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Thursday, 18 November 2010 11:38

GBPUSD: Bearish Breakout Ahead?

Contributed By: DailyFx

GBPUSD is edging lower following a test of resistance marked by the midline of a rising channel established from mid-May, with negative divergence on weekly RSI studies hinting a bearish breakout may be ahead. I will look for confirmation on a close below the channel bottom (now at 1.5788) to enter short.

Published in Forex News
Thursday, 18 November 2010 09:46

UFXBank Forex Outlook: Building Permits Halt Dollar's Rally

USD Dollar (USD) – The dollar weakened slightly against most of the major currencies as Building Permits came out worse than expected at 0.55M vs. 0.57M that was expected. Housing Starts came out negative at 0.52M vs. 0.59M, as well as the CPI, which was also below expections at 0.0% vs. 0.1%. The Stock Markets in the U.S. closed with the Dow Jones weakening by -0.14% and the NASDAQ increasing by +0.25%. Crude Oil continued to weaken and reached a four week low closing at $80.44 a barrel. Gold (XAU) continued it’s down momentum and fell by -0.1% and closed at $1336.90 an ounce. Today, Unemployment Claims are expected at 442K vs. 435K prior. The Philly Fed Manufacturing Index is expected at 5.1 vs. 1.0 prior. Natural Gas Storage is also to be released and is expected at 11B vs. 19B.

Euro (EUR) – The Euro strengthened slightly against the dollar as economic data from the US favored the Euro.  No firm decision regarding Ireland’s debt seemed to cap the EUR/USD around the 1.3500 levels. The pair is above its moving average on the hourly chart. As long as the pair remains above 1.3525, we may see the beginning of a positive momentum for the pair. Overall, EUR/USD traded with a low of 1.3460 and with a high of 1.3565. Data regarding the Current Account is expected to be released at -2.2B vs. -7.5B, and later on in the day, ECB president Trichet is expected to speak.

EUR/USD – Last: 1.3584









British Pound (GBP) – The Pound regained lost ground against the dollar in Forex trading and spiked to around 1.5950 only to be knocked to lower levels. The Claimant Count Change came out much less than expected at -3.7K vs. 6.00K prior and prevented further gains. The pair barely managed to hold above 1.5900 levels and traded within a small range of less than 100 pips. Despite the minor recovery as long as the GBP/USD remain below its 1.5950 trend line, the trend is deemed bearish. Overall, GBP/USD traded with a low of 1.5854 and with a high of 1.5948. Today, Public Sector Net Borrowing is expected at 9.0B vs. 15.6B, retail sales are also expected at 0.5% vs. -0.2% prior, later on in the day MPC Member Posen is expected to speak.

GBP/USD - Last:  1.5908








Japanese Yen (JPY) – The yen weekend against the dollar as economic data from the US came out negative, and  put an end to the pairs  6 day positive rally. Although the pair dipped strongly on the daily chart, the pair’s ability to break levels above 83.00 shows the strength of the rally and buying in the dips may be a preferred strategy. As long as the USD/JPY remains above the 82.70 level, the momentum remains positive for the pair. Overall, USD/JPY traded with a low of 83.03 and with a high of 83.55. No economic data is expected today.

USD/JPY-Last: 83.30








Canadian dollar (CAD) – The Canadian dollar continued to weaken against the dollar as commodities continue to weaken, specifically crude oil which reached a four week low, making currencies linked to commodities and economic growth seem less attractive. The pair is still strongly above its moving average on the four hour chart and continues to be in a positive trend as long as the USD/CAD remains above the 1.0180 levels. Overall, USD/CAD traded with a low of 1.0181 and with a high of 1.0261. Today, Foreign Securities Purchases is to be released and is expected at 81.6B vs. 11.09 prior. Wholesale sales m/m are expected at 0.1% vs. 1.2%.

USD/CAD - Last: 1.0199









Published in Forex Articles

Contributed By: DailyFx

Fundamental Outlook

Retail sales in Great Britain are expected to rise 0.4 percent in October after falling 0.2 percent the month prior. At the same time, sales excluding auto fuel are estimated to rise 0.2 percent during the same period. Indeed, this may be the last push higher heading into the Christmas season. A rise in tomorrow’s figures will be the first increase since July of this year where the National Statistics in London said that sales rose 0.9 percent. I expect non specialized store sales to extend September’s advance, while clothing and footwear sales will likely reverse last month’s decline.

In the upcoming months, retail sales are expected to come back under pressure as higher value added taxes will weigh on household spending. These measures are estimated to begin in January. At the same time the massive spending cuts recently announced by the government will also put downward pressure on retail sales. The fiscal tightening measures proposed by Chancellor George Osborne marks the largest cuts in decades, and will in turn weigh on growth. All in all, a reading exceeding expectations will bode well for the British pound, but the advance may be short lived as sales and overall growth in the region will likely come back under pressure in 2011 amid tough austerity measures by the government in order to battle its high budget debt. However, a disappointing result could push the pound lower and lead to a key reversal in the GBPUSD.

Technical Outlook

GBPUSD Daily Chart


Charts Created Using Intellicharts – Prepared by Michael Wright

GBPUSD: The pair has extended its two day decline and is now testing the rising trend line dating back to the middle of May. Failure to break back below this level of support may lead the pair back towards the 1.59 area. However, yesterday’s drop below the key 1.60 level is of great concern as the dollar index has worked its way into a tight ascending channel on the daily chart. Unless the greenback buckles, I do not rule out a reversal in the GBPUSD in the near term.

Published in Forex News

Contributed By: DailyFx

 Talking Points

* Japanese Yen: Weakens Across the Board
* British Pound: Jobless Claims Fall For First Time Since July
* Euro: Holds Relative Flat on Fears Surrounding Debt Crisis
* U.S. Dollar: Consumer Prices, Housing Starts on Tap

The British Pound rallied to a high of 1.5936 on Wednesday as the economic docket reinforced an improved outlook for the U.K., but fears surrounding the European debt crisis may continue to bear down on the exchange rate as the risks for contagion intensifies. A report by the U.K. Office for National Statistics showed claims for unemployment benefits unexpectedly slipped 3.7K in October to mark the first decline July, while average weekly earnings including bonuses increased 2.0% during the three-months through September, which was largely in-line with expectations. As the GBP/USD pares the overnight advance ahead of the North American trade, we should see the pair find near-term support around the 50-Day SMA at 1.5838 as it maintains the upward trend from May, but a shift in market sentiment could lead the pound-dollar to weaken further throughout the week as European policy makers struggle to restore investor confidence.

Nevertheless, the Bank of England policy meeting minutes showed the MPC voted 7-1-1 to maintain its current policy in November, with board member Andrew Sentance pushing for a 25bp rate hike, while Adam Posen pressed the central bank to expand quantitative easing by another GBP 250B given the ongoing slack within the real economy. The BoE reiterated that it remains “ready to adjust policy in either direction” as the fundamental outlook remains clouded with uncertainties, and saw a greater risk for inflation as policy makers expect price growth to hold above target throughout 2011. As a result, Mr. Sentance argued that the recent developments strengthens the case to start normalizing monetary as the recovery gradually gathers pace, while Mr. Posen saw increased downside risk for growth as the new coalition in the U.K. tightens fiscal policy in order to balance the budget deficit. As the majority of the BoE maintains a wait-and-see approach, the central bank is likely to keep the benchmark interest rate at 0.50% and maintain its asset purchase target at GBP 200B throughout the remainder of the year, but there could be a growing split within the MPC as inflation continues to hold above the government’s 3% limit for inflation. According, we are likely to see interest rate expectations play a greater role in driving future price action for the GBP/USD, and the central bank may look to adjust monetary policy in the beginning of the following year as the

Policy makers in Europe tried to talk down the fears surrounding the European debt crisis as the governments operating under the fixed-exchange rate system struggle to address the root of its problems, but the euro showed little reaction to the efforts as it held a narrow range throughout the overnight trade. As a result, we are likely to see the single-currency hold steady throughout the day, but increased fears of contagion could drag on the exchange rate throughout the day and lead the EUR/USD to fall back towards the August high at 1.3333. Meanwhile, European Central Bank board member Guy Quaden said policy makers should “avoid restrictive monetary policies and ban protectionist attitudes” as the global recovery remains “fragile,” and continued to see a risk for an “uneven” recovery during an interview with a Belgian newspaper. As the European financial system remains weak, with the debt crisis intensifying, we are likely to see the Governing Council support the economy throughout the remainder of the year, but speculation surrounding the outlook for monetary policy is likely to have a greater impact in driving price action for the euro as the central bank plans to withdraw its emergency measures in 2011.

U.S. dollar price action was mixed overnight, with the USD/JPY extending the rally from the previous day to reach a high of 83.54, and the greenback could face increased volatility going into the North American trade as the economic docket is expected to reinforce a mixed outlook for the U.S. Consumer prices in the world’s largest economy is forecasted to expand at an annual pace of 1.3% in October after expanding 1.1% in the previous month, while housing starts are projected to contract 2.0% during the same period after rising 0.3% in September. At the same time, building permits are expected to jump 3.9% in October following the 5.6% contraction in the previous month, and the batch of mixed data could produce choppy price action in the dollar as investors weigh the outlook for growth and inflation.

Published in Forex News
Wednesday, 17 November 2010 15:07

Looking for Entry as Risk Appetite Makes its Big Break

Contributed By: DailyFx

 The day we have long been awaiting is finally upon us. Investor optimism has finally crumpled under its own weight. This looks like a great opportunity to short equities, commodities and all other things tied to risk (given good trade setup and money management of course). That said, it is interesting to note that I am only in one position at the moment - USDJPY. I have been waiting for this shift in underlying sentiment; and opportunities in these other asset classes look good for entry now. However, for the currency market, the issue is a little different. It is more about timing. The final crack in risk trends was no doubt helped along but the build up of issues over the past few weeks (the downsides of the need for US stimulus, Chinese efforts to slow growth, increased margin requirements on multiple assets, G20 agreements for emerging markets to curb hot capital inflows and of course European financial troubles). However, the big topic of the day - the rapid deterioration of Irish and other EU members' financial health - has not found definitive resolution. Ireland has not yet asked for a bailout. We could still see a potential relief rally for risk trends and more importantly the euro on such a step; but that probably won't erase the turn in sentiment. I am looking for the reaction to tangible steps in Europe; but I will also be looking for entry on a number of positions risk-linked in the mean time (with an aim for better prices).

One reason USDJPY is my only active position on today is because I decided to take profit on the remaining half of my USDCAD long position. I could have certainly tried to squeeze more out of this pair than the second exit point at 1.0210; but this pair is far too choppy and its fundamentals too troublesome to expect it to move in a straight trend. As for my USDJPY, the pair has shown continued improvement. Progress is measured; but that is to be expected as the shift in balance of risk position between these two is finely balanced.

For potentials: my list is long. I think the euro is in for trouble; but I think a relief rally is still possible on an actual bailout. I'll look for an entry on a short around 1.3600/50. If they ignore this step and go straight to the long-term implications of multiple bailouts, I'll still try to jump in below 1.3475 (but that would be a reduced position because it would essentially be chasing an entry). Other euro-based pairs I like include EURJPY on a break below 111.50 and EURCHF below 1.3265 - both range lows. The pound is offering us some interesting risk-related moves (further colored by the UK's stimulus/rate hike speculation. I would like a short on GBPUSD either with a move back up to 1.5950 or a confirmed break below 1.5825 should this risk aversion move hold up. Similarly, I am holding out for a GBPCAD breakout from its wedge and still open to a possible GBPJPY pullback to the resistance in its former descending trend channel. Other majors to watch is a possible AUDUSD short with a move back up to 0.9825 and/or a drop below 0.96; NZDUSD in a drop below 0.7650 and USDCHF with an eye above parity.

Published in Forex News

Contributed By: DailyFx


 EUR/USD:The market has finally rolled over quite convincingly, with critical short-term support by 1.3695 now easily exceeded to suggest that a major lower top could be in the process of carving out by 1.4285. We had initially projected a test of longer-term falling resistance off of the record highs by 1.4500, but 1.4285 could very well be it, with setbacks now seen accelerating to the downside back towards 1.3000 over the coming days. Look for the latest weekly close below 1.3700 to help strengthen the bearish case. From here, any rallies should now be well capped ahead of 1.3800, where the 10-Day SMA has crossed below the 20-Day SMA. Next major downside target doesn’t come in until 1.3335 in the form of previous resistance now turned support.

Published in Forex News

Contributed By: DailyFx


EUR/JPY:The market has done a very good job of holding above the daily Ichimoku cloud to suggest that we could be on the verge of a material shift in the structure in favor of significant upside over the medium and longer-term. Daily studies are however in the process of consolidating, so the preferred strategy is to look to buy into dips rather than on upside breaks. The latest pullback has taken the market back into the cloud, an ideal entry point for a fresh long now comes in by the 110.50 area. Ultimately, only a close back below 110.00 would force a shift back to the downside.

Published in Forex News

Contributed By: DailyFx


EUR/CHF:Despite the latest setbacks, we retain a constructive outlook with the market in the process of carving out a major base. There is some very solid internal range support in the 1.3200’s and we would expect to see any additional declines very well supported ahead of 1.3200 on a close basis. Ultimately, only a close back below 1.3200 would give reason for concern. Look for a break back above 1.3500 to reaffirm outlook and open the next major upside extension beyond 1.3835.

Published in Forex News
Wednesday, 17 November 2010 15:08

AUDUSD Any intraday rallies should be very well capped

Contributed By: DailyFx


AUD/USD:Clear signs of another short-term top emerging with the market stalling out by fresh post-float record highs at 1.0185 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 the 50-Day SMA (0.9750) 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 0.9900.

Published in Forex News

USD Dollar (USD) – The dollar gained across the board in Forex trading after investors sought safety on the USD as risk aversion is back to the markets. The PPI came out 0.4% worse than the expected 0.8%. The TIC Net Long-Term Transactions came out at 81B worse than the expected 100.3B. Industrial Production came out at 0%, worse than the expected 0.3%. The Stock Markets in U.S. closed negative as the Dow Jones weakened by -1.59% and the NASDAQ fell by -1.75%. Crude Oil plummeted by -3% closing at $82.40 a barrel. Gold (XAU) dropped -2.2% and closed at $1339 an ounce. Today, Building Permits are expected at 0.57M vs. 0.55M previously. The Housing Starts are expected at 0.6M vs. 0.61M previously. The CPI is expected at 0.3% vs. 0.1% previously.

Euro (EUR) – The Euro showed another day of weakness against the dollar and touched a 7 week low on concerns over Ireland’s debt and Greece’s economic stability. The German ZEW Economic Sentiment came out 1.8 better than the expected -6. The CPI came out unchanged at 1.9%, as expected. Holding below the 1.3560 resistance area keeps the momentum negative for the pair. Overall, EUR/USD traded with a low of 1.3447 and with a high of 1.3654. No economic data is expected today.

EUR/USD – Last:   1.3502







British Pound (GBP) – The Pound fell against the dollar and was affected by concerns that Europe’s debt crisis will hurt demand for riskier assets. The CPI came out at 3.2%, better than the expected 3.1%. The Sterling has broken the critical support level of 1.5950 and it might cause the pair to begin a strong bearish trend as long as it is holding below that level. Overall, GBP/USD traded with a low of 1.5838 and with a high of 1.6086. Today, the Claimant Count Change is expected at 6k vs. 5.3k previously. MPC Meeting Minutes are also expected.

GBP/USD - Last:  1.5878







Japanese Yen (JPY) – The Dollar completed another positive day versus the Yen and touched 1 month high levels. Holding above the 82.70 support zone keeps the momentum positive for the pair. Overall, USD/JPY traded with a low of 82.84 and with a high of 83.58. No economic data is expected today.

USD/JPY-Last: 83.40







Canadian dollar (CAD) – The U.S. dollar jumped against Canada's dollar to a 2 week high as stock markets and commodities tumbled on slowing recovery concerns. This decreased demand for currencies linked to commodities and economic growth. Manufacturing Sales came out -0.6% better than the expected -0.7%. Holding above the 1.0180 support zone keeps the momentum positive for the pair. Overall, USD/CAD traded with a low of 1.0068 and with a high of 1.0252. No economic data is expected today.

USD/CAD - Last: 1.0218








Published in Forex Articles
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