh comments from ECB Noyer who says that there would be benefits in separating FX reserve accumulation from exchange rate policy. Noyer went on to say that countries should be free to conduct monetary policy as they see fit but at the same time should refrain fro challenging each other. Somewhat ironically, Noyer then went on to say that accommodation in advanced nations created a potential for further global imbalances. Noyer also attempted to downplay the current Euro weakness by saying that the Euro has been a tremendous success.

Data released in Asia saw Japanese retail sales drop in October to put in the second straight monthly fall. Meanwhile UK November house prices also showed a decline which resulted in the largest annual fall since December 2009. However, despite the softer data, the Pound still trades higher on the day as broader global macro themes dictate. Australian economic releases produced a mixed bag with new home sales coming in quite healthy, while company profits unexpectedly dropped in the third quarter which was much weaker than analysts had been forecasting. Meanwhile in New Zealand, data was on the whole quite solid with a better than expected trade surplus and improvement in business confidence.

Looking ahead, there is a batch of UK data due at 9:30GMT which includes; M4 money supply, mortgage approvals (47k expected), net consumer credit (0.2B expected), and net lending secured on dwellings (0.5B expected). Eurozone business climate (1.05 expected), consumer confidence (-10 expected), economic confidence (1.05 expected), industrial confidence (2 expected) and services confidence (9 expected) are then all out at 10:00GMT. Economic growth forecasts from the European Commission are then released at 10:45GMT. US equity futures are pointing higher, while oil is also bid on similar correlations. Gold on the other hand lags, and tracks moderately lower on the day.

Published in Forex News

Contributed By: DailyFx

Commodities – Energy

Crude Oil Will Look Toward U.S. Payrolls for Guidance

Crude Oil (WTI) - $85.35 // $0.59 // 0.70%

Commentary: Crude oil will look to build upon gains established in last week’s holiday-shortened week. Recall that prices added about $2 after successfully testing $80 support four times. Though European sovereign debt concerns still linger, traders are beginning to focus on the recovery in the United States, and that should remain a bullish driver for oil prices.

The big data point in the new week will be Friday’s U.S. nonfarm payrolls report which is expected to show a 145K increase for the month of November after having risen 151K in October. Private payrolls may show a similar 155K increase after advancing 159K in October. While this rate of growth in the labor force will not be enough to significantly bring down the unemployment rate—expectations are that the rate stayed at 9.6% in November—this type of job growth is characteristic of solid economic growth. In fact, during the 2004 to 2007 bull market period, average job growth was 143K per month.

Another notable release in the coming week will be the release of China’s PMI Manufacturing index for November, which is expected to come in at 54.8, close to the 54.7 reading of the prior month. The highest level for this index during the past twelve months was the 56.6 reading of December 2009, while the lowest was 51.2 put in during July of this year. A figure above 50 indicates expansion in Chinese manufacturing, while a figure below 50 indicates contraction.

Finally, as always, we will get the Department of Energy’s snapshot of U.S. petroleum inventories on Wednesday. Recently, inventory levels have fallen substantially; we will see whether this trend continued last week.

Technical Outlook: Prices have produced a bearish Hanging Man candlestick on a test of resistance in the $83.27-$84.43 congestion region, hinting a move lower is ahead. A reversal here may suggest crude is carving out the right shoulder in a Head and Shoulders top formation with a neckline at $79.49, with a break below that exposing a measured downside target at $70.40. Alternatively, a break higher will clear the way for a retest of support-turned-resistance at a rising trend line set from late September, now at $86.81


Commodities – Metals

Gold May Continue to Take Cues from Europe and Silver

Gold - $1364.00 // $0.25 // 0.02%

Commentary: Gold shrugged off gains in the U.S. Dollar last week to rise, though the metal lost a bit of momentum on Friday. Tensions in Korea and European contagion fears have led to general safe haven buying in the metal, but as we pointed out last week, perhaps the biggest supporting factor for gold has been the explosive gains in silver. As silver fell notably on Friday, gold followed suit.

Just a few months ago we would have said unequivocally that gold is the driver of the precious metals complex, but that is not necessarily the case any longer. To the extent investment capital continues to flow so dramatically into silver, we would expect it to have a significant pull on the much larger gold market.

Nevertheless, the U.S. Dollar should continue to have a distinct impact on the traders’ appetite for precious metals exposure in general, and in that regard, we would continue to look toward developments in Europe as the primary driver of both gold and silver in the near-term. If yields on Portuguese and Spanish debt continue to move higher, that should support the greenback and lead to potential selling in the precious metals complex.

Technical Outlook: Prices have turned lower following a test of horizontal resistance at $1381.15, hinting gold may be forming the right shoulder in a Head and Shoulders top formation with a neckline at $1322.39, the 38.2% Fibonacci retracement for the 7/28-11/9 advance. A validation of this setup on a break through the neckline will see the bears aim for a measured target at $1220.46. Alternatively, a push higher through near-term resistance exposes the record high at $1424.60.

Silver - $26.85 // $0.14 // 0.53%

Commentary: The gold/silver ratio stands at 50.8, up from level under 49 set last week. (The gold/silver ratio measures the relative performance of the two precious metals. A higher ratio indicates gold outperformance, while a lower ratio indicates silver outperformance).

Technical Outlook: A bearish “outside day” hints the bulls have lost initial momentum following a test of resistance at $27.82, the 23.6% Fibonacci retracement of the 10/22-11/09 upswing. From here, sellers target support at $26.87, the intersection of a rising trend line set from late August and the 38.2% retracement level. A break through this boundary exposes the 61.8% Fib at $25.33, while a reversal opens the door for another run at the 23.6% boundary.

Published in Forex News

USD Dollar (USD) – The Dollar gained against the major currencies in Forex trading as euro-zone concerns remained in focus, leading investors towards risk aversion. The Stock Market in the U.S. closed negative as the Dow Jones decreased by -0.36% and the NASDAQ lost -0.37%. Crude Oil soared by 2.4%, closing at $85.70 a barrel. Gold (XAU) posted small gains of 0.3% and closed at $1366 an ounce. Today, The Chicago PMI is expected at 59.8 vs. 60.60 previously. The CB Consumer Confidence is expected at 52 vs. 50.2 previously. FED Chairman Bernanke is also expected to speak.

Euro (EUR) – The Euro fell to a fresh 2 month low against the dollar on concerns that Portugal and Spain will follow Ireland’s lead, hence investors moved to sell the European currency. Holding above the support level of 1.3050 might push the pair upwards as oversold conditions are seen in the pair. Overall, EUR/USD traded with a low of 1.3063 and with a high of 1.3354. Today, The German Unemployment Change is expected at -20k vs. -3k previously. The CPI is expected unchanged at 1.9%. The Unemployment rate is expected unchanged at 10.1%. ECB President Trichet’s speech is also expected.

EUR/USD – Last:  1.3084

Resistance

1.3150

1.3200

1.3300

Support

1.3060

British Pound (GBP) – The Pound slightly weakened against the dollar, but is still fluctuating around the support area of 1.5550. The British currency has also been affected by the events in the euro zone. The Net Lending to Individuals came out at 1.3B, better than the expected 0.8B. The GfK Consumer Confidence came out at -21, worse than the expected -19. Holding above the support level of 1.5550 might push the pair upwards as oversold conditions are seen in the pair. Overall, GBP/USD traded with a low of 1.5526 and with a high of 1.5646. No economic data is expected today.

GBP/USD - Last: 1.5535

Resistance

1.5580

1.5640

1.5730

Support

1.5525

Japanese Yen (JPY) – The Dollar is gathering more power against the Yen on a quiet session in the pair. The Unemployment rate came out at 5.1% worse than the expected 5%. The Prelim Industrial Production came out at -1.8%, better than the expected -2.6%. Holding above the 84.2 support level might push the pair to strengthen further. Overall, USD/JPY traded with a low of 83.75 and with a high of 84.39. No economic data is expected today.

USD/JPY-Last: 84.10

Resistance

84.20

84.40

Support

83.80

83.55

83.25

 

Canadian dollar (CAD) – Canada's dollar gained against the U.S. Dollar as Crude Oil, the nation’s biggest export, jumped more than 2% to a 2 week high level. The Current Account index came out at -17.5B, worse than the expected -15.2B. Breaching the 1.0240 resistance level might rebound the pair and push it upwards. Overall, USD/CAD traded with a low of 1.0142 and with a high of 1.0256. Today, the GDP is expected at 0.1% vs. 0.3% previously.

USD/CAD - Last: 1.0198

Resistance

1.0260



Support

1.0160

1.0080

1.0030

 

 

Published in Forex Articles

USD Dollar (USD) – The Dollar gained across the board on Friday as European debt worries extended on concerns that Portugal and Spain will follow the lead of Greece and Ireland. These fears sent investors to the safe haven currencies like the greenback. The Stock Market in the U.S. closed negative as the Dow Jones decreased by -0.85% and the NASDAQ lost -0.34%. Crude Oil closed almost unchanged, fluctuating around the $84 level. Gold (XAU) lost -0.8% and closed at $1362.40 an ounce. No economic data is expected today.

Euro (EUR) – The Euro fell against the dollar in Forex trading on Friday as it reached the 1.32 zone on pressure that continued in the Euro zone. However, after an 85 billion euro aid package agreed to between Ireland and the EU/IMF, the market opened positive this week and the pair jumped above the 1.3340 levels. Ultimately, the pair failed to hold those levels and was crushed below the 1.32 area, reaching new 9 week lows. The German Prelim CPI came out at 0.1%, worse than the expected 0.2%. Holding above the support level of 1.3170 might push the pair upwards as oversold conditions are seen in the pair. Overall, EUR/USD traded with a low of 1.3181 and with a high of 1.3362. No economic data is expected today.

EUR/USD – Last:  1.3230

Resistance

1.3260

1.3290

1.3420

Support

1.3180

British Pound (GBP) – The Pound weakened against the dollar reaching 10 week lows as the markets opened this week. The Pound found support around the 1.5550 zones and then bounced back above the 1.56 area. Holding above the support level of 1.5550 might push the pair upwards as oversold conditions are seen in the pair. Overall, the GBP/USD traded with a low of 1.5558 and with a high of 1.5770. Today, Net Lending to Individuals is expected at 0.8B vs. 0.4B previously. The GfK Consumer Confidence report is expected unchanged at -19.

GBP/USD - Last: 1.5600

Resistance

1.5640

1.5730

1.5840

Support

1.5560

Japanese Yen (JPY) – The Dollar is gathering more power against the Yen and is furthering from the 80 levels at a low and safe pace approaching the 84 zone. Breaching above the 84.2 resistance level might push the pair for further strength. Overall, USD/JPY traded with a low of 83.54 and with a high of 84.18. Today, The Unemployment rate is expected unchanged at 5%. The Prelim Industrial Production is expected at -3.2% vs. -1.6% previously.

USD/JPY-Last: 84.11

Resistance

84.20

Support

84.00

83.80

83.55

Canadian dollar (CAD) – The Dollar gained against Canada's dollar as concerns on the Euro zone debt crisis and conflict between North & South Korea boosted demand for safer assets, and risk aversion was seen. Breaching the 1.0240 resistance level might extend the pairs bullish momentum. Overall, USD/CAD traded with a low of 1.0083 and with a high of 1.0245. Today, the Current Account index is expected at -15.2B vs. -11B previously.

USD/CAD - Last: 1.0203

Resistance

1.0260



Support

1.0160

1.0080

1.0030

 

Published in Forex Articles
Friday, 26 November 2010 13:29

UFXBank Forex Outlook: Dollar Rises Despite Mixed Data

USD Dollar (USD) – The Dollar continued to rise versus most majors after mixed data was released such as initial jobless claims which came 407K vs. 434K forecast and New Home Sales that came 283K vs. 311K , also the concern on the European zone debit succeeded to  support a stronger Dollar . NASDAQ and Dow Jones strengthened by 1.93% and 1.37% respectively, crude oil jumped  by 3.2%, closing at 83.86$ a barrel,  Gold (XAU) weakened by 0.3%, closing at 1373$ an ounce ,a new historic record. No economic data expected today due to bank holiday in US.

Euro (EUR) – The Euro traded near a two month low versus the Dollar in Forex trading, as concern the sovereign debt crisis will extend and Industrial New Orders that came worse than expected at -3.8% vs. -2.6% forecast, led the investors to sell the Euro.  The EUR/USD has had a very negative trend in the last three days, as long the price is below 1.3500 levels a short position is preferred. Overall, EUR/USD traded with a low of 1.3284 and with a high of 1.3421. No economic data expected today.

EUR/USD – Last: 1.3331

Resistance

1.3420

1.3600

1.3785

Support

1.3300

British Pound (GBP) – The Pound fluctuated versus the Dollar as a mix data from UK and US were released during the sessions, causing the pair to close almost unchanged. GDP remain unchanged at 0.8%. As long the GBP/USD is trading below 1.6000 the momentum is bearish and a short position is preferred, the next support level on the one hour chart is 1.5740 levels. Overall, GBP/USD traded with a low of 1.5741 and with a high of 1.5837. Today, BOE Gov King Speaks, CBI Realized Sales are expected at 35.0 vs. 36.0 prior.

GBP/USD - Last: 1.5766

Resistance

1.5840

1.5965

1.6085

Support

1.5750

Japanese Yen (JPY) –The Yen weakened against the Dollar as positive momentum of the Dollar owing to the European debt in the last days and a positive data that released yesterday in US supported a stronger Dollar. The USD/JPY has been trading around 83.00 – 83.80 area in the past few days, only if the pair breaks this levels we will see a momentum. Overall, USD/JPY traded with a low of 82.94 and with a high of 83.66. No economic data expected today.

USD/JPY-Last: 83.51

Resistance

83.60

83.80

Support

83.30

83.10

82.80

Canadian dollar (CAD) – The Canadian Dollar rose the most since September versus the Dollar as investor risk aversion declined on optimism the nation’s economic recovery will strengthen and the oil price which rose sharply during the session drifting the Canadian as well. The resistance level of the USD/CAD on the four hours chart is located at 1.0250, as long the price is trading below this level a short position is preferred .Overall, USD/CAD traded with a low of 1.0091 and with a high of 1.0224. No economic data expected today.

USD/CAD - Last: 1.0094

Resistance

1.0125

1.0225

1.0265

Support

1.0000

 

 

 

Published in Forex Articles
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Contributed By: DailyFx

Europe Session Key Developments

* Markets Buoyed by Upbeat Labor News in the US
* 14 of the 18 Western European Benchmark Indexes Close Higher

European Markets Edge Higher as Irish Bailout Nears Conclusion

European markets closed substantially higher before the thanksgiving holiday as Ireland’s government unveiled a four-year deficit-cutting plan and talks of a bailout for the indebted nation are near conclusion. Markets were also buoyed higher as applications for unemployment benefits in the US fell more than forecast last week to the lowest level since before the start of the recession. Investors took this report as reassurance that the labor market is on the verge of recovery. The Stoxx Europe 600 Index climbed 1 percent at the close in London. This gain came after the benchmark gauge sank to the lowest level since early October yesterday amid concern that sovereign debt crisis will spread south. Markets were also pushed lower this week as North Korea fired artillery shells into South Korea. Overall, national benchmark indexes rose in 14 of 18 Western European nations.

FTSE 100 / 5,657.10 / +75.80 / +1.36%

10 out of 10 sectors in the FTSE 100 closed in higher at the end of the trading session on Wednesday, as Basic Materials led the advance with a 2.49 percent advance. However, bank of Ireland sank 13 percent to 26 Euro cents after two people familiar with the situation announced that the lender may end up in majority state control. Kazakhmys Plc climbed 3.9 percent as the copper producer was raised to “outperform” from “natural” at Exane BNP Paribas. Compass advanced 5.5 percent after the company announced full-year profit that rose 15 percent, beating expectations. Provident Financial Plc surged nearly 8 percent, the largest climb since February 2009, as the company announced the government’s spending cuts will have a modest effect on its customers.

CAC 40 / 3,747.61 / +23.19 / +0.62%

The CAC 40 higher as 9 out of 10 sectors closed in the green before the thanksgiving holiday. The index was led higher by the Technology and Industrial sectors, which experienced 2.38 and 1.39 percent gains, respectively. Investors poured funds into the French benchmark gauge as they became more confident that European nations will be able to avoid further sovereign debt issues. Upbeat economic data from the US and Germany also helped the index today.

DAX / 6,823.80 / +118.80 / +1.77%

The benchmark DAX experienced the largest gain among the 5 major Western European benchmark gauges. Porsche climbed 6.3 percent to 56.41 Euros, gaining for a sixth day. Earnings before interest and tax advanced to 395 million Euros between August and October compared with 52 million Euros a year earlier. Sales increased 80 percent to 2.1 billion Euros. BMW rose 4.7 percent, while Daimler, gained 5.1 percent. Volkswagen AG climbed 4.5 percent as the company announced that it is creating a high-ranking management position with responsibility fo rdevelopi9ng new business. SAP slid 1 percent, a fourth day of declines after the verdict for copyright infringement is the largest ever.

IBEX 35 / 9742.60 / +50.80 / +0.52%

The IBEX 35 gained one half of one percent at the end of the day on Wednesday. Abengoa SA rose 2.3 percent, breaking three consecutive days of losses. The engineering company aims to increase revenue it generates from much more stable energy and environmental services and sell shares in its solar, biofuels and waste recylcling units. Enagas SA gained 1 percent, paring the last two days of losses. Grifols SA climbed 2.4 percent, the steepest increase in more than a month. Europe’s largest maker of blood-plasma products announced it signed contracts for al oan valued at $3.4 billion to fund the acquisition of US based Talecris Biotherapeutics Holdings Corp.

S&P/MIB / 20,588.07 / -2.87 / -0.01%

The Italian benchmark index was the only major gauge that closed in the red at the end of the session. The index dropped for a fourth straight day. Ansalado STS SpA jumped 65 percent to 9.70 Euros, the steepest increase since May and the largest gain in the FTSE MIB. Enel SpA, Italy’s largest utility, dropped 1 percent. Spain has frozen its 13.5 billiojn Euro program to sell state-guarenteed bonds to bridge the so-called tariff deficit until government debt market volatility abates, people with direct knowledge of the transaction announced.

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