Forex Trading Systems

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Tue, Nov 16 2010, 08:50 GMT
by KBC Market Research Desk

KBC Bank  |  View company’s profile

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On Monday, the same themes that guided currency trading at the end of last week were still at work at the start of this new trading week. There was a lot of market chatter on the options for Ireland to solve the crisis on its bond market. On Friday, there was some relief for Irish bonds and for the single currency as investors took some comfort from declarations from EU policy makers that Ireland could use the support mechanisms that were in place. However, yesterday morning, uncertainty prevailed again. There were still several issues on the table. Will Ireland finally ask for assistance? Is assistance only for the Irish banking sector an option or not (we doubt this will work and/or get approval from other member states)? What will be the consequences from assistance for Ireland for Portugal. In this context, any upticks in EUR/USD were still seen an opportunity to off-load EUR/USD long exposure. EUR/USD slipped south in the 1.36 big figure during the morning session in Europe. In addition, on the USD side of the equation, there where some developments that could be seen as USD supportive. US bond yields continued to move higher. This might be an indication that QE-2 has finally been discounted in the (US bond) market. In addition, there was still quite some market talk of pressure on Bernanke not to implement (or to implement only partially) its $600 billion QE-2 asset purchases. We don’t think that the Fed will change tactics anytime soon. Nevertheless, this debate on the execution of QE-2 might affect market sentiment. This applies in first place to the bond market, but it might have some impact on the currency market, too. The US data (retail sales and Empire manufacturing) didn’t bring much new info to the market. US bond yields obviously don’t have the same impact on EUR/USD as they do for USD/JPY. Nevertheless, the steep rise in US bond yields at the end of the session also caused some additional gains of the dollar against the single currency. EUR/USD closed the session at 1.3587, compared to 1.3691 on Friday evening.

Overnight, Fed’s Yellen said in an interview with the WSJ that the Fed is not trying to push down the value of the dollar or to boost inflation above 2%. This statement is no big news, but it confirms that the Fed for several reasons (both domestic and external) is trying to signal that it won’t play the QE-2 game in an extremely hard way.

Today, the calendar is well filled both in Europe and in the US. In Europe, the October CPI and core CPI are on the agenda. This is interesting but not really on the radar screen of the markets. In Germany, the ZEW economic sentiment indicator for November will be published. We give more weight to PMI’s and the IFO the make an assessment business sentiment. Nevertheless, the outcome of the release remains interesting even as the impact on EUR/USD should at be of intraday importance, at best, as focus of markets is currently on other issues.

The same is true for the US eco data (PPI, TIC data , industrial production and NAHB housing market index). The reaction of the dollar on these data, if any, will most probably go via the reaction on the Treasury market. So, even as the data are plenty, the real drivers for markets are elsewhere. A first key question is whether Ireland will finally accept some kind of rescue package. In this respect investors will keep a close eye on the meeting of the EU Finance Ministers. On this issue, we think that this is only a matter of how the package will be formalized, rather than whether Ireland will ‘accept’ support. If the Irish problem would be ‘solved’, the focus will turn to Portugal. It is not sure that Portugal will join an Irish step to accept support. If this isn’t the case, the uncertainty on peripheral Europe will persist and this will probably continue to weight on the single currency. However, if both countries would apply for European support, the situation could change quite materially, especially for the ECB. Part of the support might be used to support the banking sector. If the problems in the banking sector of the peripheral European countries would be ‘solved’, their banks could become less depended on the ECB for their funding. If both countries would join the support mechanism, the funding problems of the banks in these countries won’t be solved overnight. Nevertheless, if the balance sheets of these banks would be strengthened in one way or another, it might remove an important hurdle for the ECB on its way to a normalization of its liquidity providing. It is still a long call, but in theory, such a development should be euro supportive in a longer term perspective. Of course, there are still several steps to take. In addition, the US side of equation still plays an important role, too with the focus on pace of the rise in US bond yields. In this respect, long term US bond yields have broken beyond important resistance levels.

Over the previous weeks, we turned more cautious on the steep uptrend in EUR/USD. The first reaction to the Fed decision still revived some kind of reflation/ risk trade. This pushed the trade-weighted dollar to a new correction low (75.63). EUR/USD filled offers in the 1.4280 area. However, from there other factors gradually came to the forefront again, especially ongoing tensions on the peripheral EU bond markets. In addition, the USD negative impact of the QE-2 story on the dollar is finally losing power. Markets were ripe for a more pronounced correction in EUR/USD; with flaring up the tension in peripheral Europe a good reason to scale back EUR/USD long positions. In a day-to-day perspective, we maintain our EUR/USD negative bias as long as there is no clarity on the situation in Ireland and Portugal. However, once this issue would be out of the way. We have to re-evaluate our position tactics.

From a technical point of view, the picture became EUR/USD positive as the pair easily cleared the 1.3334 mark after the September Fed meeting. The pair tried to break higher out of the 1.3698/1.4160 consolidation range after the FOMC meeting, but the gains could not be sustained and EUR/USD returned within the sideways consolidation path. Last week, we changed our ST bias in EUR/USD from neutral (consolidation) to negative and adopted a sell on upticks approach in EUR/USD for return action lower in the established consolidation pattern. Last week’s drop below the 1.3697 reaction low/range bottom was an additional warning signal. In this context, we keep a euro negative bias. The targets of that multiple top formation are seen in the 1.3520/1.3470 area, at 1.3389 and the final target comes in at 1.3267.

On Monday, the dollar stayed well bid across the board and this move was also visible in the USD/JPY cross rate. So, at this stage, global uncertainty (mostly fuelled by the problems in peripheral Europe) doesn’t cause a new safe haven run on the Japanese currency, at least not for now (even EUR/JPY basically keeps a sideways trading pattern). Japan recorded strong Q3 GDP growth (0.9% Q/Q) yesterday morning, but even this (much better than expected) release was no help for the yen. The focus of markets was elsewhere, with the rise in US bond yields seen as the most important driver for this remarkable rebound in USD/JPY. This might of course be part of the explanation. Nevertheless, the rise in US bond yields might also be seen as an indication of waning interest for US bonds at the current low yield levels, taking into account the ‘risks’ for bondholders from more QE over time. Whatever the reason, one can not but conclude that the mix of recent developments (QE-2 priced in in the markets, rising US bond yields and uncertainty on peripheral Europe) has created an environment to scale back USD shorts that had been build up over the previous weeks, even months. Recently, USD/JPY often reacted different than was the case for most other USD cross rates, but for now this is not the case. Last week’s break above the 81.99 resistance area was a first indication that the downward pressure in this cross rate was easing. Yesterday, at first it looked as if last week’s move would continue unabatedly. However, the pair changed (temporary) course after the publication of eco data (Retail sales/Empire State survey). So, the pair came off from the intraday highs north of the 83.00 mark, even as European and US equities didn’t do that bad at that time. However, a late session rise in US bond yields triggered a new upleg in USD/JPY. The pair closed the session at 83.07, compared to 82.53 on Friday evening.

Since the Mid-September interventions, the tactical game between the Japanese authorities and the market continued However, the BOJ is in no comfortable position. Its G20 partners are growing very sensitive to the value of currencies. Any (perceived) manipulation of the currency is a source of friction. However, recently, the global decline of the dollar shifted into lower gear. Until last week, any uptick was still seen an opportunity to offload USD long exposure. The 82.00 resistance area was a hard nut to crack, but finally, the break succeeded, with the rise in US bond yields the main driver behind the move. This improved the ST picture in this pair. We don’t expect a major change in the USD/JPY downtrend yet. Nevertheless, a window of opportunity for some further USD/JPY gains has opened. Apparently, also in this cross rate there is also some room for repositioning in a market that was unidirectionally positioned USD short/yen long. We still look to sell into strength, but wait for a technical signal that this correction has run its course.

On Monday, the swings in the EUR/GBP cross rate were far less pronounced compared to the moves seen at the end of last week. In Asia and early in Europe, EUR/GBP basically drifted sideways in a tight range just below the 0.8500 mark. There was still some downward spill-over effect from the price action in EUR/USD later in the session. However, the 0.8450 area (last week correction low) was not really challenged. It is too early to draw any firm conclusions. However, at least for now the pattern of subsequent lower daily lows has been interrupted. EUR/GBP closed the session at 0.8564, compared to 0.8498 on Friday evening.

Today, the UK calendar contains the CPI. The headline figure is expected to stay at 3.1% Y/Y, so above the BoE target range. However, the focus of markets will be on the BoE testimony of Governor King (and some other MPC members before the House economic affairs Committee). In this respect, it will be interesting to see how King will play the balance between inflation risks and the need to support the economy. After the publication of the inflation report, we had the impression that the Bank gave slightly more weight to inflation. We look out whether this will be confirmed today. Besides the UK policy debate, the global issues on the euro will also continue to play their role for EUR/GBP trading. However, after yesterday’s price action, we have the impression that EUR/GBP is becoming a bit less sensitive to this issue.

Global context. Since late August, EUR/GBP staged a decent rebound, driven by a global rebound of the euro and investors’ disappointment on some poor UK eco data. Investors started to think that the BoE at some point would join the Fed and enlarge the program of asset purchases. This pulled the trigger for EUR/GBP to clear the key 0.8532 level (July 19 high). In this context, we kept a long-term negative view for sterling against the euro.

Recently, more or less in line with EUR/USD, we advocated that in a short-term perspective, there was room for some consolidation/correction on the recent steep EUR/GBP up-move. Until end-October, the market focused on the chances for more QE in the UK as the harsh budgetary measures were seen as a potential drag on UK growth. This kept sterling under pressure. However, the recent stronger eco data (especially the first estimate of the Q3 GDP) torpedoed the hope for additional BoE policy accommodation short-term. Longer-term, we don’t herald a major comeback of sterling. The debate on more QE is delayed, but probably not closed. The impact of the budgetary measures on growth still has to materialize. In addition, even if the QE debate in the UK fades, the BoE should lag the ECB in reducing policy stimulation.

However, in a short-term perspective one could ignore the correction in the wake of the strong Q3 GDP release. EUR/GBP dropping below the 0.8700 barrier was a first warning signal. At the end of last week, the global euro sell-off triggered also a new wave of EUR/GBP selling. The pair dropped below the key 0.8532/77 area. Already for some time, we indicated that we are looking to (re)install EUR/GBP longs in case of a more pronounced correction (e.g. toward the 0.8532/77 area (Neckline/ previous high)). These targets have been met. We still look to buy EUR/GBP, but wait to see some consolidation on the global euro decline to step in again. If Friday’s low would hold over the next days, this could be a first indication that a case is building in this cross rate.

Published on  Tue, Nov 16 2010, 08:59 GMT

This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice. 68133ed4-60b6-499f-8b56-b86553f2f401 3

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eurusd

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eurusd

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Tue, Nov 16 2010, 11:25 GMT
by Martín Feldman

FXstreet.com  |  View company’s profile

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The ministers’ meeting markets are awaiting is coming today. Although markets are most eagerly expecting it, stake holders in this situation are numerous, ranging from Ireland, of course, to  the ECB, stopping by Germany, England and the IMF.

Irish officials keep repeating that they are funded until mid 2011, meaning they will not have to tap the bond markets in the shortest term nor resort to the ECB, or the IMF for help (bailout would be another word for it). However, the banking system’s troubles seem too big a burden for a country that indebted and with austerity measures soon to be implemented.

The ECB and the European Commission are pushing for an Ireland application, something that is unclear will happen, in order to avoid a contagion effect. On the other hand, Germany the main contributor to the would-be bailout is divided between negotiating reforms for bond holder haircuts, internal pressure and European requests. England, on its part, is most likely to be requested to pitch in to any bailout since its banks are severely exposed to Irish debt.

This scenario is unnerving markets, driving stocks down along with the bloc currency. Resolution for this situation is most likely not to be a win-win situation but with spreads widening constantly many believe action is called for.

Published on  Tue, Nov 16 2010, 13:08 GMT

23322437-4616-4fb7-968b-8504a9783034 6

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European Wrap: Bit of a mish-mash really. Risk aversion picks up by FastBrokersFX
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ireland, debt, eurusd, eurozone

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ireland, debt, eurusd, eurozone

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Tue, Nov 16 2010, 07:07 GMT
by Yohay Elam

Forex Crunch  |  View company’s profile

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TIC Long-Term Purchases in the US, CPI & BOE Inflation Letter in the UK are some of the exciting events that awaits today.

In the US, Producer Price Index (PPI), price of finished goods and services sold by producers is about to rise by 0.3% and the Core PPI (excluding food and energy) is about to rise by 0.1%. Leading indicator of consumer inflation.

Later in the US, TIC Long-Term Purchases, value between foreign long-term securities purchased by US citizens and by foreigners during the last month is about to reduces by 28.4 B. foreigners must buy the domestic currency to purchase the nation’s securities.

More in the US, Industrial Production value of output produced by manufacturers, mines, and utilities is about to rise by 0.6% and impact on consumer conditions such as employment levels and earnings.

Finally in the US, Capacity Utilization Rate, available resources being utilized by manufacturers, mines, and utilities is about to rise by 0.2%. Leading indicator of consumer inflation.

In Canada, Manufacturing Sales made by manufacturers is about to reduce by 2.3%, it affected by market conditions, and changes in their sales can be an early signal of future activity such as spending, hiring, and investment.

For more on USD/CAD, read the Canadian dollar forecast.

In Europe, German ZEW Economic Sentiment, montly Survey of about 350 German institutional investors and analysts which asks respondents to rate the relative 6-month economic outlook for Germany indicates pessimism with -5.3 points.

Also in Europe, Consumer Price Index (CPI), price of goods and services purchased by consumers; is 1.9% similar to the previous month, and the Core CPI (excluding food, energy, alcohol, and tobacco) is 1.0% like on the previous month.

More in Europe, Zentrum fur Europaische Wirtschaftsforschung (ZEW), Monthly Survey of about 350 German institutional investors and analysts which asks respondents to rate the relative 6-month economic outlook for the Eurozone indicates optimism with 2.3 points.

Finally in Europe, employed people, excluding the farming industry and government is about to rise by 0.3%. Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity.

For more on the Euro, read the EUR/USD forecast and Casey Stubbs’ latest analysis.

In Great Britain, Consumer Price Index (CPI); price of goods and services purchased by consumers is 3.1% and the Core CPI (excluding the volatile food, energy, alcohol, and tobacco items) is 2.7% – both similar to the previous month and account for a majority of overall inflation.

Aldo in Great Britain, Retail Price Index (RPI), price of goods and services purchased by consumers for the purpose of consumption is about to reduce by 0.1%. differs from CPI, it measures goods and services bought for the purpose of consumption, and it includes housing costs which are excluded from CPI.

More in Great Britain, Bank of England (BOE), Consumer Price Index (CPI); It gives insight into the future of monetary policy – when CPI y/y moves more than 1% from the mandated target rate of 2%, the BOE Governor is required to write an open letter to the chancellor of the exchequer explaining what is being done to address the situation.

Finally in Great Britain, Department for Communities and Local Government (DCLG) House Price Index (HPI), selling price of homes is about to rise by 0.6%.

Read more about the Pound in the GBP/USD forecast.

In Australia, MI Leading Index, This index is designed to predict the direction of the economy and it is about to be -0.1% similar to the previous month.

Later in Australia, Wage Price Index, price businesses and the government pay for labor, excluding bonuses is about to rise by 4%. Businesses pay more for labor the higher costs are usually passed on to the consumer.

For more on the Aussie, read the AUD/USD forecast.

That’s it for today. Happy forex trading! Published on  Tue, Nov 16 2010, 07:09 GMT

Foreign exchange (forex) trading carries a high level of risk and may not be suitable for all investors. The risk grows as the leverage is higher.
investment objectives, risk appetite and the trader’ level of experience should be carefully weighed before entering the forex market. There is always a possibility of losing some or all of your initial investment / deposit, so you should not invest money which is which it can’t afford to lose. The high risk that is involved with currency trading must be known to you. Please ask for advice from an independent financial advisor before entering this market.

Any comments made on Forex Crunch or on other sites that have received permission to republish the content originating on Forex Crunch reflect the opinions of the individual authors and do not necessarily represent the opinions of any of Forex Crunch’s authorized authors. Forex Crunch has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: Omissions and errors may occur.
Any news, analysis, opinion, price quote or any other information contained on Forex Crunch and permitted re-published content should be taken as general market commentary. This is by no means investment advice. Forex Crunch will not accept liability for any damage, loss, including without limitation to, any profit loss, which may either arise directly or indirectly from use of such information.

ca741c14-7cdd-44b8-8602-4ca50ef95818 3

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European Wrap: Bit of a mish-mash really. Risk aversion picks up by FastBrokersFX
Tue, Nov 16 2010, 13:49 GMT

Asian Market Wrap: Slow Day Across All Markets by FastBrokersFX
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The EUR outperformed on strong ZEW reports by Marta on the Markets
Tue, Nov 16 2010, 12:50 GMT

PIIGS unlikely to reverse the dollar downtrend by Danske Bank A/S
Tue, Nov 16 2010, 12:48 GMT

Forex – EUR/USD, USD/JPY Flows- EUR/USD low and USD/JPY high not in jeopardy from N. America by FXMarketAlerts
Tue, Nov 16 2010, 12:44 GMT

audusd, eurusd, boe, industrialproduction, ppi, us, zew, eurozone, uk, germany, cpi

[ View All ] US PPI under perform
FXstreet.com | Tue, Nov 16 2010, 13:44 GMT

US Oct PPI ex Food & Energy (MoM) declines to -0.6%; (YoY) falls to 1.5%
FXstreet.com | Tue, Nov 16 2010, 13:32 GMT

US PPI (MoM) remains at 0.4%; (YoY) increases to 4.3%
FXstreet.com | Tue, Nov 16 2010, 13:30 GMT

Talk of stops gathering in EUR/USD
Forex Live | Tue, Nov 16 2010, 12:36 GMT

Forex: EUR/USD returns above 1.3600
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audusd, eurusd, boe, industrialproduction, ppi, us, zew, eurozone, uk, germany, cpi

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The Advisor Weblog » Best pair to trade now: EUR/USD
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audusd, eurusd, boe, industrialproduction, ppi, us, zew, eurozone, uk, germany, cpi

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Taking full advantage of precise trading zones – U.S. Session
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The Quarters Theory Webinar 4: Trend and Price Behavior Analysis of the Currency Majors
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audusd, eurusd, boe, industrialproduction, ppi, us, zew, eurozone, uk, germany, cpi

[ View All ] Tabs.Init(‘idNews_9af1aead-5ff7-4c55-a772-e1110d946a2c’,'idEBlogs_9af1aead-5ff7-4c55-a772-e1110d946a2c’,'idLive_9af1aead-5ff7-4c55-a772-e1110d946a2c’)

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Tue, Nov 16 2010, 08:24 GMT
by Raivis Zile

Dukascopy Swiss FX Group  |  View company’s profile

238b5420-44a2-47f4-a880-4f25e57dda64 3

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The euro fell to a seven-week low against the dollar on Tuesday in Asia as renewed concerns over the European sovereign debt crisis prompted investors to shy away from keeping holdings of the common currency.

E.U. officials are saying its fund facility is ready, but Ireland hasn’t come forward, saying it’s fully funded until the middle of 2011 and can also dip into its EUR25 billion pension reserves.

As of 0450GMT, the euro was at USD1.3616 from USD1.3587 after hitting USD1.3560, its lowest point since Sept. 30. Against the yen, it was at JPY113.15 from JPY113.00 on Monday in New York.

The higher levels were due to investors’ position adjustments after they have pushed the common unit to multi-week lows, dealers said.

The dollar stood at JPY83.08 compared with JPY83.17 on Monday in New York, and its outlook depends on U.S. Treasury yield moves. With the yield’s recent upward momentum, dealers say the greenback may rise going forward.

The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 78.487 from 78.613 overnight.

The Pound very weak November UK house Prices down -3.2% vs. +3.1% m/m previously added to the downside pressure already existing from the slumping Euro. GBPJPY is showing strength holding above JPY133 as the USDJPY begins to trek higher.

The Australian dollar nudged higher in Asia’s Tuesday session as sentiment over Europe’s debt crisis remains the key driver. At 0500 GMT, the Australian dollar traded at USD0.9864, up from USD0.9849 late Monday.

Market participants are now focused on whether Ireland, the center of the latest round of debt worries, will formally ask the European Union for emergency funding when the region’s finance ministers meet on Tuesday and Wednesday.

EUR may keep weakening even if Ireland files request for EU bailout, as move might only ease market’s worries over region’s debt issues for short period, say analysts. If Ireland is helped, investors will just look for the next (country in trouble). Next likely target includes Greece, as its prime minister recently said possibility of taking some extra time to repay its bailout loans already on the table, they say.

European stocks are expected to open lower Tuesday as European sovereign debt worries continue to weigh on the markets, while a late fall on Wall Street and a mixed session in Asia also paved the way for a negative session.

BoJ MPC interest rate decision Euro Finance Week- Speakers include Luxembourg Prime Minister Juncker, France EconMin Lagarde, Greece FinMin Papaconstantinou, Germany FinMin Schaeuble, IMF MD Strauss-Kahn, ECB President Trichet (15th-19th Nov) Riksbank Deputy Governor Ekholm lectures Economics students at Stockholm University Riksbank Deputy Governor Nyberg participates in a conference by De Nederlandsche Bank (DNB) RBA release minutes from prior MPC meeting EU President Van Rompuy speaks at a think tank in Brussels ECB Vice President Constancio speaks on “Economic and Financial Stability in Europe” at the Euro Finance Week National Debt Office releases the 3rd borrowing report Treasury International Capital System (TICS) Riksbank Deputy Governor Wickman-Parak will speak on the economic situation at the IR Nordic markets Awards 2010 ECB Executive Board member Stark gives speech on “Economic and Financial Stability: The Road Ahead” at the Euro Finance Week ECB Executive Board Member Stark speaks on “Economic and Financial Stability- The Road Ahead” at the Euro Finance Week BoE Governor King and MPC members Tucker and Dale attend the Economic Affairs Committee hearing at the House of Lords Treasury Under Secretary for International Affairs Brainard speaks on “Assessing the Economic Implications of the Seoul G20 Summit” Published on  Tue, Nov 16 2010, 08:32 GMT

This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained. 238b5420-44a2-47f4-a880-4f25e57dda64 3

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Global bond carnage continued unabated
There was no particular strong new story behind yesterday’s pronounced negative price action. If a correction starts after a long up-move (US Treasuries) the reposition might be violent. Today, attention goes to an unusually tense meeting of the Euro group. Will Ireland apply for a EFSF rescue?Euro weakness or dollar strength?
On Monday, currency markets were driven by several different issues. Uncertainty on Ireland and other peripheral countries continued to weigh on the single currency. However, if Ireland and Portugal would accept EU support, the picture for the ECB and the euro could change in a profound way. USD/JPY continues to enjoy support from rising US bond yieldsYesterday, US Equities erased their gains to end the session broadly unchanged. This morning, most Asian shares trade in negative territory led by Chinese stocks after growing fears that governments would take further tightening measures to curb inflation.The ECB has stepped up its calls for swift action by Ireland to restore confidence in its banking system and public finances, making clear the limits to the help the ECB is prepared to give crisis-hit euro zone peripheral countries. Last week the ECB increased it government bond purchases only slightly.Greece has promised to stick to its deficit reduction plan after Eurostat said yesterday that Greece’s 2010 budget deficit and public debt would be significantly higher than forecasted following upward revisions of data for previous years.South Korea’s central bank raised interest rates for the second time since the global crisis ended and signaled further tightening as it shifted its focus away from heavy fund inflows to rising inflation. The won ended marginally up.Negotiations between European Union lawmakers and governments over the EU’s 2011 budget hit a deadlock yesterday, threatening to throw EU financial planning into chaos.Moody’s warned yesterday that making the current US tax breaks permanent could eventually hurt the country’s ratings, but let them expire by the end of the year may not be the best idea either.Today, the eco calendar contains the UK and euro zone CPI inflation data, the German ZEW, US PPI data and industrial production. Euro Area Finance Ministers meet in Brussels.

On Monday, the same themes that guided currency trading at the end of last week were still at work at the start of this new trading week. There was a lot of market chatter on the options for Ireland to solve the crisis on its bond market. On Friday, there was some relief for Irish bonds and for the single currency as investors took some comfort from declarations from EU policy makers that Ireland could use the support mechanisms that were in place. However, yesterday morning, uncertainty prevailed again. There were still several issues on the table. Will Ireland finally ask for assistance? Is assistance only for the Irish banking sector an option or not (we doubt this will work and/or get approval from other member states)? What will be the consequences from assistance for Ireland for Portugal. In this context, any upticks in EUR/USD were still seen an opportunity to off-load EUR/USD long exposure. EUR/USD slipped south in the 1.36 big figure during the morning session in Europe. In addition, on the USD side of the equation, there where some developments that could be seen as USD supportive. US bond yields continued to move higher. This might be an indication that QE-2 has finally been discounted in the (US bond) market. In addition, there was still quite some market talk of pressure on Bernanke not to implement (or to implement only partially) its $600 billion QE-2 asset purchases. We don’t think that the Fed will change tactics anytime soon. Nevertheless, this debate on the execution of QE-2 might affect market sentiment. This applies in first place to the bond market, but it might have some impact on the currency market, too. The US data (retail sales and Empire manufacturing) didn’t bring much new info to the market. US bond yields obviously don’t have the same impact on EUR/USD as they do for USD/JPY. Nevertheless, the steep rise in US bond yields at the end of the session also caused some additional gains of the dollar against the single currency.

EUR/USD closed the session at 1.3587, compared to 1.3691 on Friday evening. Overnight, Fed’s Yellen said in an interview with the WSJ that the Fed is not trying to push down the value of the dollar or to boost inflation above 2%. This statement is no big news, but it confirms that the Fed for several reasons (both domestic and external) is trying to signal that it won’t play the QE-2 game in an extremely hard way

Today, the calendar is well filled both in Europe and in the US. In Europe, the October CPI and core CPI are on the agenda. This is interesting but not really on the radar screen of the markets. In Germany, the ZEW economic sentiment indicator for November will be published. We give more weight to PMI’s and the IFO the make an assessment business sentiment. Nevertheless, the outcome of the release remains interesting even as the impact on EUR/USD should at be of intraday importance, at best, as focus of markets is currently on other issues.

The same is true for the US eco data (PPI, TIC data , industrial production and NAHB housing market index). The reaction of the dollar on these data, if any, will most probably go via the reaction on the Treasury market. So, even as the data are plenty, the real drivers for markets are elsewhere. A first key question is whether Ireland will finally accept some kind of rescue package. In this respect investors will keep a close eye on the meeting of the EU Finance Ministers. On this issue, we think that this is only a matter of how the package will be formalized, rather than whether Ireland will ‘accept’ support. If the Irish problem would be ‘solved’, the focus will turn to Portugal. It is not sure that Portugal will join an Irish step to accept support. If this isn’t the case, the uncertainty on peripheral Europe will persist and this will probably continue to weight on the single currency. However, if both countries would apply for European support, the situation could change quite materially, especially for the ECB. Part of the support might be used to support the banking sector. If the problems in the banking sector of the peripheral European countries would be ‘solved’, their banks could become less depended on the ECB for their funding. If both countries would join the support mechanism, the funding problems of the banks in these countries won’t be solved overnight. Nevertheless, if the balance sheets of these banks would be strengthened in one way or another, it might remove an important hurdle for the ECB on its way to a normalization of its liquidity providing. It is still a long call, but in theory, such a development should be euro supportive in a longer term perspective. Of course, there are still several steps to take. In addition, the US side of equation still plays an important role, too with the focus on pace of the rise in US bond yields. In this respect, long term US bond yields have broken beyond important resistance levels.

Over the previous weeks, we turned more cautious on the steep uptrend in EUR/USD. The first reaction to the Fed decision still revived some kind of reflation/ risk trade. This pushed the trade-weighted dollar to a new correction low (75.63). EUR/USD filled offers in the 1.4280 area. However, from there other factors gradually came to the forefront again, especially ongoing tensions on the peripheral EU bond markets. In addition, the USD negative impact of the QE-2 story on the dollar is finally losing power. Markets were ripe for a more pronounced correction in EUR/USD; with flaring up the tension in peripheral Europe a good reason to scale back EUR/USD long positions. In a day-to-day perspective, we maintain our EUR/USD negative bias as long as there is no clarity on the situation in Ireland and Portugal. However, once this issue would be out of the way. We have to re-evaluate our position tactics.

From a technical point of view, the picture became EUR/USD positive as the pair easily cleared the 1.3334 mark after the September Fed meeting. The pair tried to break higher out of the 1.3698/1.4160 consolidation range after the FOMC meeting, but the gains could not be sustained and EUR/USD returned within the sideways consolidation path. Last week, we changed our ST bias in EUR/USD from neutral (consolidation) to negative and adopted a sell on upticks approach in EUR/USD for return action lower in the established consolidation pattern. Last week’s drop below the 1.3697 reaction low/range bottom was an additional warning signal. In this context, we keep a euro negative bias. The targets of that multiple top formation are seen in the 1.3520/1.3470 area, at 1.3389 and the final target comes in at 1.3267.

EUR/USD: drifting south.

Support comes in at 1.3562/61 (Reaction low/Boll bottom), at 1.3532/20 (irr C + weekly MTMA/1st target hourly multiple top), at 1.3495/70 (Break-up/1st target daily multiple top) and at 1.3435 (50% retracement since August).

Resistance stands at 1.3657/77 (Daily envelope/ STMA), at 1.3751 (ST high), at 1.3777 (Reaction high) and at 1.3869 (MTMA).

The pair is in oversold territory

On Monday, the dollar stayed well bid across the board and this move was also visible in the USD/JPY cross rate. So, at this stage, global uncertainty (mostly fuelled by the problems in peripheral Europe) doesn’t cause a new safe haven run on the Japanese currency, at least not for now (even EUR/JPY basically keeps a sideways trading pattern). Japan recorded strong Q3 GDP growth (0.9% Q/Q) yesterday morning, but even this (much better than expected) release was no help for the yen. The focus of markets was elsewhere, with the rise in US bond yields seen as the most important driver for this remarkable rebound in USD/JPY. This might of course be part of the explanation. Nevertheless, the rise in US bond yields might also be seen as an indication of waning interest for US bonds at the current low yield levels, taking into account the ‘risks’ for bondholders from more QE over time. Whatever the reason, one can not but conclude that the mix of recent developments (QE-2 priced in in the markets, rising US bond yields and uncertainty on peripheral Europe) has created an environment to scale back USD shorts that had been build up over the previous weeks, even months. Recently, USD/JPY often reacted different than was the case for most other USD cross rates, but for now this is not the case. Last week’s break above the 81.99 resistance area was a first indication that the downward pressure in this cross rate was easing. Yesterday, at first it looked as if last week’s move would continue unabatedly. However, the pair changed (temporary) course after the publication of eco data (Retail sales/Empire State survey). So, the pair came off from the intraday highs north of the 83.00 mark, even as European and US equities didn’t do that bad at that time. However, a late session rise in US bond yields triggered a new upleg in USD/JPY. The pair closed the session at 83.07, compared to 82.53 on Friday evening.

Since the Mid-September interventions, the tactical game between the Japanese authorities and the market continued However, the BOJ is in no comfortable position. Its G20 partners are growing very sensitive to the value of currencies. Any (perceived) manipulation of the currency is a source of friction. However, recently, the global decline of the dollar shifted into lower gear. Until last week, any uptick was still seen an opportunity to offload USD long exposure. The 82.00 resistance area was a hard nut to crack, but finally, the break succeeded, with the rise in US bond yields the main driver behind the move. This improved the ST picture in this pair. We don’t expect a major change in the USD/JPY downtrend yet. Nevertheless, a window of opportunity for some further USD/JPY gains has opened. Apparently, also in this cross rate there is also some room for repositioning in a market that was unidirectionally positioned USD short/yen long. We still look to sell into strength, but wait for a technical signal that this correction has run its course

USD/JPY: supported by the rise in US bond yields

Support is seen, at 8275 (daily envelope), at 82.42/40 (STMA/Reaction low), at 81.82 (Broken LTMA) and at 81.44 (Break-up daily/MTMA).

Resistance comes at 813.07 (Boll top), at 83.28 (Reaction high/weekly envelope), at 83.57 (1st target double bottom), at 83.77 (2nd target double bottom). .

The pair is in overbought territory

On Monday, the swings in the EUR/GBP cross rate were far less pronounced compared to the moves seen at the end of last week. In Asia and early in Europe, EUR/GBP basically drifted sideways in a tight range just below the 0.8500 mark. There was still some downward spill-over effect from the price action in EUR/USD later in the session. However, the 0.8450 area (last week correction low) was not really challenged. It is too early to draw any firm conclusions. However, at least for now the pattern of subsequent lower daily lows has been interrupted. EUR/GBP closed the session at 0.8564, compared to 0.8498 on Friday evening.

Today, the UK calendar contains the CPI. The headline figure is expected to stay at 3.1% Y/Y, so above the BoE target range. However, the focus of markets will be on the BoE testimony of Governor King (and some other MPC members before the House economic affairs Committee). In this respect, it will be interesting to see how King will play the balance between inflation risks and the need to support the economy. After the publication of the inflation report, we had the impression that the Bank gave slightly more weight to inflation. We look out whether this will be confirmed today. Besides the UK policy debate, the global issues on the euro will also continue to play their role for EUR/GBP trading. However, after yesterday’s price action, we have the impression that EUR/GBP is becoming a bit less sensitive to this issue.

Global context. Since late August, EUR/GBP staged a decent rebound, driven by a global rebound of the euro and investors’ disappointment on some poor UK eco data. Investors started to think that the BoE at some point would join the Fed and enlarge the program of asset purchases. This pulled the trigger for EUR/GBP to clear the key 0.8532 level (July 19 high). In this context, we kept a long-term negative view for sterling against the euro.

Recently, more or less in line with EUR/USD, we advocated that in a short-term perspective, there was room for some consolidation/correction on the recent steep EUR/GBP up-move. Until end-October, the market focused on the chances for more QE in the UK as the harsh budgetary measures were seen as a potential drag on UK growth. This kept sterling under pressure. However, the recent stronger eco data (especially the first estimate of the Q3 GDP) torpedoed the hope for additional BoE policy accommodation short-term. Longer-term, we don’t herald a major comeback of sterling. The debate on more QE is delayed, but probably not closed. The impact of the budgetary measures on growth still has to materialize. In addition, even if the QE debate in the UK fades, the BoE should lag the ECB in reducing policy stimulation.

However, in a short-term perspective one could ignore the correction in the wake of the strong Q3 GDP release. EUR/GBP dropping below the 0.8700 barrier was a first warning signal. At the end of last week, the global euro sell-off triggered also a new wave of EUR/GBP selling. The pair dropped below the key 0.8532/77 area. Already for some time, we indicated that we are looking to (re)install EUR/GBP longs in case of a more pronounced correction (e.g. toward the 0.8532/77 area (Neckline/ previous high)). These targets have been met. We still look to buy EUR/GBP, but wait to see some consolidation on the global euro decline to step in again. If Friday’s low would hold over the next days, this could be a first indication that a case is building in this cross rate.

EUR/GBP holding close to the recent lows.

Support comes in at 0.8452/50 (reaction lows), at 0.8416/13 (Boll Bottom/Break-up daily), at 0.8400 (62 % retracement + daily envelope) and at 0.8348 (Starc bottom).

Resistance is seen at 0.8489/93 (Daily envelope/MTMA), at 8512 (Reaction high), at 0.8561 (Reaction high hourly), at 0.8580 (Daily flag top) and at 0.8613 (MTMA).

The pair is in oversold territory.

In October, US retail sales rose by 1.2% M/M, the sharpest increase since March, while the consensus was looking for a more moderate rise. The details show that the significant increase was for a large part due to a 5.0% M/M rise in motor vehicle sales, while retail sales excluding autos rose by 0.4% M/M. Beside vehicle sales, also sales of building materials (1.9% M/M), sporting goods (1.0% M/M), gasoline stations (0.8% M/M) and clothing (0.7% M/M) rose significantly, while sales of furniture (-0.7% M/M) and electronics (-0.7% M/M) dropped significantly. This outcome offers hopes that the US recovery is gaining strength on the back of increase consumer spending and offers hopes that we’re heading for a strong Christmas shopping season.

After a significant increase in October, the US Empire State Manufacturing index collapsed in November. The headline index fell astoundingly (from 15.73 to -11.14), while only a marginal decline was expected and the breakdown is not a tiny bit better. New orders (-24.38 from 12.90), shipments (-6.13 from 19.39), unfilled orders (- 24.68 from -1.67) and average workweek (-12.99 from 3.33) all dropped sharply into negative territory, while number of employees fell significantly (from 21.67 to 9.09), but remained in positive territory. Inventories on the contrary, rose from -11.67 to 0, while delivery time fell slightly (from -6.67 to -9.09). Price pressures eased as prices paid dropped from 30.00 to 22.08, while prices received fell from 8.33 to -2.60. The forward-looking index, on the contrary, continued to move up, rising from 40.00 to 54.55. Although the NY Empire State manufacturing index is usually volatile, this outcome indicates that uncertainty remains high. Nevertheless, we look out for more regional business confidence surveys to see whether they confirm this development, which if confirmed would be sobering and relevant for markets.

In September, the euro zone seasonally adjusted trade balance showed the first surplus in five months. The trade surplus rose to €2.4 billion from a deficit of €1.7 billion in August, significantly above expectations. The breakdown shows that (seasonally adjusted) exports rose by 0.6% M/M, despite the rising euro, while imports dropped by 2.5% M/M. The outcome indicates that demand for euro zone goods remains on track, while domestic demand might be weakening probably due to severe austerity measures

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Mon, Nov 15 2010, 12:50 GMT
by ecPulse.com analysis team

The greenback resumed its advance against majors for the second week on rise in treasury yields and ahead of the release of retail sales and consumer prices data.

The dollar rebounded from 15-year low versus the yen to five–week high as treasury 10-year yields climbed basis points and five-year yields augmented more than 10 basis points.

On the other hand, the latest data is showing that the economy is improving, where retail sales are expected to advance 0.7% in October from 0.6% in September, while consumer prices will rise 0.3% in October from 0.1% incline in September.

The dollar index, which tracks the dollar movements versus six major currencies, rebounded to the highest level since October 5 to reach a high of 78.55 compared with the day’s opening at 78.04.

Trading this week may witness some volatile as the G20 meeting did not come with any decisive results as the key steps will be undertaken next year in France.

Concerning the euro-dollar pair, it continued its drop on the daily basis as the breach of support at 1.3890 forced the pair to decline further where it reached a low of 1.3601, while the highest point touched was at 1.3749.

Speculations that Ireland may receive a rescue package from the EU and IMF, especially with the ongoing pressure from Germany ahead of the finance ministers meeting tomorrow is putting downside pressure on the euro that started being oversold as depicted by the Stochastic Oscillator momentum indicator.

The pair is currently trading at 1.3615, whereas the trading range for today is among the key support at 1.3500 and the key resistance at 1.3760.

Moving to the royal pair, it slipped after the news revealing that U.K. Rightmove house prices index dropped 3.2% in November from the 3.1% advance in October.

The data raised concerns ahead of the release of a wave of important data including inflation, unemployment and budget deficit figures as well as the BoE’s minutes.

So far, the pair is trading at 1.6050 after recording a high of 1.6152 and a low of 1.6039, while the trading range for today is among the key support at 1.5960 and the key resistance at 1.6205.

With regard to the dollar-yen pair, it managed to continue its upside move that stared since the beginning of November where the upbeat Japanese growth figures could not uplift the yen.

Today’s data showed that the Japanese economy grew 0.9% in the third quarter from the previous 0.4% expansion in the second quarter, beating median estimates of 0.6% rise.

Currently, the pair is trading at 82.97, reaching a high of 83.02 and a low of 82.37, while the trading range for today is among the key support at 82.15 and the key resistance at 84.00.

Published on  Mon, Nov 15 2010, 12:50 GMT

The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers’ opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

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Weekly

Last Candlesticks pattern: Evening star Time of formation: June 2010 Trend bias: Sideways

Daily           

Last Candlesticks pattern: Hammer Time of formation: 14 Oct 2010 Trend bias: Down

USD/CHF – 0.9848

Dollar’s rebound from 0.9548 turned out to be stronger than expected and the daily close above the Ichimoku cloud bottom suggests upside risk remains for another corrective rise towards previous resistance at 0.9972 and possibly to the psychological resistance at 1.0000, however, reckon the Ichimoku cloud top (now at 1.0092) would limit upside and bring retreat later.

On the downside, expect pullback to be limited to yesterday’s low of 0.9763 and the Tenkan-Sen (now at 0.9710) and Kijun-Sen (now at 0.9718) would hold, bring such a rebound. Only a daily close below the Tenkan-Sen would suggest the rebound from 0.9548 has possibly ended and bring weakness to 0.9672 but break there is needed to confirm, then further weakness to 0.9600 would follow but reckon support at 0.9548 would continue to hold.

Recommendation: Exit short entered at 0.9800

On the weekly chart, although the greenback broke above the Tenkan-Sen again this week, a weekly close above this line is needed to signal a temporary low has been formed at 0.9463 earlier and bring another test of previous resistance at 0.9972, a sustained breach of this level would bring retracement of recent decline to psychological resistance at 1.0000, then 1.0130 but reckon upside would be limited to 1.0329 (38.2% Fibonacci retracement of 1.1730 to 0.9463).

On the downside, a drop below yesterday’s low at 0.9763 would prolong consolidation within 0.9463-0.9972 and then weakness to 0.9585/90 would follow. Looking ahead, only breach of 0.9548 support would suggest downtrend has resumed and bring retest of the multi-decay low of 0.9463 but break there is needed to extend weakness to 0.9389 (50% projection of 1.0630 to 0.9463 measuring from 0.9972) but reckon 0.9250/55 (61.8% projection) would hold from here.

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Daily Forex Technicals | Written by Saxo Bank | Nov 16 10 09:19 GMT

Tuesday’s calendar is loaded with event risk with the ZEW Surveys the ones to watch in the European morning session while US Industrial Production is key in the afternoon. However, price indices from UK, EZ, and US are also potential market movers.

The ZEW Surveys have turned quite ugly of late with the German Expectations Index falling from a peak of 57.7 in September 2009 to -7.2 in October 2010. The Eurozone equivalent has also weakened considerably, down to 1.8 from 59.6. But most worrying is the sheer deterioration seen in the last six months. Back then the German and Eurozone Expectations indices were at 45.8 and 37.6, respectively

However, unlike the ZEW, which surveys participants in the financial markets about the direction of interest rates, equities and inflation, the IFO queries actual businesses about their expectations for the coming six months and this survey has been much more positive in recent months. The Expectations Index of the IFO Survey for Germany rose back up to 105.1 in October, more or less tying with August and July as the highest reading in the current expansion. Are the financial experts overly pessimistic or are German (and Eurozone) businessmen set for a surprise downturn? Certainly, the divergence between the two series looks untenable

Industrial Production and Capacity Utilization are drivers in the US morning session as production looks likely to make a small comeback in October following September’s -0.2% month-on-month. We look for production to increase 0.2% in October erasing September’s decline while consensus is a tad more optimistic with a 0.3% projection. Utilization of machinery has practically stalled in the last three months around 74.7% and we look for practically unchanged utilization in October as well, rising slightly to 74.8%. Unless our expectation of a slowdown in inventory accumulation is to materialise in the fourth quarter, production needs to pick up in response consumer demand. So in that regard, yesterday’s strong Retail Sales report was quite positive.

Empire Manufacturing was largely ignored yesterday as Retail Sales put in a strong display, rising 1.2% against expectations of 0.8% and 0.9% for consensus and Saxo, respectively. However, that should not distract from was an absolute miserable report. Not only did the headline General Business Conditions Index decline all the way to -11.14 from 15.73 against market expectations for a roughly unchanged print of 14, but the internals of the report were not pleasant reading either. The discrepancy between Prices Paid (22.08 from 30) and Prices Received (-2.6 from 8.33) rose providing another indication that company margins may be hard to increase in the next earnings season. However, that was not the worst part of report. That award is split between New Orders and Shipments as both managed impressive declines. The former declined to -24.38 from 12.9 while the latter declined to -6.13 from 19.39. While it is true the Empire Manufacturing is a quite volatile series this was a particularly horrendous report, which is hopefully quickly reversed.

Saxobank

Analysis Disclosure & Disclaimer

Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.

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Trading system comes in various forms. It may come in the form of stocks, currencies, futures and options. These are most likely the most easy to get markets for daily traders. Foreign Exchange trading is the most common systems in use right now.
Foreign exchange trading system is a market where currencies are sold and bought against each other. This is usually referred to as forex market, foreign exchange market, currency market or the fx market. Foreign exchange also makes international transactions such as imports and exports and the movement of capital between countries possible.
Foreign exchange market is the largest system for trading worldwide. It has every day trading volumes exceeding $1.5 trillion. Most business involving venture and international trade must undergo this market since these transactions absorb the trade of currencies.
The fact that large numbers of sellers and buyers with the same kind of product venture in foreign exchange trading has made this kind of business almost close to perfect.
Even with a simple vacation abroad, tourists need to swap currencies to buy services and local goods. Of course, consumers cannot set the price. They just sell and buy according to existing exchange rate. For this, consumers play a significant role in this kind of system
It does not really matter who plays the biggest part. What’s important is the adequate knowledge one has when investing in this kind of business. There are news and articles stating that forex exchange trading system are not advantageous. Here is one thing though, if you’re not willing to take the risk, what advantage could you get? After all, you have the right to choose on what you want as your trading system.

Currency is the main focus of the FOREX TRADING INDUSTRY. In order to carry out foreign trade and business, currencies are needed to be exchanged. And via economic announcements, foreign exchange traders gain ideas on the true value of currency. The media and other online sites are also responsible in the dissemination of this information.
The main purpose of this foreign exchange market is to help worldwide trade and investment. This allows trades to switch from one currency to another. Money has a large responsibility on these trades. The market always involves in pairing of currency. There are four “currency pairs” that lead the profit on such trades. These four are the U.S. Dollar vs. the Euro, US Dollar vs. the Japanese Yen, US Dollar vs. British Pound and the Swiss Franc vs. US Dollar. This domination is responsible on what is happening on the foreign exchange market daily. This plays a very big part on the business industry.
Some stock holders only put their money as pure investment, for currency exchange is a big market in the world. It is a business where they can easily have a big investment and profit as well. But this business has no real home.
The forex currency trading is one of the biggest markets that operate for 24 hours. But, currency trading is not for everyone. The risks associated in dealing with it make it not suitable for everyone. This only means that you should not invest money that you can not afford to loose.