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OctaFx - Forex Analysis: US Dollar, S&P 500 Charts Warn of Risk Aversion Ahead

 

 

THE TAKEAWAY: US Dollar and S&P 500 technical positioning hints the greenback is aiming to reverse higher on the back of haven demand as the equity benchmark turns downward.

 

US DOLLAR TECHNICAL ANALYSIS– Prices are resting at rising trend line support set from the mid-September bottom, with the outlines of a Flag chart formation hinting at bullish continuation. A Piercing Line candlestick pattern reinforces the case for an upside scenario. A break above Flag resistance at 9976 initially exposes the 23.6% Fibonacci expansion at 9995. Alternatively, a drop below the trend line (now at 9942) targets the Flag bottom at 9895.

 

 

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Dec 12, 2012

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OctaFx - Forex Analysis: Forex Analysis: US Dollar Classic Technical Report 12.12.2012

 

 

Prices are resting at rising trend line support set from the mid-September bottom, with the outlines of a Flag chart formation hinting at bullish continuation. A Piercing Line candlestick pattern reinforces the case for an upside scenario.

 

A break above Flag resistance at 9976 initially exposes the 23.6% Fibonacci expansion at 9995. Alternatively, a drop below the trend line (now at 9942) targets the Flag bottom at 9895.

 

 

 

 

Dec 12, 2012

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OctaFx - Forex Analysis: Forex Analysis: Is Dollar Weakness After FOMC a Foregone Conclusion?

 

Forex markets are positioned for a US Dollar selloff as the Federal Reserve expands stimulus efforts but such an outcome is not as assured as it may seem.

 

Talking Points

 

• US Dollar to Rally vs. Majors if Fed Decides Against Unsterilized Bond-Buying
  
• British Pound to Look Past Jobless Claims Data on Static BOE Outlook, FOMC
  
• Japanese Yen Sinks as Asian Stocks Soar on Hopes for Fed Stimulus Expansion
  

 

 

 

Most major currencies were locked in narrow ranges in overnight trade as financial markets look ahead to the Federal Reserve monetary policy announcement to yield direction cues. At the heart of the decision will be the fate of the so-called Operation Twist program designed to re-target stimulus at lowering longer-term borrowing costs. This is done by swapping out short-term securities on the Fed’s balance sheet for long-dated ones at a pace of about $45 billion per month.

 

 

Twist is due to expire at year-end and the market consensus appears to be that it will be replaced with an equivalent-sized “unsterilized” bond-buying scheme.

 

This means that unlike its predecessor, the new effort will not be balance-sheet neutral. Such an outcome is likely to be treated as a meaningful move to the dovish side of the policy spectrum, broadly weighing on the US Dollar against its major counterparts.

 

Importantly, the recent run of supportive US economic data – most critically the service-sector ISM and NFP data points – as well as an upbeat Beige Book survey suggest the door is open for the FOMC to pursue a less aggressive course. A decision to introduce an unsterilized program smaller than $45 billion or opt for a Twist-like program that does not swell the balance sheet stands weigh heavily on risk appetite and send the greenback higher.

 

Besides the fate of Operation Twist, traders will likewise look toward revisions in the rate-setting committee’s economic forecasts as well as the tone of Bernanke’s quarterly press conference for additional guidance. Bleak cues on either front may cap US Dollar gains in the event that policymakers take a less dovish path than investors are looking for, opening the door for added easing to be unveiled in 2013. Alternatively, signs of optimism may trim the buck’s losses if the fully unsterilized approach is indeed adopted and aggressively amplify its gains if the committee eschews balance-sheet expansion for now.

 

On the economic data front, UK Jobless Claims headline the European docket. Expectations call for a 7,000 increase in November, marking a narrow improvement from the 10,100 rise in the prior month. The outcome is unlikely to yield a meaningful reaction from the British Pound, with BOE policy expectations firmly anchored and traders looking ahead to the Fed announcement before committing to a strong directional bias.

 

The Japanese Yen stood apart from the near-standstill across the FX space in Asian trading hours, sliding as much as 0.6 percent against its leading counterparts as regional stock exchanges pushed higher and dented haven demand. The MSCI Asia Pacific added 0.5 percent amid hopes the Federal Reserve will step up easing efforts.

 

 

 

 

Dec 12, 2012

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Dec 13, 2012

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OctaFX.Com - ECB: 'Tangible easing' of crisis, risks remain

European Central Bank: strains on eurozone banks, markets have eased but much remains to do

 

 

 

FRANKFURT, Germany (AP) -- The European Central Bank says there has been a "tangible easing" of stress on banks and markets from the eurozone debt crisis.

 

It says risks remain, however, particularly if governments slow down their efforts to cut debt and deficits and improve growth.

 

 

The bank is crediting its plan to buy the bonds of heavily indebted countries, which would lower their borrowing costs. European Union efforts to establish stronger banking oversight helped too, the bank said Friday.

 

 

The bond purchase plan has seen borrowing rates fall for troubled countries such as Spain and Italy, even though no bonds have been bought.

 

 

The ECB warned that the banking system across the 17 countries that use the euro remains fragmented, with borrowing costs higher in troubled countries than in others.

 

 

 

 

 

Dec 14, 2012

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OctaFX.Com - Forex: Euro Struggles On Deepening Recession- ECB Rate Cut On Horizon

 

 

Talking Points

 

• Euro: 3Q Employment Falters, Core Inflation Falls Short Of Expectations
  
• British Pound: U.K. Core Inflation To Tick Higher, All Eyes On BoE Minutes
  
• U.S. Dollar: Index Pares Losses As Risk Appetite Subsides, CPI Misses Forecast
  

 

 

Euro: 3Q Employment Falters, Core Inflation Falls Short Of Expectations

The EURUSD pared the overnight advance to 1.3118 as employment in the euro-area contracted 0.2% in the third-quarter, and the ongoing weakness in the labor market may produce a prolonged recession in Europe as the jobless rate is expected to hit fresh record-highs in 2013.

Although the headline reading for euro-area inflation held steady at 2.2% in November, the core reading for consumer prices increased 1.4% during the same period to mark the slowest pace of growth since August 2011, and easing price pressures certainly raises the scope for another rate from the European Central Bank (ECB)as the economic downturn threatens price stability.

As the ECB preserves a dovish tone for monetary policy, we should see the Governing Council carry its easing cycle into the following year, and the Governing Council looks poised to push the benchmark interest rate to a fresh record-low in an effort to stem the downside risks for growth and inflation.

As the EURUSD continues to carve a lower top around the 38.2% Fibonacci retracement from the 2009 high to the 2010 low (1.3120), we may see a short-term reversal take shape in the week ahead, and we will look for a move back towards the 23.6% retracement around 1.2640-50 as the fundamental outlook for the euro-area remains bleak.

 

British Pound: U.K. Core Inflation To Tick Higher, All Eyes On BoE Minutes

The British Pound fell back from 1.6142 to trade within the previous day’s range, and the sterling appears to be coiling up for a move higher as the economic docket for the following week is expected to dampen bets for more monetary support.

Although the headline reading for U.K. inflation is expected to hold steady at 2.7%, we’re anticipating a small uptick in the core CPI, and sticky price growth may prop up the sterling ahead of the Bank of England (BoE) Minutes due out on December 19 as the central bank drops its dovish tone for monetary policy.

Indeed, the policy statement may reveal a shift in policy outlook as the BoE looks to address the threat for inflation, and we should see the Monetary Policy Committee (MPC) slowly move away from its easing cycle as price growth is expected to hold above the 2% target over the next two-years. In turn, we should see the MPC endorse a wait-and-see approach in 2013, and a growing number of BoE officials may start to draw up a tentative exit strategy in the year ahead in an effort to balance the risks surrounding the U.K. economy.

As the relative strength index on the GBPUPSD preserves the upward trend from November, we continue to look for another test of the 23.6% Fib from the 2009 low to high around 1.6200, and we may see the British Pound outperform in 2013 as the BoE appears to be bringing its easing cycle to an end.

 

U.S. Dollar: Index Pares Losses As Risk Appetite Subsides, CPI Misses Forecast

 

The greenback appears to be regaining its footing going into the North American trade, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) bouncing back from a low 9,951, and the reserve currency may track higher throughout the remainder of the day as the rebound in risk sentiment appears to be tapering off.

Nevertheless, we saw U.S. consumer prices slow for the first time since May, led by lower energy costs, and easing price pressures dampens the appeal of the greenback as it increases the Fed’s scope to expand its balance sheet further. As the central bank maintains a highly accommodative policy stance, speculation for more easing will continue to drag on the exchange rate, but we may6 see the 2013 Federal Open Market Committee (FOMC) scale back their dovish tone amid the more broad-based recovery in the world’s largest economy.

 

 

 

 

 

Dec 14, 2012

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OctaFX.Com - Forex: EUR/USD Just Below 1.3200 Without Major Threats…Or Catalysts

 

 

 

 

EUR/USD Just Below 1.3200 Without Major Threats…Or Catalysts

 

• Fundamental Forecast for the Euro: Bearish
  
• European Union approves Greece’s next round of aid after bond buyback program
  
• Portugal asks for ‘equal treatment’ for bailout terms
  
• EURUSD’s reversals is showing greater technical strength
  

 

 

 

The euro’s strength was robust and broadly distributed this past week. A combination of general (though modest) improvement in economic data, the loose adoption of an EU bank supervisor and the long-awaited approval for Greece’s aid distribution generated enough optimism to lift the currency against all of its counterparts.

 

It’s performance ranged between the barely changed EURCHF (laden by regional capital flows) and the impressive 3.0 percent surge from EURJPY (helped out by an exceptionally weak yen). Helped along by a positive bearing on global investor sentiment, the Euro has leverage fundamentals to remarkable effect. Yet after the aggressive rally to multi-month and multi-year highs, we find that the burden for follow through has risen substantially – just we’ve run out of big-ticket catalysts.

 

It has taken a tremendous amount of lift to drive the euro to the heights that it scaled last week. Most prominent is the EURUSD which has risen to test the highs set in March along with the 38.2 percent Fibonacci retracement of its 2011-to-2012 bear trend at 1.3150. While the benchmark pair has officially marked its highest intraday level and daily close in over seven months, it hasn’t fully cleared the next stage to extend its bull run into a systemic trend.

 

This technical view is a fitting reflection of the fundamental and market conditions that the FX market faces moving forward.

 

 

To assess our next move, we should first appreciate what it took to wrench the euro to the heights it currently finds itself at. There were a series of economic releases this past week that could at best be described as ‘better-than-expected’. The bulk of the currency’s move was founded on relief. The risk that Greece could either default or exit the Eurozone (or both) tapped into an elemental fear of over the inviolability of the economic collective and its currency. Slowly, however, that threat has abated. The shift began back in July after an EU Summit laid out programs to support struggling members. When the ECB announced a potentially unlimited safety net in its OMT program, the pressure on the euro further eased. This past week, the approval of Greece’s next round of aid was the next step. After an initial short-fall on the bond buyback program, the market saw that the country would meet the target necessary to trigger support as the week wore on. By Thursday, the EU announced an immediate dispersal of €34.3 billion and monthly payouts afterwards.

Delivering aid to Greece removes the euro out of immediate peril, but it is interesting to note that the currency barely advanced after the news.

 

The market had priced in this outcome well before hand as the alternative would have been politically unpalatable. Yet, now we have found the relief the market had priced in before hand and bought Greece a number of months of calm before another serious shock could show up. Risk has been removed. Shouldn’t the euro be wide open to rally now? Not necessarily. While Greece may no longer be an immediate threat, there really isn’t a convincing argument of strength to be made for bidding the euro. What we have seen from July was in essence a series of relief rallies spurred on by the anticipation of and reaction to stabilizing policy. And, we have run out of catalysts…

 

 

In trader parlance, we have ‘reduced the tail risk’ – or as policy officials say, “there is no longer a crisis of confidence in the euro’. Yet, that isn’t a standalone reason to be bullish. Investors are not naïve enough to believe that this one approval will secure Greece or the Eurozone for good. What’s more, neglected concerns may start to come back to the forefront. Spain’s funding issues are national, regional and banking sector-wide; and there has been little genuine progress made beyond a fortunate easing of bond yields. An election in Italy highlights the country’s debt load.

 

Ireland will release 3Q GDP next week to remind us of the underlying economic issues are. And, perhaps most concerning of all, Portugal has built up a call for ‘equal treatment’ – access to the ‘one-off’ same accommodation as Greece.

 

 

 

 

 

Dec 15, 2012

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OctaFX.Com - Forex: British Pound to Steady Amid Mixed CPI, BoE Minutes

 

 

 

 

Fundamental Forecast for British Pound: Neutral

 

 

 

• - British Pound Sees Risk Reversal Near High
  
• - British Pound Outlook Supported by BoE Policy
  
• - USD Maintains Broader Trend Despite Fed Easing – GBP Eyes 1.6200
  

 

The British Pound had a decent week, finishing -0.98% lower against the top Euro, while climbing nearly as high against the US Dollar by +0.83%, as data was mixed overall, providing neither a cause for rally or relief by the world’s oldest currency.

 

Data was thin overall, with the November labor market readings representing the only significant event risk to the Sterling this week. Fortunately for the Sterling, the data came in mostly better than expected, with Jobless Claims dropping by -3.0K versus +7.0K expected, although Weekly Earnings disappointed suggesting that consumption could drop in the future. But our main attention is drawn to a future Bank of England governor, which when combined with the near-term fundamental backdrop necessarily suggests a “neutral” rating for the British Pound for the coming five days.

 

 

Primarily, the overarching theme that the British Pound will face in the weeks and months ahead will be a dismal growth picture marked by both high inflation and high unemployment, while inflation is expected to “overshoot” BoE targets over the coming years. Overall, this maintains our view that stagnation has set itself upon the UK economy; a symptom hard to rid one’s economy of, unless both fiscal policy and monetary policy makers move in lockstep. The stage has been set by Chancellor of the

 

Exchequer George Osborne: the UK will remain on the austerity path for at least another year.

 

Accordingly, the big news this week, or rather, big news for those reading between the lines of central bankers’ speeches, was that incoming BoE Governor and current Bank of Canada Governor Mark Carney suggested that a nominal GDP targeted stimulus package would be appropriate for those central banks whose policies are operating at the zero bound of interest rates. Or, that if a central bank had already cut its key rates towards 0.00%, it could pursue a policy that would promise additional stimulus until a predetermined level of growth is reached; for example, the BoE could pledge an Asset Purchase Program expansion of £10B/month until annualized GDP hit +3.0%.

 

Considering that the UK economy isn’t likely to see a growth figure above +2.0% annualized until late-2014 at the earliest, a nominal GDP target could be a heavy albatross around the British Pound’s neck if adopted when Governor Carney takes over in July 2013.

 

 

For now, as this is priced in over the coming months, we expect it to slowly erode yields and thus undermine the Sterling. But for this week, considering that holiday trading conditions are around the corner, we doubt that it will pose much of a significant threat; rather, it will be a growing conversation piece. Data this week isn’t enchanting itself, with the November Consumer Price Index report on Tuesday and the BoE Minutes on Wednesday.Also due are the November Retail Sales on Thursday and the final 3Q’12 GDP reading on Friday.

 

Of the expected data, the November CPI might be the least informative print of the year, with a huge disparity between the monthly and yearly readings. The BoE Minutes should underscore the notion that the BoE is willing to do more QE, but has chosen to remain on the sidelines for now.

 

At the end of the week, the November Retail Sales offer a strong opportunity to see some upside in the Sterling, given the forecasts for a solid beat, while the final 3Q’12 GDP figure holding steady shouldn’t stoke much volatility. In sum, we are neither impressed nor disappointed with what the economic docket offers for the British Pound this week, leaving our bias at neutral, while expecting another middle of the road performance.

 

 

 

 

 

Dec 15, 2012

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[OctaFX_Farid]

 

OctaFX.Com -Forex Analysis: EUR/USD Classic Technical Report 12.18.2012

 

 

 

 

Prices broke above resistance at the top of a falling channel set from mid-September, a barrier reinforced by the 38.2% Fibonacci expansion at 1.3090. The pair is now testing the September 14 high at 1.3168, with a break above that aiming for the 50% level at 1.3222.

 

A Spinning Top candlestick coupled with negative RSI divergence of a pullback ahead however. The 1.3090 has been recast as support, with a push below that exposing the 23.6% Fib at 1.2924.

 

 

 

 

Dec 18, 2012

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OctaFX.Com - Forex News: Risk Appetite Sends Euro and Sterling to New Highs

 

 

A risk-on attitude seems to have grasped the markets over the past 24-hours and the influence can be clearly seen in currency trading, as the risk-correlated Euro and sterling set new highs. Signs of risk appetite could be seen in equity trading, as the S&P climbed 1.15% in yesterday’s trading, and today European equities are showing decisive gains across the board.

The Euro set new 7-month highs in today’s European session, most of the gains came shortly after the better than expected IFO German business sentiment survey. However, the reaction was delayed and may have been more of a reaction to general risk appetites.

The rise in Euro happened at the same time a sudden rise in Greek bond prices led to what has so far been a 64 basis point drop in today’s trading. The rise in Greek bond prices follows the overnight S&P upgrade to Greek bond ratings. Greece’s sovereignty rating is now at B- with a stable outlook, up from a selective default rating.

The British Pound set a new 3-month high against the US Dollar in today’s session following the release of the BoE minutes, which said that the vote to not raise asset purchases was 8-1. The yearly GBPUSD high currently sits at 1.63009.

Also in today’s session, ECB’s Praet told the publication Le Firago that the threat of exits from the Euro has vanished. He also said that France needs to reform before the market attacks, as public spending is still too high.

Outside of Europe, Japan PM Elect Abe said that monetary policy is not enough to beat deflation or correct a strong Yen. In New Zealand, Finance Minister English said that the country doesn’t have the tools to move its currency to a certain level. The New Zealand gross domestic product is set to be released later today.

EURUSD is currently trading around 1.3270, and the pair could find resistance at a previous high of 1.3284. Support could be provided by a previous resistance around 1.3154.

EURUSD Daily: December 19, 2012

 

 

 

 

 

 

Dec 19, 2012

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Forex Strategy: Australian Dollar Sold Against Canadian Counterpart

 

Strategy: Short AUDCAD at 1.0340, Targeting 1.0260

 

 

Prices retesting support-turned-resistance at the bottom of a previously broken rising channel having found initial support at 1.0260 marked by the 38.2% Fibonacci retracement. The overall fundamental backdrop appears to favor weakness, with priced-in expectations suggesting the RBA will continue to cut interest rates over the coming year while the BOC remains on hold.

 

The recent bounce has improved risk/reward parameters and we will now enter short, initially aiming for a return to the 1.0260 level. A stop-loss will be triggered on a daily close above 1.0420.

 

 

 

Mar 07, 2012 11:50

 

[OctaFX_Farid]

 

OctaFX.Com -Forex Analysis: NZD/USD Classic Technical Report 12.20.2012

 

 

 

Prices are moving lower as expected after putting in a Harami candlestick pattern below resistance at 0.8470, the February 29 high. Near-term support is in the 0.8317-55 area, with a drop below that exposing the rising channel support at 0.8175.Alternatively, a reversal above resistance targets the channel top at 0.8558.

 

 

 

 

 

Dec 20, 2012

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OctaFX.Com -Forex Analysis. Dollar Traders Watch EUR/USD, AUD/USD After Overnight Risk Plunge

 

Dollar Traders Watch EUR/USD, AUD/USD After Overnight Risk Plunge

 

We were reminded this morning that these are not the kind of market and fundamental trading conditions that you can simply leave a risk-sensitive position unattended in. Through much of the active trading hours Thursday, speculative trends were tame and the safe haven dollar was left to drift in its ever-tightening range. With speculative participation already near 15-year lows (measured through S&P 500 futures open interest) and the FX Volatility Index dragging along at 5-year lows, there is the natural inclination to simply return to the sidelines while some even let their riskier positions collect yield. However, a lack of liquidity, markets dangling at extremes after an aggressive rally the past four weeks, and a serious unresolved risk in the US Fiscal Cliff does not make for a safe / passive trading environment.

 

After the rather slow trading through Thursday’s session, volatility ripped through the markets during the morning hours of the Asian trading session – normally the quietest period for systemic activity. The catalyst was the market’s last, major threat through the end of the year: the countdown to the automatic US budget adjustments. Yesterday, after the White House and Republican Congressional leaders broke without any reported progress on the ongoing negotiations; Speaker Boehner said that a Plan B bill would be put through the House of Representatives. Both the Senate Majority Leader and President both said the proposed back up plan would never receive approval through their respective phases, so market-based Fiscal Cliff watchers should have already discounted the effort’s market influence. And yet, when news that there wasn’t enough support in the House to pass the bill hit the wires before 8 PM EST, the markets started to convulse. The most dramatic effect came through the S&P 500 futures which collapsed nearly 50 points in minutes. The failure of an effort that wouldn’t be taken seriously wasn’t likely what the markets were responding to, rather it was the suggestion that the House was in recess until after Christmas.

 

If this critical branch of government is offline until next Wednesday, there is only four full days (fewer for reasonable negotiations) to push through a deal that averts automatic tax hikes and spending cuts that the Congressional Budget Office forecasts will pitch the US economy into recession in 2013. A deal can still be done, but the probabilities that it won’t are clearly starting to rise. The return of tail risk certainly exposes positions that are deemed ‘risky’. And yet, when we look at the risk sensitive majors (EURUSD, AUDUSD, GBPUSD) and incredibly overbought yen crosses (EURJPY, AUDJPY, NZDJPY), the reaction was tepid. A difference in market depth and speculative concentration no doubt has a lot to do with this. Now we watch to see whether a ‘flash’ reaction will have deeper implications for risk that leverage an 11th hour dollar rally. It is important to remember: next week will be largely drained of participation, but we also have the Quadruple Witching Friday expiration Friday.

 

Euro Takes a Hit Through Risk Channels Overnight

 

Over the past few weeks, there has been something of a collective sigh of relief amongst Euro traders as sovereign yield spreads, banking crises and sovereign aid payments have all found progress. This has certainly generated a serious push of support for the shared currency as it has risen against everyone of its counterparts over the past month. Yet, a relief rally is a passive move. An active catalyst can easily take the reins. The jump in the Spanish and Greek deficit along with the three-and-a-half year low in EZ consumer confidence stir a little concern, but outright risk aversion the tide that sinks all ships. In early Friday trade, the Euro is down against all but the New Zealand dollar.

 

Australian and New Zealand Dollars Dive on US Fiscal Cliff Fears

 

There are those that believe currency’s that bear a higher yield are in fact ‘safer’ than their counterparts because they produce return that offsets possible capital losses (a decline in the currency). However, when risk aversion kicks in, the need is to ‘free up’ capital to either cover losing trades or hold cash. We felt a little bit of that headwind this morning when the Fiscal Cliff headlines drove equity futures lower. The threat of a broader unwind of speculative positions before the general liquidity drain of next week can exacerbate already richly priced currencies.

 

Japanese Yen Nudged Higher but Full Reversal Not Yet Confirmed

 

After a consistent drive higher, the yen crosses have essentially leveled off the past two trading days. And, finally this morning, it seems like there may be the start of an effort to unwind late-in-the game speculative positions (not to mention a sudden demand for safety. The yen is up across the board this morning (from 0.6 to 1.0 percent) on the US fiscal fears, but we are not yet seeing a full blown freefall.

 

British Pound: Short-Term GBPUSD Fear Reading at Record Low

 

Generally, activity levels across the capital markets have receded over the past weeks, months and even years. That is why we find the FX Volatility Index at its five year low and the trend in S&P 500 volume dropping to multi-year lows itself. However, there are some that are even more inert than others. And, for the short-term risk measure of GBPUSD (one-week implied volatility); we find an incredible extreme – a record low below 4 percent. The pair is certainly more fundamentally stable than most, but such a lack of concern is worrisome.

 

Canadian Dollar Faces Risk Winds Heading into Heavy Data

 

Is the Canadian dollar the perfect blend of safe haven and investment appeal? With the IMF’s reserve status contemplation still lingering in the air, we found a surprise jump in domestic economic strength from Canada in the form of the biggest jump in retail sales since October 2011. A tame performance in the risk-off overnight will lead us into possible beta volatility and GDP, CPI data tomorrow.

 

Gold Breaks Mid-Point of Year’s Range, Ignores Stalled Plan B News

 

With the Fiscal Cliff activity through the overnight, gold’s tumble might make sense. Yet, the dollar hasn’t really taken off, a Fiscal Cliff would theoretically boost the metals value (through possibility of US downgrade) and the commodity actually made its drop before the drop. Yet, break the mid-point of the year’s range and 200-day moving average it did. The five-day slide is the biggest since July 10, 2011.

 

 

 

 

 

Dec 21, 2012

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OctaFX.Com -Forex Analysis. Dollar, Yen Aim Higher as Fiscal Cliff Fears Escalate

 

 

 

Talking Points

• Dollar, Yen Aim Higher on Haven Flows on Swelling “Fiscal Cliff” Fears
  
• Pre-Holiday Liquidity Drain, “Quadruple Witching” May Boost Volatility
  
• Supportive US Economic Data to be Overshadowed by Budget Deal Woes
  

 

 

Risk sentiment appears to be crumbling as expected amid a lack of progress in US “fiscal cliff” negotiations. Divergent headlines pulled markets in opposing directions throughout the week but confidence began to crumble in earnest as plans to vote on the so-called “Plan B” – a unilateral Republican initiative aimed at raising taxes on millionaires – failed to secure enough support to warrant a vote.

 

S&P 500 index futures are pointing sharply lower in late Asian trade, down nearly 1.6 percent having spiked down over 3 percent as the “Plan B” failure crossed the wires.

 

This makes for an ominous sentiment signal as markets head into the final hours of the trading week, hinting a sharp pick-up in risk aversion is brewing. Volatility may also prove unusually intense as liquidity dries up ahead of the Christmas holiday.

 

“Quadruple witching” – the simultaneous expiry of stock index futures, stock index options, stock options and single stock futures – may complicate market conditions further. Continued risk aversion is likely to boost the US Dollar and Japanese Yen against their major counterparts.

 

The final revision of third-quarter UK GDP figures headlines the economic calendar in European hours, with forecasts. Later in the day, the spotlight shifts to a busy US docket. November’s Personal Income and Spending figures as well as the Durable Goods Orders report are all due to cross the wires, with narrow improvements expected on all fronts. A revision of Decembers University of Michigan Consumer Confidence figure is also on tap.

 

Here too, forecasters are pencilling in a slight upgrade. Cheerful economic news can hardly be expected to meaningfully underpin sentiment however absent a breakthrough on the “fiscal cliff” side of the equation.

 

 

 

 

 

 

Dec 21, 2012

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OctaFX.Com -Watch out current Financial Analysis of OctaFX

 

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Dec 25, 2012

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OctaFX.Com -Yen down as Japan gets a new government; U.S. shares gain

 

 

 

NEW YORK/TOKYO (Reuters) - The yen fell to a 20-month low against the dollar on Wednesday after Japan swore in a new prime minister who has promised aggressive stimulus measures to rein in deflation, while U.S. stocks and oil rose in thin trading.

 

 

The dollar rose to a 20-month high of 85.48 yen on trading platform EBS following the swearing-in of Shinzo Abe as premier. Traders eyed the dollar's 2011 high of 85.53 yen as the next target.

 

 

Abe is calling for a mix of aggressive monetary policy easing and big fiscal spending to beat deflation and weaken the yen. He is pressuring the Bank of Japan to adopt a 2 percent inflation target that would auger for a weaker currency, threatening changes at the central bank if his wishes are not met.

 

 

The euro rose as high as 112.92 yen on EBS, a 16-month high, and was last at 112.68 yen, up 0.8 percent. The euro was at $1.3244 against the dollar, up 0.5 percent.

"The election of Abe has had a galvanizing effect on the dollar/yen exchange rate and he has been able to accomplish more in two months of jawboning than the BoJ has... over the past several years," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.

 

 

U.S. shares were slightly higher in post-Christmas trading with Congress likely to resume negotiations to avoid the "fiscal cliff," a series of $600 billion in spending cuts and tax hikes that would slow the U.S. economy sharply unless lawmakers take action.

A U.S. official said on Tuesday that President Barack Obama may return to Washington from his Hawaiian holiday as early as Wednesday evening to resume talks.

 

 

The odds are increasing that Congress will not come to an agreement before the end of the year, however, leaving a series of big decisions to early 2013, when tax rates are scheduled to rise for most Americans. Economists warn that the world's largest economy could fall into recession.

 

 

There is some concern that the impending tax hikes cut into holiday spending in the United States. Holiday-related sales were up 0.7 percent from October 28 through December 24, compared with a 2 percent increase in 2011, according to MasterCard Advisors SpendingPulse.

 

 

Many markets remain closed following Christmas. European exchanges were largely shuttered, and Hong Kong and Australia were also closed.

 

 

The Dow Jones industrial average (.DJI) was up 10.09 points, or 0.08 percent, at 13,149.17. The Standard & Poor's 500 Index (.SPX) was down 0.95 points, or 0.07 percent, at 1,425.71. The Nasdaq Composite Index (.IXIC) was down 3.05 points, or 0.10 percent, at 3,009.55.

 

 

U.S. single-family home prices rose in October for the ninth month in a row. The S&P/Case Shiller composite index of 20 metropolitan areas gained 0.7 percent in October on a seasonally adjusted basis, stronger than the 0.5 percent rise forecast by economists polled by Reuters.

 

 

Ten-year U.S. Treasury notes rose 4/32 of a point in price to yield roughly 1.7598 percent. The U.S. bond market was closed on Tuesday for Christmas. (US/)

Brent crude climbed above $110 per barrel on Wednesday, hitting a two-month high, with investors hoping for a last-minute deal to avoid a U.S. fiscal crisis. U.S. crude futures gained $2.39, or 2.8 percent, to $91. (O/R)

YEN WEAKENS

The weaker yen has bolstered hopes for better earnings from Japanese companies and underpinned the Nikkei, which has gained some 18 percent since mid-November, when the election was scheduled. The yen has lost nearly 8 percent against the dollar in the same period.

 

 

The Nikkei (.N225) closed at a nine-month high with a 1.5 percent gain on Wednesday. (.T)

Minutes of the BOJ's policy-setting meeting in November, released on Wednesday, showed that some board members said the central bank must act decisively, without ruling out any policy options, if the outlook for the economy and prices worsens further.

 

 

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was little changed. Shanghai shares (.SSEC) were flat, but stayed in positive territory on the year after a 2.5 percent jump on Tuesday erased 2012 losses. It is set for a first annual gain in three years.

 

 

 

 

 

 

 

Dec 26, 2012

OctaFX.Com News Updates

 

 

 

 

 

[OctaFX_Farid]

 

 

 

 

OctaFX.Com -Gartman: Why I'm Selling Japanese Yen

 

 

 

The Japanese government has given a "sell" signal for the yen, Dennis Gartman, editor of The Gartman Letter, said Wednesday on CNBC.

 

 

On "Fast Money," Gartman said he was short of yen in US dollar, Canadian dollar, Australian dollar and New Zealand dollar terms.

 

 

Over the past six or seven months, Gartman added, the trade is working out.

"I think it's abundantly clear that this new administration has made it very clear it intends to force the Bank of Japan to supply Japanese yen in unlimited terms," he said. ""I can't remember ever having heard that before.

 

 

(More From CNBC: Forget Stocks? Why Shilling's Backing Bonds)

"You have to remember, a government has a hard time strengthening its currency. But governments can very easily weaken their currencies simply by printing them. And when the Japanese said they're going to print them in an unlimited fashion, you have to believe them."

 

 

Gartman said that Japan was "going to take rates to negative numbers before it's done."

A decline in domestic consumption for Japan meant that its options were limited. "

 

 

"They're going to have to continue to export goods and services out of Japan, and the only way they can do it is by devaluing the yen," Gartman said.

 

 

"What do I care whether they can or cannot create inflation as long as they are going to create more yen? This is the first time we've seen an authority in Japan use the term 'unlimited,'" he said.

An alternate trade was to buy Japanese equities, Gartman said.

 

 

"I think the NIkkei is on its way to 15,000 over the course of the next several years," he added. "If you don't like trading currencies, trade the Nikkei because that's going to be a corollary to the Japanese yen itself."

 

 

 

 

 

 

Dec 27, 2012

OctaFX.Com News Updates

 

 

 

 

 

[OctaFX_Farid]

 

 

 

 

OctaFX.Com -European sentiment boosts S&P 500

 

 

 

U.S. stock futures are following Europe higher this morning as the Japanese yen weakens and investors bet that politicians in Washington will address the fiscal cliff.

 

The S&P 500 is indicated to open higher by about one-quarter of a percent. France's CAC-40 is leading gains across the Atlantic with a gain of more than two-thirds of a percent, followed by London's FTSE-100.

 

The bullish sentiment has increased in the last hour as the euro pushes higher. Japan's Nikkei was the top winner in Asia overnight, climbing almost 1 percent.

 

There are still no clear signs that U.S. lawmakers will reach a deal with President Obama to avert tax increases and spending cuts at year-end. But the risk has been well known for months and investors appear increasingly comfortable that, even if the situation isn't fixed immediately, it will be addressed by early 2013 after the new Congress is seated.

 

Worries about the fiscal cliff had caused the S&P 500 to pull back from multi-year highs between mid-October and mid-November. It's been rebounding since then and has been attempting to build support above its 50-day moving average in the last two weeks, which could be leading some chart watchers to expect further gains.

 

In addition to the political news, the market has a full docket of economic data today. Weekly jobless claims will be released at 8:30 a.m. ET, followed by new home sales and consumer confidence at 10 a.m. ET.

 

Foreign-exchange markets are painting a bullish picture this morning, while commodities are more negative. Currencies that tend to follow risk appetite--the euro, Australian dollar, and Canadian dollar--are all higher. The Japanese yen is also lower across the board, which tends to support equities because investors use it as a safe haven.

 

Oil and copper, however, are modestly lower. Precious metals are down by almost half a percent, and most agricultural foodstuffs are posting small declines

 

 

 

 

 

 

Dec 27, 2012

OctaFX.Com News Updates

 

 

 

 

 

[OctaFX_Farid]

 

 

 

 

OctaFX.Com -Forex Analysis: NZD/USD Classic Technical Report 12.27.2012

 

 

 

Prices moved lower as expected after putting in a Harami candlestick pattern below resistance at 0.8470, the February 29 high. Sellers pushed through support in the 0.8317-55 area and are now testing the bottom of a rising channel set from late July (0.8191). A break below that exposes 0.8052. The 0.8317-55 region is now acting as near-term resistance.

 

 

 

 

 

 

 

 

 

Dec 27, 2012

OctaFX.Com News Updates

 

 

 

 

 

[OctaFX_Farid]

 

 

 

 

OctaFX.Com -Forex Analysis: EUR/USD Classic Technical Report 12.31.2012

 

 

 

Prices are probing below channel mid-line support at 1.3223 after putting in a bearish Gravestone Doji candlestick, with a break lower targeting the formation’s bottom at 1.3105. Near-term resistance is at 1.3283, the May 1 high, with a push above that exposing the March 27 top at 1.3384.

 

 

 

 

 

 

 

 

 

Dec 31, 2012

OctaFX.Com News Updates

 

 

 

 

 

[OctaFX_Farid]

 

 

 

 

OctaFX.Com -Forex Analysis: Dollar, Yen Fall as Markets React to Fiscal Cliff Deal

 

 

 

Talking Points

 

• US Dollar, Yen Plunge as Risk Appetite Swells on “Fiscal Cliff” Compromise
  
• Status-Quo Eurozone PMI, German CPI Data Unlikely to Derail Momentum
  
• Risk-On Mood May Find Added Fuel in December’s ISM Manufacturing Data
  

 

The US Dollar and Japanese Yen plunged overnight after the US Congress reached a last-minute deal averting the so-called “fiscal cliff”, scattering fears of a sharp austerity shock in the world’s largest economy and denting demand for the go-to safe haven currencies. The Senate voted in favor of the compromise measure by an overwhelming 89-8 margin in the early hours of Tuesday morning in Washington, DC. The House of Representatives followed suit by the evening, passing the measure with a 257-167 vote.

 

The so-called American Taxpayer Relief Act of 2012 delayed “sequestration” budget cuts created in 2011 by two months to give additional time for negotiation. Meanwhile, a broad-based increase in taxes was averted, instead allowing rates on incomes over $400,000 for individuals and $450,000 for families to increase from 35 to 39.6 percent. The bill also marked a phase-out of tax deductions and credits on incomes over $250,000 and the expiry of the payroll tax cut put in place in 2010.

 

European stock index futures are trading sharply higher in late Asian trade, hinting the risk-on mood is likely to carry forward as traders return from the New Year holiday.

 

Final revisions of December’s Eurozone Manufacturing PMI data set and a preliminary look at German CPI headline the economic calendar.

 

No major changes are expected on either front, seemingly leaving little to stand in the way of existing momentum. The US ISM Manufacturing report may reinforce the chipper mood later in the day, with forecasts pointing to a return to expansionary territory with a print at 50.4 in December after a disappointing 49.5 result in the prior month.

 

 

 

Jan 2, 2013

OctaFX.Com News Updates

 

 

 

 

 

[OctaFX_Farid]

 

Forex Strategy: Australian Dollar Sold Against Canadian Counterpart

 

Strategy: Short AUDCAD at 1.0340, Targeting 1.0260

 

 

Prices retesting support-turned-resistance at the bottom of a previously broken rising channel having found initial support at 1.0260 marked by the 38.2% Fibonacci retracement. The overall fundamental backdrop appears to favor weakness, with priced-in expectations suggesting the RBA will continue to cut interest rates over the coming year while the BOC remains on hold.

 

The recent bounce has improved risk/reward parameters and we will now enter short, initially aiming for a return to the 1.0260 level. A stop-loss will be triggered on a daily close above 1.0420.

 

 

 

Mar 07, 2012 11:50

 

[OctaFX_Farid]

 

 

 

 

OctaFX.Com -Forex Analysis: US Dollar Resilient Despite Sharp S&P 500 Advance

 

 

 

THE TAKEAWAY:

 

The US Dollar managed to hold up near familiar technical levels despite a sharp rally in the S&P 500 that might have been expected to sink the haven currency.

 

 

 

US DOLLAR TECHNICAL ANALYSIS– Prices are testing above resistance at 10044, the 32.8%Fibonacci expansion. This barrier is reinforced by rising trend line support-turned-resistance at 10064. A break above the latter level aims for the 50% level at 10082. Initial support is at 9995, the 23.6% expansion, with a reversal below that exposing a

 

The US Dollar and Japanese Yen plunged overnight after the US Congress reached a last-minute deal averting the so-called “fiscal cliff”, scattering fears of a sharp austerity shock in the world’s largest economy and denting demand for the go-to safe haven currencies. The Senate voted in favor of the compromise measure by an overwhelming 89-8 margin in the early hours of Tuesday morning in Washington, DC. The House of Representatives followed suit by the evening, passing the measure with a 257-167 vote.

 

Daily Chart - Created Using FXCM Marketscope 2.0

 

S&P 500 TECHNICAL ANALYSIS – Prices launched sharply higher in the aftermath of a deal to avert the fiscal cliff, taking out resistance at a falling trend line set from mid-September and exposing 1466.10. A break above that exposes the 1471.60-1474.90 area marked by the October 5 and September 14 swing highs. Initial support is at 1450.10, the December 19 top, with a break below that exposing the trend line at 1441.20 and former resistance at 1432.90.

 

 

 

Jan 3, 2013

OctaFX.Com News Updates

 

 

 

 

 

[OctaFX_Farid]

 

 

 

 

OctaFX.Com -Forex Analysis: EUR/USD Pullback Sought for Long

 

 

 

Prices have turned lower as expected after putting in a bearish Gravestone Doji candlestick. Sellers have now cleared support at the bottom of a rising channel set from mid-November (now at 1.3091) as well as the 38.2% Fibonacci retracement (1.3060), exposing the 50% level at 1.2983.

 

A drop beneath that aims for the 61.8% Fib at 1.2907. The 1.3060 level has been recast as resistance. We will look for the pullback to yield a long entry in line with our 2013 outlook.

 

 

 

 

Jan 4, 2013

OctaFX.Com News Updates

 

 

 

 

 

[OctaFX_Farid]

 

 

 

 

OctaFX.Com -Forex Analysis: Global stocks tick up, dollar pares gains after U.S. payrolls

 

 

 

NEW YORK (Reuters) - World shares rose and the U.S. dollar pared gains on Friday after a payrolls report scaled back expectations of a change in U.S. monetary policy.

 

The pace of U.S. job growth slowed slightly in December, keeping the unemployment rate steady at 7.8 percent, but details of the Labor Department's U.S. employment report also pointed to a slow but steady recovery.

 

The stubbornly high unemployment rate was unlikely to make the Federal Reserve rethink its easy-money policies, which have been propping up the recovery. Indications that the Fed could change its easy stance on asset purchases erased gains in stocks on Thursday and pushed benchmark Treasury yields to eight-month highs.

 

"When it comes to Fed policy, this report should keep (it)steady," said Tom Porcelli, chief U.S. economist at RBC Capital markets in New York.

 

He said with the payrolls data "basically where it was when the Fed decided to do more quantitative easing last month," a change in policy was not in the horizon.

 

An index of global shares was on track to post its best week in six, and its sixth week of gains in the last seven, as a last-minute budget deal in the United States and strengthening global economic data drew investors into riskier assets.

 

The Dow Jones industrial average (.DJI) rose 16.55 points or 0.12 percent, to 13,407.91. The S&P 500 (^GSPC) gained 3.54 points or 0.24 percent, to 1,462.91. The Nasdaq Composite (.IXIC) added 0.87 points or 0.03 percent, to 3,101.43.

 

An MSCI index of global shares <.MIWD00000PUS> rose 0.2 percent and was up nearly 3 percent for the week, making it its best since late November.

 

The U.S. dollar pared gains versus the euro and came off a near 2-1/2 year high against the yen after the jobs data bolstered expectations the Fed will not tighten monetary policy anytime soon.

 

The data "will if anything push out the date for an end to QE, represents solidly risk-positive numbers and will lead to some minor squeeze on recent U.S. dollar longs," said Alan Ruskin, head of G10 FX strategy at Deutsche Bank in New York.

 

The yen has fallen in recent weeks as investors bet the new government will push the Bank of Japan to weaken the currency by implementing aggressive economic stimulus.

Tentative signs that the euro zone economy may have passed the worst of its downturn also supported risk assets.

 

Markit's Euro zone Composite PMI, which gauges business activity across thousands of the region's companies, rose in December to 47.2, from 46.5 in November - below the 50 line which divides growth from contraction but at its highest level since March last year.

 

Benchmark U.S. Treasury yields continued their climb, but sharply cut gains after hitting a more than eight-month high of 1.9755 percent before the jobs report.

 

The 10-year U.S. Treasury note was last down 5/32, with the yield at 1.9274 percent.

Bund futures cut losses after slipping over half a point but were still adding to recent losses. They were last down 0.4 percent at 142.95.

 

Brent crude shed 0.4 percent to $111.66 a barrel while U.S. crude was down 0.1 percent at $92.80.

 

 

 

Jan 4, 2013

OctaFX.Com News Updates