Forex traders are likely to look past the European economic calendar as most of the upcoming news likely to have already been priced into the market, eyeing a dour US Non Farm Payrolls report that is set to show the economy shed 525 thousand jobs in December. Overnight, Japan’s Leading Index fell to a decade low, suggesting the recession in the world’s second-largest economy deepening
Key Overnight Developments
• Japan’s Leading Index Falls to Lowest in 10 years
• Euro, British Pound Correct Lower Against US Dollar
Critical Levels
01-09-2009 1
The Euro continued to decline in overnight trading having found resistance just below 1.38 in early New York hours. Prices found near-term support at 1.3634, the 61.8% Fibonacci retracement of the intraday rally. The British Pound consolidated in a narrowing wedge around the 1.52 mark overnight after retracing as low as 1.5121 from the New York session high at 1.5373.
Asia Session Highlights
01-09-2009 2
Preliminary estimates of Japan’s Leading Index saw the measure fall to 81.5 in November, the lowest in a decade. The index is a composite of 12 economic indicators including manufacturing orders and stock prices and is intended to foreshadow the direction of the broad economy in the following 6 - 9 months. The measure declined -3.7% from the preceding month, suggesting the recession in the world’s second-largest economy deepening. Indeed, recent data has shown record high unemployment and rapidly shrinking consumer spending. The slower pace of economic activity has brought inflation down significantly, giving the Bank of Japan room to maneuver as they attempt aggressive new measures that look beyond lowering the already near-zero benchmark interest rate.
Euro Session: What to Expect
01-09-2009 3
German Retail Sales are expected to add 0.5% in December to lift the annualized growth rate from negative territory to 0.0%. The meager improvement is foreshadowed by a better-than-expected Retail PMI survey: the reading rose to 42.3 in December from 41.3 in the preceding month as stores saw a shallow uptick in activity around the holiday season. Importantly, the boost to sales failed to bring retail sector sentiment out of contractionary territory (a reading below 50 means pessimists outnumber optimists surveyed for the PMI) because it was achieved through sharp price discounts, eating away at firms’ operating margins. On balance, this likely means more job cuts as retailers cut capacity after spending falls back to pre-holiday levels. Earlier this week, unemployment grew more than expected and is likely to continue to expand as both domestic and overseas demand is dwarfed by the spreading global slowdown. This will weigh on disposable incomes and spur precautionary saving, suggesting traders are unlikely to see much follow-through to December’s improvement. The broader Euro Zone Retail Sales are expected to print down -1.7% in the year to December, the fifth consecutive month of decline. Deepening recession saw initial estimates of December’s CPI print lower than expected earlier this week, suggesting the European Central Bank is likely to continue to slash borrowing costs. Traders are currently pricing in a 25-50 basis point interest rate cut when the ECB announces policy next week.
In the UK, Producer Prices are set to shrink -0.6% in December to bring annualized wholesale inflation to 4.0%, the lowest in 14 months. The result hints at continued decline in consumer price growth (the benchmark inflation gauge) as firms pass on falling production costs by discounting finished items. Yesterday, the Bank of England cut interest rates by 50 basis points to 1.50%, the lowest since the bank’s creation in 1694. Although Mervyn King and company shied away from promising further easing, trading in overnight index swaps points to another 0.25% cut in February and bond yield forecast see rates falling as low 0.50% by the second quarter.
On balance, traders are likely to look past the European data docket, with most of the upcoming news likely to have already been priced into the market. The US Non Farm Payrolls release will dominate attention late into the session, with expectations saying the economy shed 525 thousand jobs in December. Traders have treated the health of the US economy as proxy for that of the globe at large, betting that a recovery for the world’s largest consumer market will offer positive spillover elsewhere.
To contact Ilya regarding this or other articles he has authored, please email him at ispivak at dailyfx dot com.
Sunday, January 11, 2009
Euro Finds Support On Improved Retail Sales, Markets Focus On NFP Report
A better than expected Euro-Zone retail sales report woke up currency markets which had been consolidating ahead of the U.S. Non-Farm payroll report. The Euro jumped 50 bps when the consumption report showed a 0.6% gain in November versus expectations of flat sales.
Talking Points
• Japanese Yen: Finds Support At 90.60
• Pound: Manufacturing Falls For Ninth Month
• Euro: Retail Sales Improved n November
• US Dollar: NFP On Tap
Euro Finds Support On Improved Retail Sales, Markets Focus On NFP Report
A better than expected Euro-Zone retail sales report woke up currency markets which had been consolidating ahead of the U.S. Non-Farm payroll report. The Euro jumped 50 bps when the consumption report showed a 0.6% gain in November versus expectations of flat sales. A 0.5% gain in food sales led the improvement from the month’s prior 1.0% decline. Germany led the way with a 0.7% increase, with developing nations Poland and Romania also seeing improvements. The Euro would reach as high as 1.3732 before finding resistance as traders are reluctant to make major bets ahead of the U.S. labor report.
The improvement in consumption may have little longer term implications for the Euro as recent evidence that the economy’s downturn has steepened will dampen expectations. Manufacturing and service activity in the region has contracted for the past seven months which is forcing companies to slash costs. Therefore, expectations are that the labor picture which saw unemployment rise to 7.8% in November will continue to deteriorate going forward. Nevertheless, any positive data may be enough for the ECB to justify refraining from further easing. Yet, with process continuing to free fall the mounting deflation concerns may leave the central bank no alternative as they adhere to their price stability mandate.
The Pound traded choppy during European trading as it fell to 1.5118 after reaching a high of 1.5269 on weak manufacturing data and falling producer prices. However, the Sterling would find support from the positive European retail sales numbers on expectations that a weak pound will lead to greater future demand. Indeed, the BoE cited the currency’s weakness as a source of stimulus as it creates greater demand for U.K. products and a reason that they weren’t more aggressive in their easing. However, November’s manufacturing data demonstrates that the benefits haven’t started to be realized as activity fell for a ninth month to its lowest levels since 1980. The 2.9% decline was led by a 6.2% drop in chemicals and an 11.0% fall in metals as the global slowdown has dampened demand for raw materials. Meanwhile, factory gate prices fell to 4.7% from 5.1%, but were far greater than the 4.0% that was predicted which may lead the BoE to pause their current easing cycle. The Pound appears to be settling into a range between 1.4500- 1.500 where it could trade for sometime as markets look for signs as to which economies will be the first to emerge from the current downturn
The estimates for the upcoming Non-Farm payroll report have continued to fall from initial prediction of -475,000 to the current if 525,000. Wednesday ADP report which was reconfigured to take into account similar factors as the NFP release showed job losses of 693,000 for December which has some market participants looking for a loss of as high as 1 million. Therefore, we could see bearish price action if the labor report significantly misses to the downside. Conversely, with such low expectations an inline or better print may spark bullish price action as it would reinforce notions that the U.S. is best positioned to emerge from the current economic downturn. Another number to watch will be the unemployment rate, which is expected to shoot to 7.0% from 6.7%. An inline or worse print will increase fears that the jobless rate will climb to as high as 9.0% which will dim the outlook for domestic growth and a potential turn around in 2009.
Talking Points
• Japanese Yen: Finds Support At 90.60
• Pound: Manufacturing Falls For Ninth Month
• Euro: Retail Sales Improved n November
• US Dollar: NFP On Tap
Euro Finds Support On Improved Retail Sales, Markets Focus On NFP Report
A better than expected Euro-Zone retail sales report woke up currency markets which had been consolidating ahead of the U.S. Non-Farm payroll report. The Euro jumped 50 bps when the consumption report showed a 0.6% gain in November versus expectations of flat sales. A 0.5% gain in food sales led the improvement from the month’s prior 1.0% decline. Germany led the way with a 0.7% increase, with developing nations Poland and Romania also seeing improvements. The Euro would reach as high as 1.3732 before finding resistance as traders are reluctant to make major bets ahead of the U.S. labor report.
The improvement in consumption may have little longer term implications for the Euro as recent evidence that the economy’s downturn has steepened will dampen expectations. Manufacturing and service activity in the region has contracted for the past seven months which is forcing companies to slash costs. Therefore, expectations are that the labor picture which saw unemployment rise to 7.8% in November will continue to deteriorate going forward. Nevertheless, any positive data may be enough for the ECB to justify refraining from further easing. Yet, with process continuing to free fall the mounting deflation concerns may leave the central bank no alternative as they adhere to their price stability mandate.
The Pound traded choppy during European trading as it fell to 1.5118 after reaching a high of 1.5269 on weak manufacturing data and falling producer prices. However, the Sterling would find support from the positive European retail sales numbers on expectations that a weak pound will lead to greater future demand. Indeed, the BoE cited the currency’s weakness as a source of stimulus as it creates greater demand for U.K. products and a reason that they weren’t more aggressive in their easing. However, November’s manufacturing data demonstrates that the benefits haven’t started to be realized as activity fell for a ninth month to its lowest levels since 1980. The 2.9% decline was led by a 6.2% drop in chemicals and an 11.0% fall in metals as the global slowdown has dampened demand for raw materials. Meanwhile, factory gate prices fell to 4.7% from 5.1%, but were far greater than the 4.0% that was predicted which may lead the BoE to pause their current easing cycle. The Pound appears to be settling into a range between 1.4500- 1.500 where it could trade for sometime as markets look for signs as to which economies will be the first to emerge from the current downturn
The estimates for the upcoming Non-Farm payroll report have continued to fall from initial prediction of -475,000 to the current if 525,000. Wednesday ADP report which was reconfigured to take into account similar factors as the NFP release showed job losses of 693,000 for December which has some market participants looking for a loss of as high as 1 million. Therefore, we could see bearish price action if the labor report significantly misses to the downside. Conversely, with such low expectations an inline or better print may spark bullish price action as it would reinforce notions that the U.S. is best positioned to emerge from the current economic downturn. Another number to watch will be the unemployment rate, which is expected to shoot to 7.0% from 6.7%. An inline or worse print will increase fears that the jobless rate will climb to as high as 9.0% which will dim the outlook for domestic growth and a potential turn around in 2009.
Canada Sheds 34.4K Jobs In December, Unemployment Rate Hits Three-Year High
• Plan to Cut Foreclosure Rate Clears Key Hurdle – Wall Street Journal
• Lehman Brothers Plans Private-Equity Spinoff – Wall Street Journal
• Citi exposed to $1.4bn loss over LyondellBasell – Financial Times
• Gross Wins ‘Game of Chicken’ Shunning GMAC Swap as Bonds Soar – Bloomberg
• Germany Offers GM’s Opel as Much as $2.5 Billion – Bloomberg
USDCAD – The Canadian economy shed 34.4K jobs in December after losing 70.6K jobs in the previous month, which raised the annual rate of unemployment to a three-year high of 6.6% from 6.3% in November. The downturn in the global economy paired with financial uncertainties have dragged on growth throughout the fourth quarter of 2008, and as the U.S., Canada’s biggest trading partner, faces its longest recession in over a quarter century, employment conditions are likely to get worse throughout the first half of this year. Discuss the topic and your trade ideas in the USD/CAD Forum.
EURUSD – Retail spending in the Euro-Zone increased 0.6% in November after falling 1.0% in the previous month, and raised the annual rate of consumption to -1.5% from a revised reading of -2.3% in the previous month. Moreover, private-sector spending in Germany rose 0.7% from a revised reading of -2.2% in October on the back of lower energy costs. Meanwhile, fading demands from the global economy led German businesses to cut outputs for the third consecutive month as industrial production plunged 3.1% in December. The worst slump in over a decade lowered the annual rate of production to -6.4% from -3.7%, and conditions are likely to get worse as growth prospects for Europe’s largest economy deteriorates at a rapid pace. However, falling oil prices could help consumers to deal with the slowdown in the economy, and may lead the ECB to lower borrowing costs even further as price pressures alleviate. Discuss the topic and your trade ideas in the EUR/USD Forum.
GBPUSD – Output prices in the U.K. held flat in December amid forecasts for a 0.6% decline, while the annual rate of inflation slipped to 4.7% from 5.1% in the previous month. In addition, the core measure for outputs were unchanged at 5.0% despite expectations for a drop to 4.7%. The breakdown of the report showed that energy costs fell 4.3% during the month, while a 0.8% rise in food and tobacco offset the fall in oil prices. Meanwhile, input prices tumbled another 2.0% during the month on the back of lower energy costs, which was followed by a 3.0% drop in November. Nevertheless, industrial production fell 2.3% in November, followed by a 1.7% contraction in the previous month, which lower the annual reading to -6.9% from -5.2% in October - the weakest reading since March 1981.The data continues to reflect a dour outlook for the Europe’s second largest economy, and reinforces the Bank of England’s concern for deflation as price pressures continue to fall at a rapid pace. Discuss the topic and your trade ideas in the GBP/USD Forum.
• Lehman Brothers Plans Private-Equity Spinoff – Wall Street Journal
• Citi exposed to $1.4bn loss over LyondellBasell – Financial Times
• Gross Wins ‘Game of Chicken’ Shunning GMAC Swap as Bonds Soar – Bloomberg
• Germany Offers GM’s Opel as Much as $2.5 Billion – Bloomberg
USDCAD – The Canadian economy shed 34.4K jobs in December after losing 70.6K jobs in the previous month, which raised the annual rate of unemployment to a three-year high of 6.6% from 6.3% in November. The downturn in the global economy paired with financial uncertainties have dragged on growth throughout the fourth quarter of 2008, and as the U.S., Canada’s biggest trading partner, faces its longest recession in over a quarter century, employment conditions are likely to get worse throughout the first half of this year. Discuss the topic and your trade ideas in the USD/CAD Forum.
EURUSD – Retail spending in the Euro-Zone increased 0.6% in November after falling 1.0% in the previous month, and raised the annual rate of consumption to -1.5% from a revised reading of -2.3% in the previous month. Moreover, private-sector spending in Germany rose 0.7% from a revised reading of -2.2% in October on the back of lower energy costs. Meanwhile, fading demands from the global economy led German businesses to cut outputs for the third consecutive month as industrial production plunged 3.1% in December. The worst slump in over a decade lowered the annual rate of production to -6.4% from -3.7%, and conditions are likely to get worse as growth prospects for Europe’s largest economy deteriorates at a rapid pace. However, falling oil prices could help consumers to deal with the slowdown in the economy, and may lead the ECB to lower borrowing costs even further as price pressures alleviate. Discuss the topic and your trade ideas in the EUR/USD Forum.
GBPUSD – Output prices in the U.K. held flat in December amid forecasts for a 0.6% decline, while the annual rate of inflation slipped to 4.7% from 5.1% in the previous month. In addition, the core measure for outputs were unchanged at 5.0% despite expectations for a drop to 4.7%. The breakdown of the report showed that energy costs fell 4.3% during the month, while a 0.8% rise in food and tobacco offset the fall in oil prices. Meanwhile, input prices tumbled another 2.0% during the month on the back of lower energy costs, which was followed by a 3.0% drop in November. Nevertheless, industrial production fell 2.3% in November, followed by a 1.7% contraction in the previous month, which lower the annual reading to -6.9% from -5.2% in October - the weakest reading since March 1981.The data continues to reflect a dour outlook for the Europe’s second largest economy, and reinforces the Bank of England’s concern for deflation as price pressures continue to fall at a rapid pace. Discuss the topic and your trade ideas in the GBP/USD Forum.
Euro Vulnerable to a Decline Below 1.33
The AUDUSD has reached initial resistance from the confluence of the October 14th high / 38.2% of .9856-.6005 at .7247/56. The structure of the decline on very short term intraday charts (15 min) is promising from a bear’s perspective (decline looks impulsive). Even if wave (2) is not complete, it is likely that the rally from .6005 would experience a sizeable retracement because it is in 3 waves (a flat with structure 3-3-5 could unfold). Coming under .6956 would warrant a bearish bias.
US Dollar Strength May Hinge Upon Risk Trends Once Again
The US dollar ended the week mixed across the majors, as the currency tumbled against the British pound, which was strong across the board, but also slipped versus some of the commodity dollars on a brief pick up in risk appetite. However, the US dollar’s biggest rally of the week was on Friday, after data showed that US non-farm payrolls fell by a whopping 524,000 in December and brought the cumulative total of job losses in 2008 to 2.589 million, the most since 1945. Meanwhile, the unemployment rate rose more than expected to a 16-year high of 7.2 percent from 6.8 percent. So why did the US dollar rally in response? There are a few reasons. First, most of the major currency pairs remain within massive ranges, but major support levels for the US dollar helped to stabilize its decline. From a fundamental perspective, it is necessary to consider the fact that interest rates in the US can't really go any lower since the Federal Reserve has already cut the fed funds target to a record low range of 0.0 percent - 0.25 percent, and it is that interest rate dynamic (or lack of it), that is allowing the greenback to brush off this abysmal data. Furthermore, a sharp drop in the Dow Jones Industrial Average and surge in the Japanese yen on the same day suggest that risk aversion is lingering in the financial markets.
When looking ahead to the next week of trading, it will be important to keep the status of risk trends in mind, especially given the event risk on hand. On Tuesday morning, Federal Reserve Chairman Ben Bernanke is scheduled to speak in London on the financial crisis and policy response, and this could prove to be one of the biggest market-movers of the week due to its potential impact on risk sentiment. If Chairman Bernanke is bearish on prospects for the financial markets and global economy, his comments could have very negative repercussions for the stock markets, and we could see flight-to-quality spark demand for Treasuries, the US dollar, and Japanese yen. On the other hand, if he announces a new type of policy action or if he manages to inspire confidence that conditions will not get significantly worse, risky assets could rally.
Other indicators to watch include advance retail sales, which are forecasted to show that US retail sales fell negative for the sixth straight month in December. This is particularly negative because the holiday shopping season is supposed to be a boon for retailers, but even the most aggressive discounting wasn’t able to offset the impact of a deteriorating labor market, tighter credit conditions, and a year-long recession. Meanwhile, the release of the December reading of the US Consumer Price Index (CPI) could lead the term “deflation” to be used abundantly in coming weeks and months. Indeed, CPI is forecasted to have plunged 0.9 percent during December while the annual rate is anticipated to have fallen negative for the first time since 1955 by 0.1 percent. Excluding volatile food and energy prices, though, core CPI may have risen a slight 0.1 percent during the month, leaving the annual rate to edge down to a more than 4-year low of 1.9 percent from 2.0 percent. Overall, the news could weigh on the US dollar if the headline CPI figure does indeed fall negative.
When looking ahead to the next week of trading, it will be important to keep the status of risk trends in mind, especially given the event risk on hand. On Tuesday morning, Federal Reserve Chairman Ben Bernanke is scheduled to speak in London on the financial crisis and policy response, and this could prove to be one of the biggest market-movers of the week due to its potential impact on risk sentiment. If Chairman Bernanke is bearish on prospects for the financial markets and global economy, his comments could have very negative repercussions for the stock markets, and we could see flight-to-quality spark demand for Treasuries, the US dollar, and Japanese yen. On the other hand, if he announces a new type of policy action or if he manages to inspire confidence that conditions will not get significantly worse, risky assets could rally.
Other indicators to watch include advance retail sales, which are forecasted to show that US retail sales fell negative for the sixth straight month in December. This is particularly negative because the holiday shopping season is supposed to be a boon for retailers, but even the most aggressive discounting wasn’t able to offset the impact of a deteriorating labor market, tighter credit conditions, and a year-long recession. Meanwhile, the release of the December reading of the US Consumer Price Index (CPI) could lead the term “deflation” to be used abundantly in coming weeks and months. Indeed, CPI is forecasted to have plunged 0.9 percent during December while the annual rate is anticipated to have fallen negative for the first time since 1955 by 0.1 percent. Excluding volatile food and energy prices, though, core CPI may have risen a slight 0.1 percent during the month, leaving the annual rate to edge down to a more than 4-year low of 1.9 percent from 2.0 percent. Overall, the news could weigh on the US dollar if the headline CPI figure does indeed fall negative.
Tuesday, December 16, 2008
Euro Rally Nears September Low, Which is Potential Resistance
Written by Jamie Saettele, Senior Currency Strategist
-1.3877 Should Provide Resistance
-USDJPY Risk for Bears Can be Moved to 92
-NZDUSD Rally Accelerates, AUDUSD Next?
12-16-08techs1
12-16-08techs2
The EURUSD broke above trendline resistance drawn off of the July and September highs. The pair is closing in on former resistance from October at 1.3789 and former support from the September 11 low is at 1.3877. I wrote yesterday that “staying above 1.3247 keeps the short term trend up but beware that a top of at least a few days likely forms in the 1.3631-1.3877 zone.” A corrective decline could be sharp, given the thin market conditions that are present at year-end. A move back to at least 1.3250-1.34 is probable once a correction begins.
-1.3877 Should Provide Resistance
-USDJPY Risk for Bears Can be Moved to 92
-NZDUSD Rally Accelerates, AUDUSD Next?
12-16-08techs1
12-16-08techs2
The EURUSD broke above trendline resistance drawn off of the July and September highs. The pair is closing in on former resistance from October at 1.3789 and former support from the September 11 low is at 1.3877. I wrote yesterday that “staying above 1.3247 keeps the short term trend up but beware that a top of at least a few days likely forms in the 1.3631-1.3877 zone.” A corrective decline could be sharp, given the thin market conditions that are present at year-end. A move back to at least 1.3250-1.34 is probable once a correction begins.
Dollar Extends Losses; Currency Pairs Close in on Targets
The US dollar plunged across the board today and various pairs have reached or are very close to reaching important levels. In particular, the euro / dollar is nearing completion of a 3 wave rally from the October low (in what will probably be the first of 2 such rallies). Resistance should be strong at 1.43.
12-16-night1
12-16-night2
After today’s surge in the EURUSD, the pair is probably nearing completion of the first of several 3 wave advances that will carry price close to 1.50 over the next several months. A brief history lesson is in order after today’s rally. Since the introduction of the euro, the EURUSD had never rallied more than 5% in one week (most was 4.84% in December 2000). This has changed as the EURUSD rallied just over 5% last week and has rallied exactly 5% to this point already this week. Price spiked through 1.41 today and through the 50% of the drop from 1.6040 in the process. The next level of potential resistance is weekly pivot R3 at 1.4313. Needless to say, this rally is extended and today's nearly 3% gain is one of the largest % gains in the EURUSD's history. Similar advances (in % terms) have resulted in at least multi-week tops within 1 to 2 days. In summary, expect resistance at 1.43.
12-16-night3
No change from this morning: It is still possible that last Friday’s spike down to 88.10 provides more significant support but it is best to stick with the strategy I have employed over the past number of months. That is, keep moving the stop down as price decreases because longer term charts argue for a drop below 80 in order to complete a long term 5 wave drop that began in the 1970s. “In viewing the rally from 88.10, I am more inclined to stay bearish. The rally is not clearly impulsive (which would mark a probable trend change), so there is little reason to flip from bearish to bullish. In fact, the rally counts best as a double zigzag correction.” Move risk to 92.
12-16-night1
12-16-night2
After today’s surge in the EURUSD, the pair is probably nearing completion of the first of several 3 wave advances that will carry price close to 1.50 over the next several months. A brief history lesson is in order after today’s rally. Since the introduction of the euro, the EURUSD had never rallied more than 5% in one week (most was 4.84% in December 2000). This has changed as the EURUSD rallied just over 5% last week and has rallied exactly 5% to this point already this week. Price spiked through 1.41 today and through the 50% of the drop from 1.6040 in the process. The next level of potential resistance is weekly pivot R3 at 1.4313. Needless to say, this rally is extended and today's nearly 3% gain is one of the largest % gains in the EURUSD's history. Similar advances (in % terms) have resulted in at least multi-week tops within 1 to 2 days. In summary, expect resistance at 1.43.
12-16-night3
No change from this morning: It is still possible that last Friday’s spike down to 88.10 provides more significant support but it is best to stick with the strategy I have employed over the past number of months. That is, keep moving the stop down as price decreases because longer term charts argue for a drop below 80 in order to complete a long term 5 wave drop that began in the 1970s. “In viewing the rally from 88.10, I am more inclined to stay bearish. The rally is not clearly impulsive (which would mark a probable trend change), so there is little reason to flip from bearish to bullish. In fact, the rally counts best as a double zigzag correction.” Move risk to 92.
Fed Cuts Rates by 75bps to a New Record Low
The U.S. Federal Reserve decided on Tuesday to lower its Fed Funds rate by 75 basis points to 0.25 percent, the lowest level for the overnight rate ever. In particular, the Fed is concerned about the deterioration in the labor market, tight credit conditions and the ongoing contraction in the housing market which is likely to weigh on economic growth over the next few quarters. More importantly, the Fed anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time, according to the Federal Open Market Committee (FOMC) statement released today.
Forex Market size and liquidity
The foreign exchange market is unique because of the following characteristics:
* the high trading volumes
* the extreme liquidity of the market
* large number of traders in the market
* large variety of traders
* geographical dispersion
* long trading hours: 24 hours a day (except on weekends)
* the many factors that affect exchange rates
* the low margins of profit
* the high trading volumes
* the extreme liquidity of the market
* large number of traders in the market
* large variety of traders
* geographical dispersion
* long trading hours: 24 hours a day (except on weekends)
* the many factors that affect exchange rates
* the low margins of profit
Friday, December 5, 2008
Korean Won Close to Decade Low Again
South Korean wonThe South Korean won continued its decline against the U.S. dollar today despite the other Asian stocks rebound caused by the U.S. government’s intentions to bail-out Citigroup.
The won almost renewed its decade low level, set on November 20th, and extended its monthly drop against the greenback today. The currency lost 38 percent this year and is currently the worst-performing one among the 16 most-traded world currencies.
There are speculations on the equity and Forex market that South Korea will soon enter the worst recession since 1998. The banks expect that almost half of the country’s biggest construction companies will have to search for the liquidity support this year.
USD/KRW rose from 1493.2 to 1513.0 as of 6:00 GMT today, reaching the daily maximum at 1515.5, which is slightly below the record high level of 1515.9 set on November 20th.
The won almost renewed its decade low level, set on November 20th, and extended its monthly drop against the greenback today. The currency lost 38 percent this year and is currently the worst-performing one among the 16 most-traded world currencies.
There are speculations on the equity and Forex market that South Korea will soon enter the worst recession since 1998. The banks expect that almost half of the country’s biggest construction companies will have to search for the liquidity support this year.
USD/KRW rose from 1493.2 to 1513.0 as of 6:00 GMT today, reaching the daily maximum at 1515.5, which is slightly below the record high level of 1515.9 set on November 20th.
Yen Gains after Two Days of Losses
Japanese yenThe Japanese yen rose today against the major currencies after losing for two days as the U.S. macroeconomic reports will show the worsening of the crisis, according to the analysts’ expectations, and the investors will cut the amount of assets funded in the Japanese currency.
The yen experienced one of the worst days yesterday as the stocks surged in U.S. on the revealing of the Barack Obama’s administration’s economic team and the bail-out plan for Citigroup. The demand for the high-yielding assets rose and the yen declined more than any other currency.
The advance report for the third quarter U. S. GDP showed a decline of 0.3 percent almost a month ago. Today, the preliminary report is released and the analysts expect that the decline will be revised to 0.5 percent. The extended contraction of the world’s largest economy will surely hurt the high-yielders and benefit the Japanese yen.
On one hand, the today’s growth of the yen may be just a correction, but on the other hand the overoptimism of the last two trading days was probably just predating a deep worsening of the situation and the further yen’s gains.
USD/JPY dropped from 97.06 to 96.46 as of 8:29 GMT today. EUR/JPY declined from 125.68 to 124.29 and GBP/JPY went down from 147.42 to 145.98.
The yen experienced one of the worst days yesterday as the stocks surged in U.S. on the revealing of the Barack Obama’s administration’s economic team and the bail-out plan for Citigroup. The demand for the high-yielding assets rose and the yen declined more than any other currency.
The advance report for the third quarter U. S. GDP showed a decline of 0.3 percent almost a month ago. Today, the preliminary report is released and the analysts expect that the decline will be revised to 0.5 percent. The extended contraction of the world’s largest economy will surely hurt the high-yielders and benefit the Japanese yen.
On one hand, the today’s growth of the yen may be just a correction, but on the other hand the overoptimism of the last two trading days was probably just predating a deep worsening of the situation and the further yen’s gains.
USD/JPY dropped from 97.06 to 96.46 as of 8:29 GMT today. EUR/JPY declined from 125.68 to 124.29 and GBP/JPY went down from 147.42 to 145.98.
British Pound Declines before GDP Report
Great Britain poundThe British pound fell today against the U.S. dollar and the yen, following the three days of growth, as the traders expect the GDP report to confirm a decline of the economy today.
The traders expected that the today’s Q3 GDP report will confirm the 0.5 percent decline seen in the advance report a month ago. The report will be released today at 9:30 GMT. Although it won’t mean a recession in U.K. yet, the continuing decline in the fourth quarter will turn the year-to-year GDP change to negative.
The elevated optimism during the first two days of this week and last Friday brought the 4.9 percent growth to the pound versus the greenback. From this point of view, the today’s slight decline is just a temporal correction.
GBP/USD fell from 1.5455 to 1.5354 as of 8:36 GMT today, while GBP/JPY declined from 147.32 to 145.74.
The traders expected that the today’s Q3 GDP report will confirm the 0.5 percent decline seen in the advance report a month ago. The report will be released today at 9:30 GMT. Although it won’t mean a recession in U.K. yet, the continuing decline in the fourth quarter will turn the year-to-year GDP change to negative.
The elevated optimism during the first two days of this week and last Friday brought the 4.9 percent growth to the pound versus the greenback. From this point of view, the today’s slight decline is just a temporal correction.
GBP/USD fell from 1.5455 to 1.5354 as of 8:36 GMT today, while GBP/JPY declined from 147.32 to 145.74.
Thai Baht Declines on Political and Civil Crisis
Thai bahtThe Thai baht continued its decline against the U.S. dollar today and touched its lowest level in the last 21 months as the political protests and the civil unrest raged through the country.
The political turmoil in the country is caused by the demands of the opposition and the military leaders for the current Prime Minister Somchai Wongsawat to resign. He still rejects these demands despite the fact that the opposition has already captured the two country’s most important airports.
Analysts don’t see anything positive for the baht for as long as the situation in the country remains at such a dangerous level. And there are no signs that it will end soon, causing the baht to depreciate further.
The Thailand’s baht falls under the double pressure — the currencies of the Asian region fall because of the recession in the developed countries and the foreign capital outflow and also because of the current political crisis, which doesn’t add optimism to the investors and the currency traders.
USD/THB rose from 35.26 to 35.32 as of 10:00 GMT today after reaching as high as 35.51 during the early trading session — a level not seen since February 2007.
The political turmoil in the country is caused by the demands of the opposition and the military leaders for the current Prime Minister Somchai Wongsawat to resign. He still rejects these demands despite the fact that the opposition has already captured the two country’s most important airports.
Analysts don’t see anything positive for the baht for as long as the situation in the country remains at such a dangerous level. And there are no signs that it will end soon, causing the baht to depreciate further.
The Thailand’s baht falls under the double pressure — the currencies of the Asian region fall because of the recession in the developed countries and the foreign capital outflow and also because of the current political crisis, which doesn’t add optimism to the investors and the currency traders.
USD/THB rose from 35.26 to 35.32 as of 10:00 GMT today after reaching as high as 35.51 during the early trading session — a level not seen since February 2007.
Dollar to Post Weekly Decline against Euro
U.S. dollarThe measures proposed by the U.S. government to support the national financial system and the optimism that followed the announcement of Obama’s economic team caused the U.S. dollar to decline against the euro this week as the money risks decreased world-wide.
The U. S. dollar is currently heading for the second negative week against the euro and the British pound and for the third one against the Japanese yen. The developed and emerging countries (including China) showed commitment to continue spending their foreign reserves (denominated mainly in dollars) to boost the economy during the crisis.
The reason behind the growth of the dollar during the recent months lies in the repatriation of the investments during the liquidity crisis. The currency analysts believe that the end of this process is near and the dollar may start to depreciate as the investors will be willing to enter the emerging markets backed by the local government’s stimulus.
EUR/USD rose from 1.2899 to 1.2929 as of 7:38 GMT today to the total of 2.5 percent weekly growth. GBP/USD went up from 1.5387 to 1.5424 or 3.1 percent on the weekly scale. USD/JPY declined slightly today — from 95.33 to 95.24, while the weekly drop is currently at 0.7 percent.
The U. S. dollar is currently heading for the second negative week against the euro and the British pound and for the third one against the Japanese yen. The developed and emerging countries (including China) showed commitment to continue spending their foreign reserves (denominated mainly in dollars) to boost the economy during the crisis.
The reason behind the growth of the dollar during the recent months lies in the repatriation of the investments during the liquidity crisis. The currency analysts believe that the end of this process is near and the dollar may start to depreciate as the investors will be willing to enter the emerging markets backed by the local government’s stimulus.
EUR/USD rose from 1.2899 to 1.2929 as of 7:38 GMT today to the total of 2.5 percent weekly growth. GBP/USD went up from 1.5387 to 1.5424 or 3.1 percent on the weekly scale. USD/JPY declined slightly today — from 95.33 to 95.24, while the weekly drop is currently at 0.7 percent.
Chinese Yuan Depreciates to July’s Levels
Chinese yuan The Chinese yuan fell to the weakest level since August today as the country’s government continued to manipulate its currency before the scheduled meeting with the U. S. Treasury Secretary.
The reference rate, set by the People’s Bank of China, allows 0.5 percent deviation in the either side during the daily yuan trading session. Today the rate was set to the lowest level since August 2008 and the daily trading led the currency below that level as the traders expected further depreciation.
China’s economic growth is declining; it reached the lowest rate since 2003 as the government tried to decrease the inflation with the strong yuan in the first half of this year. Financial crisis brought another stress factor for the Chinese export-orientated economy — developed countries decreased their demand for the China-produced goods, pressing on the production growth in the country.
According to many analysts the yuan will continue its decline, directed by the People’s Bank of China, as the currency rate manipulation is seen as one of the most effective method to stimulate growth.
U.S. Treasury Secretary Henry Paulson will try to convince the Chinese officials to tolerate more freedom for the yuan’s rate during the meeting on December 4th and 5th. U. S. President-elect Barack Obama also called for a stronger and more loose yuan control. Despite the pressure from the United States, it’s unlikely that China will refrain from using its currency as an economy’s growth locomotive.
USD/CNY reference rate was set to 6.8505 today and currency pair rose from 6.8330 to 6.8802 as of 9:06 GMT today, reaching the daily high at 6.8830.
The reference rate, set by the People’s Bank of China, allows 0.5 percent deviation in the either side during the daily yuan trading session. Today the rate was set to the lowest level since August 2008 and the daily trading led the currency below that level as the traders expected further depreciation.
China’s economic growth is declining; it reached the lowest rate since 2003 as the government tried to decrease the inflation with the strong yuan in the first half of this year. Financial crisis brought another stress factor for the Chinese export-orientated economy — developed countries decreased their demand for the China-produced goods, pressing on the production growth in the country.
According to many analysts the yuan will continue its decline, directed by the People’s Bank of China, as the currency rate manipulation is seen as one of the most effective method to stimulate growth.
U.S. Treasury Secretary Henry Paulson will try to convince the Chinese officials to tolerate more freedom for the yuan’s rate during the meeting on December 4th and 5th. U. S. President-elect Barack Obama also called for a stronger and more loose yuan control. Despite the pressure from the United States, it’s unlikely that China will refrain from using its currency as an economy’s growth locomotive.
USD/CNY reference rate was set to 6.8505 today and currency pair rose from 6.8330 to 6.8802 as of 9:06 GMT today, reaching the daily high at 6.8830.
Pound Loses for Third Day Despite Correction
Great Britain poundThe U.K. pound continued to fall against the U.S. dollar and the Japanese yen today, despite the correction seen in some other dollar- and yen-based currency pairs, as the traders expect a major rate cut by the Bank of England.
Traders bet that the Bank of England will have to cut the interest rate by 100 basis points down to 2.00 percent on December 4th to protect economy from falling down even faster amidst the recession and the global financial crisis. While positive to the economy such a rate cut will definitely eliminate one of the main advantage of the British pound — its high yield.
Currency analysts believe that the pound is still viewed as the high-risk and high-yield currency and behaves according to the respective market patterns. But if the BoE’s interest rate decreases continues at the current pace, the pound may soon join the dollar and the yen in their «club» of the currencies with the rate close zero.
GBP/USD declined from 1.4886 to 1.4829 as of 10:16 GMT today. GBP/JPY dropped only slightly today — from 138.42 to 138.03, while EUR/GBP rose from 0.8473 to 0.8527.
Traders bet that the Bank of England will have to cut the interest rate by 100 basis points down to 2.00 percent on December 4th to protect economy from falling down even faster amidst the recession and the global financial crisis. While positive to the economy such a rate cut will definitely eliminate one of the main advantage of the British pound — its high yield.
Currency analysts believe that the pound is still viewed as the high-risk and high-yield currency and behaves according to the respective market patterns. But if the BoE’s interest rate decreases continues at the current pace, the pound may soon join the dollar and the yen in their «club» of the currencies with the rate close zero.
GBP/USD declined from 1.4886 to 1.4829 as of 10:16 GMT today. GBP/JPY dropped only slightly today — from 138.42 to 138.03, while EUR/GBP rose from 0.8473 to 0.8527.
Swedish Krona Near 5-Year Low on Rate Cut
Swedish kronaThe Swedish krona advanced it’s yearly low levels against the U.S. dollar today as the country’s central bank surprised the market participants with the biggest rate cut in the last 16 years to prevent the economy from contracting.
The official repo rate was reduced from 3.75 percent to 2 percent by 175 basis points today. It exceeded the traders’ expectations that were aimed on 1 percent cut. The Riksbank announced its decision today — 3 months after it has raised the interest rate to 4.75 percent.
The krona will definitely become a victim of such unexpectedly huge rate cut. Analytics believe that the Sweden’s government will have a hard time balancing between the target inflation rate and stimulating the economy growth to keep the unemployment as low as possible. The krona will have to continue its decline both against the dollar and the euro.
USD/SEK rate went up from 8.1871 to 8.3470 as of 9:53 GMT today after falling for two consecutive days before. The local maximum was set at 8.5234 on November 21 and if the currency pair goes above that level, it will set a new record high rate since August 2003.
The official repo rate was reduced from 3.75 percent to 2 percent by 175 basis points today. It exceeded the traders’ expectations that were aimed on 1 percent cut. The Riksbank announced its decision today — 3 months after it has raised the interest rate to 4.75 percent.
The krona will definitely become a victim of such unexpectedly huge rate cut. Analytics believe that the Sweden’s government will have a hard time balancing between the target inflation rate and stimulating the economy growth to keep the unemployment as low as possible. The krona will have to continue its decline both against the dollar and the euro.
USD/SEK rate went up from 8.1871 to 8.3470 as of 9:53 GMT today after falling for two consecutive days before. The local maximum was set at 8.5234 on November 21 and if the currency pair goes above that level, it will set a new record high rate since August 2003.
Russian Ruble Near 3-Year Low vs. Dollar
Russian rubleThe Russian central bank widened the trading band for the ruble today as the Russia’s main exports — crude oil and metals continued to depreciate on the global markets.
The Bank of Russia allowed the ruble to depreciate by 30 kopecks today at the beginning of the currency trading session. It was the fourth time since November 11 when the central bank allowed the ruble to decline against benchmark currency basket, which consists of 45% euro and 55% U.S. dollar.
The Urals crude oil, which is Russia’s main export commodity, fell to $39.34 per barrel yesterday — the lowest level since 2005. The Bank of Russia continues to spend the national foreign reserves to keep the currency from depreciating too fast, meanwhile, lowering its benchmark rate stepwise.
Currency analysts don’t believe that the Russian ruble may return to appreciation while the oil prices decline. The current price levels are already critical and they will certainly continue to press on the Russian currency.
USD/RUR rose from 27.820 to 28.061 as of 10:50 GMT today after reaching 28.110 — the new yearly high since February 2006. EUR/RUR went up from 35.637 to 35.799 and reached 35.920 during the trading session — the highest rate since October 8.
The Bank of Russia allowed the ruble to depreciate by 30 kopecks today at the beginning of the currency trading session. It was the fourth time since November 11 when the central bank allowed the ruble to decline against benchmark currency basket, which consists of 45% euro and 55% U.S. dollar.
The Urals crude oil, which is Russia’s main export commodity, fell to $39.34 per barrel yesterday — the lowest level since 2005. The Bank of Russia continues to spend the national foreign reserves to keep the currency from depreciating too fast, meanwhile, lowering its benchmark rate stepwise.
Currency analysts don’t believe that the Russian ruble may return to appreciation while the oil prices decline. The current price levels are already critical and they will certainly continue to press on the Russian currency.
USD/RUR rose from 27.820 to 28.061 as of 10:50 GMT today after reaching 28.110 — the new yearly high since February 2006. EUR/RUR went up from 35.637 to 35.799 and reached 35.920 during the trading session — the highest rate since October 8.
Daily Report: Dollar at Critical Point ahead of Non-Farm Payroll
Short term outlook of the dollar is at a critical point ahead of non-farm payroll today. Dollar index's sharp retreat from 87.68 argues that rebound from 84.78 might be completed and turned intraday outlook neutral for the moment. More importantly, the lack of decisive momentum is now raising the possibility that dollar index is completing a head and shoulder top formation (ls: 87.87, h: 88.46, rs: 87.68). However, we must emphasize that it's not advisable to jump ahead before the pattern is formed. Firstly, any rise above 87.68 will dampen the chance of this head and shoulder top scenario and indicate that recent up trend is still intact. Secondly, break of the neckline support at 85.38 will be be an important alert that such head and shoulder pattern has completed. While one could enter short in such case, this should not be taken as the confirmation that a medium term top is formed yet. Sustained break of 83.11 is still needed to be the confirmation. Thirdly, any strong rebound above 83.11 will argue that dollar index could indeed be just unfolding as in triangle consolidations. In any case, head and shoulders look-alikes are always tricky to trade. The non-farm payroll report to be released today could be the trigger.
Dollar Index 4 Hours Chart - Forex Newsletters, Forex Outlook, Forex Review, Forex Signal
Elsewhere, the themes in the forex markets are pretty much unchanged. Yen remains firm against dollar and in crosses. EUR/USD's consolidation continues with the support from Euro's strength in EUR/GBP which hit record high of 0.8723. Commodity currencies are mixed with clear weakness seen in the Canadian dollar as crude oil dived to as low as 43.36. AUD/USD, on the other hand, continues to trade in tight range.
Dollar Index 4 Hours Chart - Forex Newsletters, Forex Outlook, Forex Review, Forex Signal
Elsewhere, the themes in the forex markets are pretty much unchanged. Yen remains firm against dollar and in crosses. EUR/USD's consolidation continues with the support from Euro's strength in EUR/GBP which hit record high of 0.8723. Commodity currencies are mixed with clear weakness seen in the Canadian dollar as crude oil dived to as low as 43.36. AUD/USD, on the other hand, continues to trade in tight range.
Euro Session: What to Expect
The economic calendar is noticeably uneventful in European hours, with German Factory Orders the only data set to print. Expectations call for orders to lose -0.5% from the preceding month, pointing to a -11.2% decline in the year to October. This will amount to the second-worst reading ever recorded for the metric and the lowest since at least 1993. Industrial output is an important part of the Euro Zone’s largest economy, contributing over 30% to overall growth. Looking ahead, manufacturing can be expected to remain under pressure: industrial goods dominate Germany’s top export commodities and sluggish economic performance around the world is sure to trim demand. That said, some stimulus may be had from continued currency depreciation, making German goods relatively cheaper for overseas buyers. DailyFX Chief Strategist Antonio Sousa expects the Euro to continue to lose value through 2009.
Asia Session Highlights
Australia’s AiG Performance of Construction Index dropped for the ninth consecutive month in November as a sluggish economy and scarce access to lending kept consumers away from big ticket purchases. Spreading expectations that Australia will experience recession in 2009 have seen the RBA slash interest rates by a whopping 3% since early September. That said, Reserve Bank Governor Glenn Stevens noted earlier this week that the “major easing in monetary policy…together with spending measures announced by the Government and a large fall in the Australian dollar” will support demand over the year ahead (albeit, Stevens said this as the RBA cut interest rates by another full percentage point). Still, traders continue to price 15-100 basis points in easing over the next 12 months.
Key Overnight Developments
Critical Levels
The Euro corrected lower overnight to find support at 1.2732, the 38.2% Fibonacci retracement of the 300-pip intraday rally that took the pair as high as 1.2846 in New York hours. The pullback in the British Pound was more pronounced: sterling retraced 50% (1.4642) of the intraday rally to 1.4814 and then turned range-bound between this and the 38.2% Fib level (1.4683). Technical positioning points to the likelihood of a bullish correction in EURUSD and GBPUSD in the near term before broad bearish trends regain momentum.
The Euro corrected lower overnight to find support at 1.2732, the 38.2% Fibonacci retracement of the 300-pip intraday rally that took the pair as high as 1.2846 in New York hours. The pullback in the British Pound was more pronounced: sterling retraced 50% (1.4642) of the intraday rally to 1.4814 and then turned range-bound between this and the 38.2% Fib level (1.4683). Technical positioning points to the likelihood of a bullish correction in EURUSD and GBPUSD in the near term before broad bearish trends regain momentum.
Forex Traders to Look Past European Data, Focus on Non Farm Payrolls (Euro Open)
Written by Ilya Spivak, Currency Analyst
Forex traders are likely to look past a noticeably uneventful economic calendar to focus on the upcoming US Non Farm Payrolls release late into the session. German Factory Orders data is the only scheduled release, with expectations calling for a -11.2% decline in the year to October. The Euro and British Pound retraced lower in overnight trading to consolidate gains in New York hours.
US Dollar: Non-Farm Payrolls(NFPs) May Fall by the Most Since 1982
The US dollar continues to consolidate within wide ranges, but remains relatively strong across the majors. However, on Friday morning, US non-farm payrolls are anticipated to fall by a whopping 330,000, which would be the worst decline since 1982, while the unemployment rate is forecasted to reach a fresh 15-year high. Will this news trigger a sharp decline in the greenback, or will the forex market consolidation continue?
The Swiss National Bank and the franc
The Swiss National Bank and the franc
Amid the main factors distinguishing the Swiss franc from other hard currencies, is its lasting tendency to serve as a safe haven asset, representing the currency of small, albeit open economy.To access this research, assessing the role of the franc in today's fx markets while shedding light on the part of the Swiss National Bank, please see "Foreign Exchange Markets: A Practical Guide", an innovative approach to covering FX fundamental and technical analysis.
USD, JPY Drift Lower, RBA Cuts 100-bp
The dollar relinquished ground against the majors, slipping to 1.2765 versus the euro and near the 0.65-handle against the Aussie. Crude oil extended its losses amid decelerating demand as a result of the sharp slowdown in global economic growth, dropping to its lowest level in 3 ½ years to $46.82. Global equity bourses rebounded in the Tuesday session, prompting currency traders to jump back into higher-yielding currencies and sending both the greenback and the yen lower.
The Bank of Japan held an emergency policy meeting, leaving policy unchanged but moved to further alleviate tightening credit conditions, announcing it would broaden the range of collateral to accept for up to 3-months. With the BoJ’s benchmark lending rate hovering near zero, the Bank continues to explore alternative methods to jumpstart the economy.
The key highlights for the remainder of the week will be the policy decisions from the ECB and the BoE, as well as the labor report from the US on Friday. Both the ECB and BoE are anticipated to cut rates aggressively near the end of the week, with markets expecting 50-basis point rate cuts. We look for the greenback to remain buoyed heading into the end of the year and expect the recent strength in the euro and Aussie to be short-lived.
This article contains the following sections:
The Bank of Japan held an emergency policy meeting, leaving policy unchanged but moved to further alleviate tightening credit conditions, announcing it would broaden the range of collateral to accept for up to 3-months. With the BoJ’s benchmark lending rate hovering near zero, the Bank continues to explore alternative methods to jumpstart the economy.
The key highlights for the remainder of the week will be the policy decisions from the ECB and the BoE, as well as the labor report from the US on Friday. Both the ECB and BoE are anticipated to cut rates aggressively near the end of the week, with markets expecting 50-basis point rate cuts. We look for the greenback to remain buoyed heading into the end of the year and expect the recent strength in the euro and Aussie to be short-lived.
This article contains the following sections:
Tuesday, December 2, 2008
Short-Term Forex Technical Outlook: GBP/CHF
The GBPCHF plunged 750+ pips to end the previous session at 1.7953, and the pair may face increased selling pressures over the week as investors continue to curb their appetite for risk.
Currency Pair: GBP/CHFChart: 60 Min ChartsShort-Term Bias: Bearish
Analysis
The GBPCHF plunged 750+ pips to end the previous session at 1.7953, and the pair may face increased selling pressures over the week as investors continue to curb their appetite for risk. After reaching a high of 1.8976 at the beginning of November, the pair slipped to a low of 1.7436 on 11/13, and has held within the broad range over the last two weeks. Fading demands for carry trades paired with the interest differential between the Swiss franc and the British pound continues to favor a bearish outlook for the pair. Over the remainder of the trading session, we may see the pair work its way down towards yesterday’s low of 1.7855, but the divergence from the 120 SMA suggest that may see a slight retracement over the next two trading sessions. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
To contact the author of this article, please email: dsong@fxcm.com
Currency Pair: GBP/CHFChart: 60 Min ChartsShort-Term Bias: Bearish
Analysis
The GBPCHF plunged 750+ pips to end the previous session at 1.7953, and the pair may face increased selling pressures over the week as investors continue to curb their appetite for risk. After reaching a high of 1.8976 at the beginning of November, the pair slipped to a low of 1.7436 on 11/13, and has held within the broad range over the last two weeks. Fading demands for carry trades paired with the interest differential between the Swiss franc and the British pound continues to favor a bearish outlook for the pair. Over the remainder of the trading session, we may see the pair work its way down towards yesterday’s low of 1.7855, but the divergence from the 120 SMA suggest that may see a slight retracement over the next two trading sessions. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
To contact the author of this article, please email: dsong@fxcm.com
JPY Rallies of Safe-Haven Flows
The yen was the biggest gainer at the start of the week as safe-haven flows propped up the Japanese currency, pushing it to 138.12 against the sterling and 117.45 versus the euro. The greenback also edged higher against the majors, surging versus the pound to 1.4805 while edging up toward the 1.26-region against the euro. With revelations from the NBER that the US economy has been in a recession since December 2007, the major US stock bourses collapsed as the Dow Jones sank by 7.7%, and both the Nasdaq and S&P 500 plunging by nearly 9%. The selling accelerated following comments from both Fed Chairman Bernanke and US Treasury Secretary Paulson. Bernanke acknowledged the predicament the Fed finds itself in and expressed further pessimism over the economic outlook. He said, ¡°Although further reductions from the current federal funds target of 1% are certainly feasible, at this point the scope for using conventional interest-rate policies to support the economy is obviously limited¡±. Moreover, he expects the economy to remain weak for some time. Bernanke also suggested the Fed could purchase longer-term Treasuries or agency securities on the open market in substantial quantities in an effort to ¡°spur aggregate demand¡±. This article contains the following sections: You need to be logged in to Forexnews to view the remainder of this article. Please login with your username and password at the top left corner of the site, or Request Free username and password to receive full access.
Forex news 1
Past history indicates a relationship between the background of the US Treasury Secretary and the direction of the US dollar. Treasury chiefs who spent a considerable part of their carreer in the private sector, particularly in banking an finance, have led through a strong dollar period. For complete assessment of this relationship, please see "Foreign Exchange Markets: A Practical Guide", an innovative approach to covering FX fundamental and technical analysis.
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We provide genuine real-time forex market commentaries and trading recommendations to both Reuters and Internet users. Led by world renowned technical analyst, Wilson Leung, we have a team of 7 analysts monitoring the market and updating our recommendations and commentaries 24 hours a day. Wilson Leung has over 20 years of experience in forex market. He is a regular speaker at Technical Analysis seminars all over the world and has conducted over 100 such seminars with Reuters for forex traders in Asia, Continental and Eastern Europe, Scandinavia, CIS and the Middle East. Our key strengths are:
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Full coverage of the marketAs long as the market is open, we're there providing insights to you.
Real-time updatesForeign exchange is a fast market, with real-time being the vital ingredient for success; analysis from an hour ago can sometimes become useless.
Multi time-frame recommendationsTo profit from the market, one needs to know the short term, medium term and long term trend. Providing intra-day, daily, weekly and medium term analysis and recommendations is our unique feature.
We provide genuine real-time forex market commentaries and trading recommendations to both Reuters and Internet users. Led by world renowned technical analyst, Wilson Leung, we have a team of 7 analysts monitoring the market and updating our recommendations and commentaries 24 hours a day. Wilson Leung has over 20 years of experience in forex market. He is a regular speaker at Technical Analysis seminars all over the world and has conducted over 100 such seminars with Reuters for forex traders in Asia, Continental and Eastern Europe, Scandinavia, CIS and the Middle East. Our key strengths are:
Precise RecommendationsNo-nonsense clear-cut recommendations that include specific entry, stop, target levels.
Full coverage of the marketAs long as the market is open, we're there providing insights to you.
Real-time updatesForeign exchange is a fast market, with real-time being the vital ingredient for success; analysis from an hour ago can sometimes become useless.
Multi time-frame recommendationsTo profit from the market, one needs to know the short term, medium term and long term trend. Providing intra-day, daily, weekly and medium term analysis and recommendations is our unique feature.
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