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Forex Daily News | Forex Articles | Forex Information
Tuesday, 16 November 2010 06:26

Currencies Tracking Higher in Quiet Tuesday Start

Contributed By: DailyFx

 Currencies are up a across the board against the buck in early Tuesday trade and ahead of the European open, with most of the price action seen more as consolidative rather than attributable to any significant fundamental developments. The release of the Australian RBA minutes were on the whole more balanced than many hawks would have liked, with the central bank suggesting that they could be content with leaving rates as is for the time being. The Australian Dollar has therefore been lagging against most of the other major currencies as a result. Elsewhere, Fed Dudley comments have been getting some attention after the official recently said that the need exit from current policies could be years away. These comments could be hurting the Greenback a bit, although, market participants should not be surprised by dovish comments from the Fed official.

On the strategy side, unfortunately after booking 200 points profit on half of our long Eur/Aud position, the market then pulled back to just take out our stop on the remaining half of the position which had been moved to break-even. We are now only holding one position, which is a short Kiwi position from 0.7920 from several days back. At the moment, there are no new and interesting set ups, but as always, we will be on the lookout for the next trading opportunity. Things have been going real well over the past couple of months and we are not inclined to force anything to compromise our positive results.

Looking ahead, a batch of UK data is slated for release at 9:30GMT including; CPI, DCLG house prices, and the retail price index. Eurozone CPI, and Eurozone ZEW are then out at 10:00GMT, along with German ZEW. US equity futures and commodities are tracking lower into the European open.

Published in Forex News
Tuesday, 16 November 2010 06:27

Crude Oil Stalls as Bearish News Flow Spurs Profit Taking, Gold Follows Through to the Downside as Dollar Rises

Contributed By: DailyFx

Commodities – Energy

Crude Oil Stalls as Bearish News Flow Spurs Profit Taking

Crude Oil (WTI) - $84.52 // $0.34 // 0.40%

Commentary: Crude oil erased early gains to finish close to unchanged on Monday at $84.86. Price action for the day was in step with that of U.S. equity markets, with European sovereign debt concerns offsetting the bullish underpinnings of the financial markets, which include the Fed’s QE2 program, the improving U.S. labor market, and sizzling growth in the emerging market economies.

This price action we are seeing in crude and equity markets is merely consolidation after enormous gains over the past few months. The European debt crisis and Chinese inflation fears are simply excuses for traders to lock in profits. After prices finish consolidating and work off their overbought conditions, look for the rally to resume.

Given this view, it should be no surprise to readers that we are looking at this correction as nothing more than a buying opportunity. An ideal entry would be just below $80 for crude, but if Wednesday’s inventory report is another bullish surprise like last week, that may be a stretch.

Technical Outlook: Prices continue to test support at a rising trend line set from mid-September (now at $84.73) having put in a bearish Shooting Star candlestick formation. A break below this juncture exposes horizontal support at $83.27. Near-term resistance lines up at the $86.00 figure.

 Crude_Oil_Stalls_as_Bearish_News_Flow_Spurs_Profit_Taking

Commodities – Metals

Gold Follows Through to the Downside as Dollar Rises

Gold - $1359.40 // $1.20 // 0.09%

Commentary: Gold followed through on last Friday’s $40 decline, as the metal shed another $8.15, or 0.6%, to settle at $1360.60. While the dollar index advanced 0.56%, as we have been harping on, most of that was due to yet another move lower in the Euro. Commodity currencies, which have been exhibiting an extremely strong correlation with gold, were mixed, but close to unchanged. The Aussie rose just slightly, while the Kiwi and Cad fell.

Profit taking seems to be the biggest motivating factor for gold’s latest sell off, as it is clear that very few market participants believe this bounce in the dollar is anything but a correction in the longer-term downtrend. As we stated yesterday, to see a sustained move lower in gold, “there will need to be some sign that the easy monetary conditions in the U.S. and Eurozone economies are coming to an end. With QE2 made official just two weeks ago, there is little to suggest that that will happen anytime soon.”

On the other hand, as we have said repeatedly in our Gold – Forex Correlations report, gold has gotten way ahead of the increase in ETF holdings. Were there to be a reestablishment of the relationship between these two variables, prices could fall steeply. Without investor demand backing up gold, there is little to support prices, regardless of the outlook for the dollar or inflation.

Technical Outlook: Prices are testing support at a rising trend line set from late July, now at $1353.97 having declined after putting in a well-defined Bearish Engulfing candlestick pattern. A break lower exposes $1322.39, the 38.2% Fibonacci retracement for the 7/28-11/9 advance. Near-term resistance lines up at $1387.35.

Silver - $25.64 // $0.16 // 0.63%

Commentary: The silver liquidation continued on Monday, with prices falling another $0.60, or 2.29%, to settle at $25.48. Prices are now down significantly from the 30-year highs put in earlier this month at $29.36.

The gold/silver ratio rose to 53 and is now up notably from levels near 50 earlier this month. The long silver-short gold trade seems to be unwinding fast. (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: Prices have continued lower to test support at $25.33, the 61.8% Fibonacci retracement of the 10/22-11/09 upswing. Continued selling exposes $24.92. Near-term resistance lines up at $26.10, the 50% Fib.

Gold_Follows_Through_to_the_Downside_as_Dollar_Rises

 

 

Published in Forex News

Contributed By: DailyFx

 British_Pound_Extends_Decline_Despite_Better_Than_Expected_U.K._Inflation_Figures

British_Pound_Extends_Decline_Despite_Better_Than_Expected_U.K._Inflation_Figures_key_points

Fundamental Headlines

• European Stocks Slip – Wall Street Journal

• Bond Market Defies Fed – Wall Street Journal

• Fed Officials Defend $600 Billion Stimulus - Financial Times

•U.K. Inflation Rate Increases to 3.2%, Forcing King Letter - Bloomberg

•Ireland’s Cowen to Weigh EU Steps to Shore Up Banking System - Bloomberg

GBPUSD: Annualizedconsumer prices in Great Britain inched higher to 3.2 percent in October from 3.1 percent the month prior amid economists’ expectations of 3.1 percent. Taking a look at the breakdown of the report, education prices rose 2.2 percent, while fuel prices gained 11.4 percent. The report is of great importance due to the fact that it precedes the Bank of England Minutes, which will be released tomorrow at 9:30 GMT. In the currency markets, the GBPUSD rose subsequent to the report, but quickly reversed course as the U.S. dollar continued to rally against all major currencies during the overnight trade. Focus now turns to the producer prices and industrial production reports from the world’s largest economy. Indeed, dismal reports may lead the greenback to pare some of its overnight gains. I will remain long the GBPUSD so long as price action is capped by the 20-day SMA.

Published in Forex News

Contributed By: DailyFx

Talking Points

* Japanese Yen: Benefits From Risk Aversion
* British Pound: U.K. Price Growth Accelerates
* Euro: Inflation Rises The Most Since November 2008
* U.S. Dollar: Producer Prices, Industrial Production on Tap

The British Pound slipped to a low of 1.5980 during the European trade as investors scaled back their appetite for risk, and the exchange rate may push lower throughout the North American trade as market sentiment falters. However, as the GBP/USD bounces back from the 20-Day moving average at 1.5983, we may see the exchange hold steady throughout the day as market participants wait for the Bank of England policy meeting minutes tomorrow at 9:30 GMT. There is likely to be another 7-1-1 split within the MPC given the broad range views amongst U.K. policy makers, and there could be little reaction to the statement unless we see an increased split within the central bank.

Nevertheless, a report by the U.K. Office for National Statistics showed the headline reading for inflation unexpectedly increased to an annualized rate of 3.2% in October, which forced BoE Governor Mervyn King to write his fourth letter of explanation to Chancellor of the Exchequer George Osborne, and the stickiness in price growth could lead the central bank to start normalizing monetary policy over the coming months as it aims to balance the risks for the region. Mr. King reiterated that the MPC stands ready to move monetary policy in either direction as the central bank expects inflation to hold above target in 2011, but went onto say that the outlook for price growth remains “highly uncertain, with substantial risks in both directions.” As the economic outlook remains clouded with uncertainties, there could be a growing split within the MPC as board member Andrew Sentance pushes for a 25bp rate hike while Adam Posen sees scope to QE further, and we may see the GBP/USD hold steady ahead of the BoE minutes due out tomorrow as investors weigh the prospects for future policy.

The Euro fell back from a high of 1.3654 on Tuesday and the lack of momentum to hold above the 50-Day SMA (1.3641) could lead the single-currency to retrace the overnight advance as policy makers in Europe continue to endorse a bailout plan for Ireland. European Central Bank Vice-President Vitor Constancio said the Governing Council’s temporary bond program has helped to stabilize the financial markets during a speech in Frankfurt, but went onto say that a bailout for Ireland would help stabilize the current situation as investors see a risk for the country to default on its obligations. As fears surrounding the European debt crisis intensify, the recent reversal in the EUR/USD may gather pace as policy makers fail to address the root of the problem, and the ECB could face increased pressures to support the real economy in 2011 as the economic recovery tapers off. Nevertheless, the economic docket showed consumer prices in the Euro-Zone increased at an annualized pace of 1.9% in October to mark the fastest pace of growth since November 2008, while investor confidence in German increased for the first time in seven-months as the ZEW survey increased to 81.5 in November from 72.6 in the previous month. As the outlook for growth and inflation improves, the ECB may look to carry out its exit strategy next year, and speculation surrounding the outlook for monetary policy is likely to play an increased role in driving future price action given the mixed outlook held by the members of the Governing Council.

The greenback rallied against most of its major counterparts, with the USD/JPY advancing to a fresh monthly high of 83.32, and the reserve-currency may appreciate further throughout the day as it benefits from the rise in safe-haven flows. As equity futures foreshadow a lower open for the U.S. market, the rise in risk aversion is likely to carry into the North American trade, but the event risks scheduled for Tuesday could spark increased volatility in the exchange rate as investors weigh the outlook for future growth. Producer prices in the world’s largest economy is forecasted to increase at an annualized pace of 4.6% in October after expanding 4.0% in the previous month, while demands for U.S. assets are projected to rise $62.5B in September following a $128.7B rise in the month prior. Moreover, industrial outputs are anticipated to rise 0.3% in October, while the NAHB housing market index is expected to increase to 17 in November from 16 in the previous month, and the slew of data could reinforce an improved outlook for the economy as the recover gradually gathers pace.

Published in Forex News

USD Dollar (USD) – The dollar gained against most of the major currencies in Forex trading after Retail Sales data came out at 1.2%, better than the expected 0.7%. This in addition to signs of recovery in the U.S. markets might help the FED to cut part of the QE2 program. The Stock Markets in U.S. closed mixed with no significant change as the Dow Jones advanced by 0.08% and the NASDAQ fell by -0.17%. Crude Oil struggled with the 85 level and closed around $84.50 a barrel. Gold (XAU) decreased after a failed attempt to jump above the $1370 zone, eventually closing at $1360 an ounce. Today, the PPI is expected at 0.8% vs. 0.4% previously. The TIC Net Long-Term Transactions are expected at 100.3B vs. 128.7B. Industrial Production is expected at 0.3% vs. -0.2% previously.

Euro (EUR) – The Euro showed another day of weakness against the dollar and hit a fresh 6-week low as stocks in the US trimmed gains and debt concerns pushed the investors to prefer the safe currency. Holding above the 1.3560 support area and oversold conditions might start a recovery in the pair and push it back upwards to 1.37 zones. Overall, EUR/USD traded with a low of 1.3560 and with a high of 1.3750. Today, the German ZEW Economic Sentiment is expected at -6 vs. -7.2 previously. The CPI is expected unchanged at 1.9%.

EUR/USD – Last:   1.3617

Resistance

1.3640

1.3680

1.3765

Support

1.3560


British Pound (GBP) – The Pound fell against the dollar but still holds above the 1.6 zone as it remains trading in the previous day’s range and shows more stability than the European currency. The only action that might cause a bearish trend in the pair, would be breaking the 1.5950 support level, otherwise it will remain in the known range. Overall, GBP/USD traded with a low of 1.6040 and with a high of 1.6153. Today, the CPI is expected unchanged at 3.1% and the Core CPI is expected at 2.6% vs. 2.7% previously.

GBP/USD - Last:  1.6063

Resistance

1.6130

1.6180


Support

1.6030

1.5970


Japanese Yen (JPY) – The Dollar completed another positive day versus the Yen reaching 6 week high on signs that the economic recovery is gathering pace. The Tertiary Industry Index came out at -0.9%, worse than the expected -0.5%. Holding above the 82.70 support zone keeps the momentum positive for the pair. Overall, USD/JPY traded with a low of 82.29 and with a high of 83.24. No economic data is expected today.

USD/JPY-Last: 82.99

Resistance

83.25

Support

82.70

82

81.55

Canadian dollar (CAD) – The USD/CAD pair closed the day with no major change and fluctuating 40 pips around the 1.01 zone. The USD/CAD is very choppy on the daily chart, but the trend still seems to be positive for the pair as long as it trades above parity. Overall, USD/CAD traded with a low of 1.0055 and with a high of 1.0137. Manufacturing Sales are expected at -0.7% vs. 2% previously.

USD/CAD - Last: 1.0080

Resistance

1.0140

1.0180

Support

1.0030

0.9980


 

Published in Forex Articles

Contributed By: DailyFx

 AUDUSD_Classical_body_aud2.png

AUD/USD:Clear signs of another short-term top emerging with the market stalling out by fresh post-float record highs at 1.0185 several days back, and then reversing course to end a sequence of consecutive daily higher lows. The latest break back below the 20-Day SMA further encourages bearish outlook from here, and we will look for a 2-day close below this shorter-term moving average for additional bearish confirmation. From here the risks are for declines towards critical support by 0.9650, below which will really accelerate. Any intraday rallies should be very well capped ahead of 1.0000.

Published in Forex News
Monday, 15 November 2010 12:02

GBP/USD:The market has come back under pressure

Contributed By: DailyFx

 GBPUSD_CLassica_body_gbp2.png

GBP/USD:The market has come back under pressure since capping out by 1.6300, and it looks as though deeper setbacks are in the cards over the coming days, with a fresh lower top sought out by 1.6185. Look for a close back below key support at 1.5950 to force an official shift in the short-term structure and accelerate declines back towards 1.5650 over the coming sessions. Ultimately, only back above 1.6300 negates and gives reason for pause.

Published in Forex News

Contributed By: DailyFx

 NZDUSD_CLassical_body_nzd2.png

NZD/USD:We are finally starting to see some form of a top, with the multi-month gains stalling out just shy of critical psychological barriers by 0.8000 and reversing course. From here, there is plenty of room for additional weakness and we see scope for declines back towards 0.7400 over the coming sessions. Intraday rallies should be well capped ahead of 0.7900, while a close below 0.7700 should accelerate.

Published in Forex News

Contributed By: DailyFx

 USDCAD_CLassical_body_cad2.png

USD/CAD:As per our commentary in previous days, setbacks have been very well supported by parity, and the market finally looks like it could be in the process of carving out yet another base. A break and close back above 1.0100 will confirm a double bottom formation that should accelerate gains well above 1.0200 and then put the focus on some more critical resistance by 1.0375 further up. Ultimately, only a close back below 0.9970 would give reason for concern.

Published in Forex News

Contributed By: DailyFx

 USDCHF_CLassical_body_swiss1.png

USD/CHF: We contend that the market is in the process of carving a material base by 0.9460, and any setbacks should be very well supported in favor of a sustained recovery. A fresh higher low is now sought out by 0.9550 to be confirmed on a break back above 0.9975 over the coming sessions. Above 0.9975 will accelerate gains and open the next major upside extension towards 1.0200 further up.

Published in Forex News
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