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Forex Daily News | Forex Articles | Forex Information

USD Dollar (USD) – The dollar weakened against most of the major currencies in Forex trading despite positive economic data, the fact that Irish leaders welcomed “substantial contingency capital funding” for Irish banks finally gave some certainty to the market and saw the dollar weaken. Unemployment Claims came out better than expected at 439.00K vs. 442.00K.  The Philly Fed Manufacturing Index was also much stronger than expected at a 22.50 vs. 4.50. The Stock Markets in U.S. closed with the Dow Jones gaining by 1.57% and the NASDAQ increasing by 1.55%. Crude Oil strengthened by 1.8% and closed at $81.85 a barrel. Gold (XAU) also gained by 1.2% and closed at $1353 an ounce. Today, Fed Chairman Bernanke is expected to speak.

Euro (EUR) – The Euro strengthened against the dollar as Brian Lenihan Irish finance minister said he would welcome a “substantial contingency capital funding” mechanism for Irish banks. The idea of contingency funds is welcomed more politically far more for banks than for states. The euro rallied more than 100 pips against the USD. The current account came out worse than expected at -13.10B vs -2.20 expected. With The pair returning to above the level of 1.3600 the trend is bullish and a long position is preferred. Overall, EUR/USD traded with a low of 1.3542 and with a high of 1.3667. Today, ECB President Trichet  is expected to speak.

EUR/USD – Last:1.3612

Resistance

1.3630

1.3660

Support

1.3600

1.3555

1.3508

British Pound (GBP) – The Pound continued to strengthen against the dollar and climbed back to hold above 1.6000 levels. Public Sector Net Borrowing came out greater than expected at 9.80B vs. 8.90B. Retail sales also came out greater then expect at 0.50% vs 0.20%. As long as the pair GBP/USD remains above 1.5950 the trend seems to be positive and a long position is preferred. Overall, GBP/USD traded with a low of 1.5887 and with a high of 1.6056. No economic data is expected today.

 

GBP/USD - Last:  1.6025

Resistance

1.6049

1.6087


Support

1.6010

1.5979

1.5945

Japanese Yen (JPY) – The Yen continued to weaken against the dollar as economic data from the US favored the Dollar over the Yen. Today’s gain puts the pair back on to its strong rally. Through the day the pair traded with a tight range until breaking out at 83.40. Although the trend is still strongly bullish the pair seems to constantly get caught in a range, capturing the breakout may be a preferred strategy. With the pair trading above 82.70 a long position is advised. Overall, USD/JPY traded with a low of 83.09 and with a high of 83.78. No economic data is expected today.

USD/JPY-Last: 83.40

Resistance

83.60

83.78

Support

83.40

83.10

83.00

Canadian dollar (CAD) – The Canadian dollar strengthened against the dollar as certainty prevailed regarding Irish debt which sent commodities and global equities to higher levels. Positive data also helped the pair’s momentum. Foreign Securities Purchases came out 12.25B vs. 9.21B and wholesale sales at 0.4% vs. 0.10%. The trend for the pair remains slightly bullish as long as the USD/CAD trades above 1.0150. Overall, USD/CAD traded with a low of 1.0155 and with a high of 1.0236. No economic data is expected today.

 

USD/CAD - Last: 1.0208

Resistance

1.0220

1.0260

Support

1.0180

1.0161

Published in Forex Articles

USD Dollar (USD) – The dollar weakened against most of the major currencies in Forex trading despite positive economic data, the fact that Irish leaders welcomed “substantial contingency capital funding” for Irish banks finally gave some certainty to the market and saw the dollar weaken. Unemployment Claims came out better than expected at 439.00K vs. 442.00K.  The Philly Fed Manufacturing Index was also much stronger than expected at a 22.50 vs. 4.50. The Stock Markets in U.S. closed with the Dow Jones gaining by 1.57% and the NASDAQ increasing by 1.55%. Crude Oil strengthened by 1.8% and closed at $81.85 a barrel. Gold (XAU) also gained by 1.2% and closed at $1353 an ounce. Today, Fed Chairman Bernanke is expected to speak.

Euro (EUR) – The Euro strengthened against the dollar as Brian Lenihan Irish finance minister said he would welcome a “substantial contingency capital funding” mechanism for Irish banks. The idea of contingency funds is welcomed more politically far more for banks than for states. The euro rallied more than 100 pips against the USD. The current account came out worse than expected at -13.10B vs -2.20 expected. With The pair returning to above the level of 1.3600 the trend is bullish and a long position is preferred. Overall, EUR/USD traded with a low of 1.3542 and with a high of 1.3667. Today, ECB President Trichet  is expected to speak.

EUR/USD – Last:1.3612

Resistance

1.3630

1.3660

Support

1.3600

1.3555

1.3508

British Pound (GBP) – The Pound continued to strengthen against the dollar and climbed back to hold above 1.6000 levels. Public Sector Net Borrowing came out greater than expected at 9.80B vs. 8.90B. Retail sales also came out greater then expect at 0.50% vs 0.20%. As long as the pair GBP/USD remains above 1.5950 the trend seems to be positive and a long position is preferred. Overall, GBP/USD traded with a low of 1.5887 and with a high of 1.6056. No economic data is expected today.

 

GBP/USD - Last:  1.6025

Resistance

1.6049

1.6087


Support

1.6010

1.5979

1.5945

Japanese Yen (JPY) – The Yen continued to weaken against the dollar as economic data from the US favored the Dollar over the Yen. Today’s gain puts the pair back on to its strong rally. Through the day the pair traded with a tight range until breaking out at 83.40. Although the trend is still strongly bullish the pair seems to constantly get caught in a range, capturing the breakout may be a preferred strategy. With the pair trading above 82.70 a long position is advised. Overall, USD/JPY traded with a low of 83.09 and with a high of 83.78. No economic data is expected today.

USD/JPY-Last: 83.40

Resistance

83.60

83.78

Support

83.40

83.10

83.00

Canadian dollar (CAD) – The Canadian dollar strengthened against the dollar as certainty prevailed regarding Irish debt which sent commodities and global equities to higher levels. Positive data also helped the pair’s momentum. Foreign Securities Purchases came out 12.25B vs. 9.21B and wholesale sales at 0.4% vs. 0.10%. The trend for the pair remains slightly bullish as long as the USD/CAD trades above 1.0150. Overall, USD/CAD traded with a low of 1.0155 and with a high of 1.0236. No economic data is expected today.

 

USD/CAD - Last: 1.0208

Resistance

1.0220

1.0260

Support

1.0180

1.0161

Published in Forex Articles
Saturday, 20 November 2010 08:06

British Pound Fortunes Tied To Solution for Ireland

Contributed By: DailyFx

 British-Pound-Fortunes-Tied

British Pound Fortunes Tied To Solution for Ireland

Fundamental Forecast for British Pound: Bearish

* BoE Minutes Reveal Three Way Split
* Jobless Claims Unexpectedly Fell by 3.7K in October
* UK Inflation Rises to 3.2% As Fuel Costs Gain

The British Pound closely tracked the issues in Ireland on the week with the ongoing saga expected to be a driver of price action going forward, as U.K. banks have significant exposure to their indebted neighbor. Irish officials are in talks with the EU and IMF on a potential bailout package similar to what was extended to Greece. However, a point of contention remains the country’s low business tax which has helped attract foreign investment in the country. Any aid will assuredly come with strict austerity measures to help bring down the bloated deficit and any resistance could threaten the potential for a resolution. The prospect of a solution helped stem sterling losses but signs of a road block have brought the currency back under pressure.

Dovish comments from BoE governor King sparked a mid-week sell off as the lead policy maker derailed building interest rate expectations by stating that "We could do further quantitative easing if that turned out to be necessary, further asset purchases. We see that as a normal instrument of monetary policy." Inflation rising to 3.2% in October improved the hawkish case that has been developing since the central bank didn’t follow its U.S. counterpart down the path of quantitative easing. However, the minutes from the MPC’s last policy meeting showed the tally remained unchanged at 7-1-1 as the majority continues to be willing to sit on the sidelines until price growth shows signs of slowing before adding stimulus. Indeed, Deputy Governor Paul Tucker recently restated the monetary authority’s belief that inflation will return below their 2.0% target as existing slack in the economy remains. Despite the dovish talk positive fundamentals has the outlook for yields at their highest since August as improving retail sales and employment data provide a counter argument.

The upcoming economic docket pales in comparison to the past week with only the second reading of 3Q GDP and BBA loans for home purchase on tap. Therefore, we may see price action continue to be at the mercy of broader trends with the issues in Ireland the biggest influence. A resolution could provide sterling support but sign that talks are meandering toward a disappointing end could sink the pound. A second story line that must be watched is China’s efforts to curb domestic growth as a dimming outlook for the global economy could spark a flight to safety which could see the cable lose ground to the greenback. Nevertheless, a bullish case can also be made on the back of a aid package for Ireland and the building case for higher yields which would be furthered by a upward revision in growth.

Published in Forex News

Contributed By: DailyFx

 Japanese_Yen_Losing_its_Safe_Haven_Status_and_Thereby_its_Buoyancy

Japanese Yen Losing its Safe Haven Status and Thereby its Buoyancy

Fundamental Forecast for Japanese Yen: Bearish

* The OECD projects Japanese GDP to slow from 3.7 percent this year to 1.7 percent in 2011 and 1.3 percent in 2012
* USDJPY has shown significant progress in three weeks; but is it a sign of a true trend change?

It is interesting to note that over the past three weeks, we have seen strong swings in risk appetite and risk aversion. And, through it all, USDJPY has maintained a steady advance. This bullish push (the most consistent since April) is made even more meaningful by the fact that this recent advance has turned a descending trend channel that had maintained the market’s bearings for six months. It is worth noting that similar selling patterns have emerged against the euro, pound and Canadian dollar among others; so this is not simply a one-off. However, there is something remarkable to take away specifically from USDJPY’s performance as both currencies stand as safe havens that have seen their fundamental foundations crumble from beneath them.

The reason that we should focus on the USDJPY cross specifically is that over the past few years, we have seen very clear trends emerge both for and against risk appetite. When panic hit its peak, capital was flowing into both the US dollar and Japanese yen; and when confidence was restored, the tide of funds once again receded. It is short-sighted to simply attribute cause and effect through risk appetite alone; because it contradicts a few fundamental truisms. To be a safe haven, a security generally needs deep liquidity, secure financial markets, stable pricing and some level of yield. Yet, with both the dollar and yen, financial uncertainties are prevalent (hence the need for stimulus), there is a real risk of deflation, and yields fall well short of risk. Often times, it is the case that the expectations for a currency to play the role of safe haven will produce a self-fulfilled prophecy; however, such a condition will reach its limit eventually. Even the scenario whereby the unwinding of previously established carry positions can keep the yen bid will run out steam. If, the Japanese yen were not so near record or multi-year highs across the board, it would be easier to ignore this fact. However, this is not the case here.

A wind down of risk funds from the Japanese yen is akin to nuclear disarmament – it will be very slow and highly reactive. Pushing the yen down means a combination of unwinding established long-positions and placing new shorts. The prevalence of long yen positions is already limited s we have not seen a meaningful risk aversion trend from the capital markets in some time. On the other hand, taking new yen short positions would be an indirect means of taking a long-carry view. That naturally raises an investor’s risk profile. However, the picture is very different between AUDJPY and say USDJPY. For the Aussie-based pair, the carry exposure is explicit; but for the dollar-backed major, we have two ‘safe haven’ currencies. That is why, to establish the true health of the Japanese yen, we need to keep a close eye on the performance of its very different pairings.

Published in Forex News
Saturday, 20 November 2010 08:06

Euro: How Will Traders React to an Irish Bailout?

Contributed By: DailyFx

 Euro_How_Will_Traders_React_to_an_Irish_Bailout

Euro: How Will Traders React to an Irish Bailout?

Fundamental Forecast for Euro: Bearish

- Ireland ignores calls to seek aid as the EU President warns euro in a ‘survival crisis’

- Greece’s 2009 deficit is revised sharply higher to 15.4 percent of GDP

- Euro marks a trend-defining breakout but comes up short on follow through momentum

Given the title of this section, it is clear what I expect to come of the persistent problems facing Ireland. Officials from the European Union, European Central Bank and IMF have traveled to Dublin to assess the ability of the country’s financial system to stand on its own two feet. Finance Minister Lenihan’s decision not to ask for aid at the last monthly EU meeting represents a sidestep in a complicated dance of politics and risk appetite trends. His suggestion that the government is fully funded through the middle of next year is technically true; and the refusal to seek aid is a sign of fiscal conservancy and confidence in his economy. However, the capital markets are not led by example; and the Ireland’s banking system is in dire need of affordable funding. With the nation’s banks borrowing 130 billion euros from the ECB (80 percent of GDP) and Allied Irish seeing liquidity drain with a 17 percent drop in deposits so far this year; something needs to be done to stem the bleeding.

Looking ahead to next week, there is no set time for when Ireland’s unofficial auditors will release their assessment on the country’s financial condition and deliver its recommendation; but the longer a decision is pushed back, the more speculative influence will take over and the greater the sense of anxiety will grow. In fact, there are two outcomes to this scenario. If the entourage of policy officials deems the stressed economy capable of fixing itself; it would be encouraging. That said, such an assessment would very likely be completely disregarded as record yield spreads would quite clearly weigh on the banking sector’s health. The speculative market is expecting aid; and there is a clear risk that confidence would crash and funding costs would soar should that conclusion not be met. If indeed Ireland’s immediate financial troubles are smothered, sovereign bond investors would be less reticent to hold the nation’s debt and the threat of an imminent crisis will be averted – for now. This could offer a temporary boost to the euro and market-wide sentiment.

Yet, in the wake of a financial rescue for Ireland, it will be hard to ignore the fact that this is the second EU member that would have to be saved from a crisis in six months. Had it been only one, it could be written off as anomaly. Yet, with two, there are the makings of a trend. And, if we wanted to identify those countries that are at-risk of a similar fate under adverse financial conditions, we can easily make the case for Portugal and then we step up to a far bigger player: Spain. The major variable here is how long confidence lasts in the EU’s effort to support its members. Much of the prevailing sentiment will have to do with the recognition that severe austerity measures amongst the high deficit economies will choke off growth and thereby increase the deficit through lost tax revenues. In the meantime, Germany’s push for sovereign bond investors to accept a portion of future potential losses will curb demand in an already restrictive time. Furthermore, risk aversion can be stoked by factors outside the European bubble (by say US housing market concerns or the application of emerging market capital curbs); but the effect would be the same on Europe’s pained financial system. As a global sore thumb, yields differentials would continued to balloon and force EU members deeper into trouble.

Published in Forex News

Contributed By: DailyFx

 US_Dollar_Recovery_on_Track_as_Traders_Cover_Short_Positions

US Dollar Recovery on Track as Traders Cover Short Positions

Fundamental Outlook for US Dollar: Bullish

US Dollar drops on speculation that Ireland to accept Euro Zone fiscal aid

Greenback loses on soft US CPI inflation print, broader financial market consolidation

Yet the DailyFX team remains broadly positioned for continued US Dollar strength

A week of broader market consolidation left the US Dollar roughly unchanged from last week’s close, but the Greenback’s impressive turn from significant lows warns that the currency could recover further into the weeks ahead. Speculation that Ireland would accept a fiscal aid package from the Euro Zone and the UK calmed market tensions over the stability of the Euro, and the subsequent recovery in financial market risk sentiment sunk the safe-haven US currency. Yet exceedingly volatile day-to-day swings in the US S&P 500 and other financial market risk barometers warn that sentiment remains especially fragile, and flare-ups in tensions could easily force further US Dollar strength.

Lower-tier US economic data may make event-driven volatility unlikely in the days ahead, but traders should keep an eye out for especially surprising results from a densely packed string of economic releases through Tuesday and Wednesday. Such events include Existing Home Sales data, monthly changes in Durable Goods Orders, Personal Income and Spending releases, New and Existing Home Sales purchases, and the Minutes from the most recent US Federal Open Market Committee meeting.

FOMC Minutes arguably have the greatest potential to move markets, as they will clarify the Fed’s thinking in their decision to boost controversial Quantitative Easing measures by a further $600 billion through their most recent meeting. Though their decision was almost unanimous, markets may pay especially close attention to dissenting views from within the central bank as several officials have already spoken against such efforts.

The other events certainly have the potential to shift financial market sentiment, but it may take especially above or below-forecast results for these second-tier news releases to elicit reactions from the US Dollar. Given the recent fragility in financial market risk sentiment, we would argue that risks remain to the downside on any key disappointments in consumer and housing-centric economic data.

Recent weeks of US Dollar rallies leave momentum firmly in the currency’s favor, and the past week of sideways price action seems reasonable in light of previous gains. We maintain that the US Dollar established a fairly significant low against the Euro and other key currencies in the days following the Fed’s announcement of further QE. Recent CFTC Commitment of Traders data shows that many speculators have rushed to cover USD shorts amidst a general correction across financial markets. Yet Non-Commercial traders remain fairly net-short, and a further contraction in leveraged financial bets could fuel further US Dollar strength.

Published in Forex News
Saturday, 20 November 2010 08:07

Crude Decline May Accelerate

Contributed By: DailyFx

Crude_Decline_May_Accelerate 

Near term in crude, 5 waves down are visible from the top which confirms that the larger trend has reversed. Crude reversed close to the former 4th wave extreme of 8300 therefore the next leg lower (either wave c or 3) is probably underway towards 71.50 (May low). Above 8332 would shift focus to resistance from Fibonacci at 8400 and 8500.
Published in Forex News
Saturday, 20 November 2010 08:07

Euro Could See Support at 13560

Contributed By: DailyFx

Euro_Could_See_Support_at_13560

 As mentioned in recent days, “price needs to stay below 13775 for the immediate extremely bearish count to remain valid. A move above there could also complete an expanded flat so it is best to NOT put a stop at that level. Bottom line, the larger EURUSD trend is down and I favor selling rallies.” Forget trying to count every single market squiggle and instead focus on the fact that the EURUSD has reversed in the face of extreme sentiment. The rally from the low may be wave a of an a-b-c correction. If it is, then wave b may test 13560 before a c wave ends upwards of 13860 early next week. A rally to there would present the ultimate shorting opportunity.

Published in Forex News

Contributed By: DailyFx

 The CADJPY has worked its way into an ascending channel which has remained intact since the end of October. We entered into a long position at 80.86as the pair broke above its falling channel that lasted nearly seven months. I believe this pair has a great risk to reward level. A break and a close above 82.50 will validate my bullish bias. Looking ahead, we will shift our focus to the Canadian interest rate decision. As of late, economists are forecasting the annualized inflation rate to rise to 2.2 percent in October from 1.9 percent the month prior. In turn, this report may be the catalyst needed for the CAD to push higher. At the same time, holding onto out long British pound positions despite Irish woes proved well as the currency rallied yesterday amid speculation of an Irish bailout. Though I favor additional upside in the GBPJPY, I will take profits at this level and look to re-enter if the pair manages to break and close above the 200-day moving average. On the other hand, I will remain long GBPUSD as price action managed to break above the descending channel on the 4 hour chart. However, I will take off half of my positions as the slow stochastic indicator looks poised to cross back over to the downside, hinting at a slight pull back.

Nonetheless, entering into an AUDCAD short may be in the horizon as the pair has broken below the rising channel on the 4 hour chart. Taking a look at the daily chart, a close below 0.995 may validate additional downside risks towards the 0.97 area. Interest rate expectations in Canada are 16.0 percent versus 3.0 percent in Australia. Good luck trading!!!

Published in Forex News
Saturday, 20 November 2010 08:07

Stay short EURUSD, sell test of 1.375

Contributed By: DailyFx

 I remain short EURUSD from last week at reduced size, having taken partial profits on the position at 1.36. I would ideally wait for the pair to test 1.3750-1.3800 before adding to my short position. Yet the pair has since reversed at just above the 1.3700 mark and I'm not sure it will get that far. The next step seems as if a test of 1.3600 is likely, and a break below targets a fresh run towards lows.

Published in Forex News
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