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FOREX: OctaFX.Com - Dollar Ends Week Unchanged, What Will Force a EURUSD Break Out?
- Dollar Ends Week Unchanged, What Will Force a EURUSD Break Out?
- Euro Hopes Seek Spain Bailout, Fear Centered on Greece
- Japanese Yen: Japan’s Fiscal Cliff Could Drive USDJPY to 85, Beyond
- Canadian Dollar Sensitive to Jobs Data as Policy Wavers
- New Zealand and Australian Dollar: Rely on Risk Trend, If that Fails Intervention
- Oil Traders Watch Hurricane Sandy but Supplies Already Topped Off
- Gold Posts First Three-Week Decline in 13 Months, Next Break 1700?
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Dollar Ends Week Unchanged, What Will Force a EURUSD
Break Out?
With the close this past Friday, the Dow Jones FXCM Dollar Index (ticker = USDollar) closed the week out less than a point from where it opened. In fact, this measure of the currency has progressed less than 0.1 percent through each of the past three weeks. There is no better measure of congestion and indecision. The lack of progress fits the fundamental backdrop of a market that grows increasingly concerned about the outlook for growth, yields and financial stability yet doesn’t deflate risky assets due to unrelenting hope for more stimulus. This lack of conviction has left the S&P 500 with a critical reversal of the most recent phase of its rally from June but without the commitment to build momentum on a move below 1400. Similarly, the same uncertainty has kept EURUSD anchored to congestion between 1.3100 and 1.2825.
If we want to see a clear and lasting move from the dollar – we need a development that plays to its most basic role: ultimate safe haven and liquidity provider. Given the low level of participation in the capital markets (many investors have kept their money on the sidelines due to the extremely low yields and persistent of financial risks), it is rather easy to spur volatility with economic indicators. Yet, turning the tides of sentiment is an order that few of the ordinary indicators and releases can accomplish. The October NFPs due Friday are the pinnacle for scheduled economic data on the US docket; yet its already-lukewarm fundamental impact has been further diminished. We learned this past week that the Fed would not move to increase its stimulus efforts until at least the expiration of the Operation Twist program, and its ‘growth proxy’ role has been diminished by the release of 3Q GDP. That said, the typical slowdown into its release will likely reply.
To break the cycle of indecision and hesitation ahead of never-ending event risk (we can wait for NFPs, then the US election, then the Fiscal Cliff, etc), we need a serious withdrawal of capital from risky exposure or mass influence of sidelined funds into the system. It would be extremely difficult to line up the necessary events to spur lasting rally (another interim stimulus, a move towards permanent fix for the Euro-zone, a turn in growth, slow recovery in benchmark rates, etc), but that doesn’t preclude another temporary rally on another short-term fix. Meanwhile, the backdrop has deteriorated enough that all it would take is the infectious belief that stimulus has reached is limits to spark fear.
Euro Hopes Seek Spain Bailout, Fear Centered on Greece
Europe’s two greatest threats carry opposing high-impact possibilities. While both Greece and Spain can see their situations improve or deteriorate, there is a greater influence over the euro and investor sentiment depending on which way they fall. Considering Spain is the Eurozone’s fourth largest economy, a fully engaged crisis can cause severe problems for the region’s future. However, there are still a number of interim steps that the country would have to go through before the market considered it hopeless. In fact, should Spain ask for a full rescue, it would very likely spur a substantial rally and perhaps even sentiment rally. It wouldn’t solve the underlying issues but it would delay the pain. Alternatively, Greece has passed through too many iterations of rescue for investors to be fooled by temporary measures. Furthermore, the country is struggling just to receive aid to keep running. Amid a lot of data, there is also a Troika-Greece meeting on Monday and Wednesday.
Japanese Yen: Japan’s Fiscal Cliff Could Drive USDJPY to 85, Beyond
The market is well aware of the fiscal shortfalls of Japan, but the country’s troubles on this front have not received as much press (from financial news and traders) as its US counterpart. This was at least partially due to the fact that there was a hard time frame to the United States’ trouble (the Fiscal Cliff that can cut $600 billion from GDP at the end of year) while the world grew accustomed to Japan’s debts. Well, that passive acceptance may come to an end as the government struggles to pass a bill necessary to keep operating. The recently announced stimulus program will tap reserve funds. But, by the end of November – with a scheduled debt sale – the country may run out of cash.
Canadian Dollar Sensitive to Jobs Data as Policy Wavers
Loonie skeptics have long warned that the Canadian economy is facing the same sort of troubling housing bubble and consumer debt that led so many other country’s to crisis. Yet, if it isn’t an immediately pressing problem, why not take advantage of the currency’s relative yield and stability. That ideal mix of safety and return may be coming to an end. Moody’s this past Friday placed six large Canadian banks on downgrade reviews. Next week, we have Canadian employment figures which can further weigh BoC Governor Carney’s concerns about ‘growing risks’.
New Zealand and Australian Dollar: Rely on Risk Trend, If that Fails Intervention
Both the Aussie and kiwi dollars have shown exceptional resilience through a questionable risk environment. Both are investment currencies for global Forex and interest rate traders; but their historically low yields are bolstered by a severe lack of alternative options with positive, real return. Central banks have recognized this and started to diversify into these funds. To offset this stubborn inflow, RBA and RBNZ central bankers are likely hoping that risk aversion drops carry to offer exchange rate relief. If that doesn’t happen, they have to cut rates / intervene.
Oil Traders Watch Hurricane Sandy but Supplies Already Topped Off
Risk aversion and a long building supply-demand imbalance pushed US crude to its lowest close in three months this past week. Having fallen five out of the past six weeks, a clear trend is starting to develop (though futures volume and open interest are dropping). With the speculative appeal of the commodity tarnished, the market recognizes production at 17-year highs. Not even Hurricane Sandy can change that glut.
Gold Posts First Three-Week Decline in 13 Months, Next Break 1700?
The bear trend that began for gold at the beginning of this month just below 1800 is proving just as consistent as the climb that preceded it. The metal is now eyeing 1700 with something that looks like hesitation. A dollar tumble and/or stimulus for Spain are among the few events that can turn this tide. Meanwhile, we are seeing the most consistent bear trend in 13-months, a drop in speculative interest and building volume.
Oct 27, 2012
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OctaFX.Com - Forex Analysis: Dollar Waits for Catalyst as S&P 500 Hints at Rebound
THE TAKEAWAY: The US Dollar has pulled back as prices digest last week’s upward breakout. Traders now look to the S&P 500 for direction cues amid signs of a rebound.
US DOLLAR – Prices continue to retest resistance-turned-support at the upper boundary of a falling channel set from the June 1 high (9897) having broken higher after forming a bullish Piercing Line candlestick pattern.
A rebound sees initial resistance remains at 9963, the 38.2% Fibonacci retracement, with a push above that exposing the 50% Fib at 10032. Alternatively, a drop below support targets rising trend line support at 9859.
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Daily Chart - Created Using FXCM Marketscope 2.0
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Oct 29, 2012
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Forex News: Euro Rises on Surprising Spanish GDP
THE TAKEAWAY: Spanish GDP drops by 0.3% in Q3, better than expected -> Better GDP could lower expectations for bailout -> Euro rises
The Spanish economy shrank by 0.3% in the third quarter, marking 4 straight quarters of economic contraction.
However the drop in gross domestic product was better than the expected 0.4% decline, as predicted by forex news sources, and better than the previous quarter’s 0.4% drop in GDP. The third quarter saw a 1.6% drop in GDP from Q3 of 2011, according to National Statistics Institute.
Spain is said to be considering a bailout from the EU via the ESM bailout fund, but has thus far resisted asking for the aid. An improving economy could lower our expectations for a Spanish bailout request.
In forex markets, the Euro climbed on the positive economic news, despite its effect on bailout expectations, rising close to 1.2950 against the US Dollar.
EURUSD has since erased those gains following disappointing German employment data. Support could be provided by a rising month-long trend line which is currently near 1.2843.
EURUSD 15-minute: October 30, 2012
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October 30, 2012
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Forex News: Euro Erases Gains on Intense Rise in German Unemployment
THE TAKEAWAY: German unemployment rises by 20,000 in October -> German unemployment rate at 6.9% -> Euro reverses gains
The amount of people looking for work in Germany has increased at the fastest pace in 6 months as the unemployment rate remained at an 11-month high.
The rise in unemployment during October was 20,000 (seasonally adjusted), double the expected 10,000 person rise in those unemployed, and significantly higher than last month’s revised 12 thousand rise in amount of people looking for work.
The unemployment rate remains at 6.9% for the second month, as last month’s rate was revised higher from 6.8%, according to the Federal Labor Agency.
The amount of people out of work in Germany now totals 2.94 million. The German economy has suffered because of the Euro debt crisis, and the GDP only rose 0.3% in the second quarter. Germany is the biggest economy in the Euro and signs of economic suffering are Euro negative in forex markets.
In currency trading, EURUSD erased earlier gains that were made following a Spanish GDP release and retracted from a short term 1.2950 resistance. Support could now be provided by a rising month-long trend line, which is currently near 1.2843.
EURUSD 15-minute: October 30, 2012
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October 30, 2012
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Forex News: Italian Benchmark Bond Prices Soar, and so Does the Euro
Following a meeting in Berlin, France Finance Minister Moscovici and German Finance Minister Schaeuble announced that they are aiming for a solution to Greece by November. They said that they both want to see Greece remain in the Euro-zone, and that the solution will be discussed further in tomorrow’s Euro-group meeting tomorrow.
Schaeuble declined to comment on the size of the funding gap in Greece, but added that they can’t go in the opposite direction on debt reduction. Moscovici said he doesn’t want to reopen the discussion on Euro bonds. Greece has previously said that the government might run out of money by November. The release of these statements had little effect on forex markets.
Obviously, the biggest story of the day is Hurricane Sandy and its impact on the East Coast of the US. Bloomberg is reporting estimates of 20 billion dollars of damages from the hurricane and US stock markets will remain closed today.
The US markets may reopen as soon as tomorrow, and there has been no noticeable effect on currency trading from the hurricane since some early losses to EURUSD on Monday morning.
The big catalyst in today’s trading was the BoJ decision to expand asset purchases. The stimulus expansion barely met expectations and therefore had a positive effect on Yen trading. BoJ’s Shirakawa and a government official speaking after the meeting both agreed that the central bank must continue to act until an end of deflation.
In Spain, the GDP in Q3 was reported to have contracted less than expected and therefore gave a brief boost to the Euro to just a bit short of 1.2950 in trading.
That gain was soon erased by higher than expected unemployment in Germany.
Finally, an Italian bond sale saw a drop in 10-year bond yields to 4.92% from 5.24% in September’s sale. EURUSD bounced back towards 1.2950 following the sale news, where the currency is still trading.
The North American session calendar is light and traders should keep an eye out for updates relating to Greece or any serious changes to damage estimates from the hurricane.
EURUSD Daily: October 30, 2012
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October 30, 2012
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OctaFX.Com - Forex Analysis: Euro Vulnerable on CPI Print, Yen May Fall on US Data
The Euro may face selling pressure on swelling ECB rate hike bets as inflation hits a three month low. The Yen is vulnerable if US economic data boosts risk appetite.
Talking Points
- Euro Vulnerable as CPI Slowdown Fuels ECB Interest Rate Cut Expectations
- Dollar, Yen May Extend Losses as Chicago PMI Rebound Boosts Risk Appetite
The preliminary estimate of October’s Eurozone CPI reading headlines the economic calendar in European hours. Expectations call for the annual inflation rate to tick lower to 2.5 percent, marking the lowest print in three months. The outcome may weigh on the Euro as forex traders interpret fading price pressure as leaving the door open for the ECB to cut interest rates amid signs of deepening recession in the single currency area.
Later in the day, the spotlight turns to the US data docket and the Chicago PMI report. Expectations call for an uptick to 51.0 in October after a disappointing 49.7 print in the prior month, putting the gauge back above the 50 “boom-bust” level. The result stands to reinforce the recent improvement in US economic data and could boost overall risk appetite, a scenario that is likely to put downward pressure on the safe-haven Japanese Yen and US Dollar.
The two anti-risk currencies already came under pressure overnight as Asian stocks pushed higher, sapping demand.
The MSCI Asia Pacific regional benchmark equity index added 0.7 percent after a gauge of US home prices rose to the highest since September 2010. The release buoyed hopes that a firming recovery in the world’s largest economy will help support demand for Asian exporters.
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Oct 31, 2012
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OctaFX.Com - ECB: Loan demand sags in slack eurozone economy
Eurozone central bank reports 'pronounced' fall in demand for loans as businesses hold back
FRANKFURT, Germany (AP) -- The European Central Bank has more dismal numbers about the slack eurozone economy.
The chief monetary authority for the euro reports a "pronounced net decline" in business demand for credit in the third quarter. Its quarterly bank lending survey shows that companies are not asking for money.
Credit shows signs of shrinking even though banks are themselves finding it easier to raise money as the turmoil from the eurozone debt crisis has eased.
The key figure showed a minus 28 percent balance, reflecting the difference between banks reporting more and less loan demand. The figure worsened from 25 percent in the second quarter.
The eurozone economy shrank 0.2 percent in the second quarter and many fear it could sink into recession when third quarter figures come out Nov. 15.
Oct 31, 2012
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OctaFX.Com - ECB: Loan demand sags in slack eurozone economy
Eurozone central bank reports 'pronounced' fall in demand for loans as businesses hold back
Unemployment for the 17 countries that use the euro rose to a record high of 11.6 percent in September.
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Oct 31, 2012
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OctaFX.Com - Forex Analysis: US Dollar Classic Technical Report 11.01.2012
Prices remain wedged between resistance-turned-support at the upper boundary of a falling channel set from the June 1 high (9884) and the 38.2% Fibonacci entrancement at 9963.
A break higher exposes the 50% Fib at 10032. Alternatively, a drop below support targets rising trend line support at 9867.
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Nov 1, 2012
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OctaFX.Com - Forex News: Sterling Rises as UK Construction Activity Expands
THE TAKEAWAY: UK construction PMI for October rises to 50.9 -> Report is very pessimistic despite expansion -> Sterling rises
Following two months of reduction, UK construction activity expanded in October according to Markit’s Purchasing Managers’ Index. The construction PMI was reported at 50.9, beating expectations for an index result of 49 and higher than last month’s 49.5 index result. A PMI result below 50.00 indicates deterioration in activity.
Civil engineering saw a rise in construction output, while residential output was the weakest area of construction, and commercial activity was marginally reduced. New order volumes for construction were lower which led to lower employment in the industry.
Markit’s Senior Economist Tim Moore said that, ‘the bigger picture remains bleak given ongoing falls in new orders alongside renewed job cuts across the sector over the month.’
Yet despite some of the pessimism in the report, Sterling climbed higher in forex trading on the surprising index level. GBPUSD climbed above 1.6100 following the release of the forex news. Resistance could be provided by a two week high around 1.6174.
GBPUSD 15-minute: November 2, 2012
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Nov 2, 2012
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