OctaFX.Com - Financial News and Analysis

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OctaFX.Com - EU leaders meet to chart eurozone future

 

 

 

 

European leaders will meet in Brussels this week to work on closer ties between eurozone countries that are seen as critical to converting recent progress on fixing the region's debt crisis into a sustainable path to growth.

The summit comes during a period of uneasy calm in global financial markets. Bond yields for troubled euro area governments have declined significantly after the European Central Bank said in September it was ready to buy potentially unlimited amounts of sovereign debt.

 

Despite signs of progress, investors remain nervous about Greece, where the government and its international creditors continue to negotiate over the latest installment of bailout money for the debt-stricken nation.

Leaders will meet Thursday and Friday to discuss an interim report outlining steps to strengthen the eurozone, including proposed reforms of the banking sector and more integrated budget policies, according to a letter from European Council president Herman Van Rompuy.

 

Spain has won relief from market pressure thanks to widespread expectations that it will request a formal bailout by seeking a credit line from the newly-activated European Stability Mechanism. This would allow the ECB to start buying its bonds.

 

Moody's confirmed its investment grade rating on Spain this week, based on an assumption that Madrid will tap the ESM, and reflecting progress on fiscal and banking reform. But it assigned a negative outlook to the rating, underscoring the pressure on eurzone leaders to agree much closer integration.

"Shocks at the euro area level could also have negative repercussions on Spain's rating, for example in the absence of concrete progress in reforming the euro area's fiscal, economic and regulatory institutions," the agency said.

Analysts say Prime Minister Mariano Rajoy will wait at least until after regional elections on Oct. 21 before asking for help from his eurozone partners.

A spokeswoman for the Spanish economy ministry told CNN the government was still considering its options.

Observers say the likelihood of progress at this week's summit is low, following a more substantial agreement announced at the last summit. In a move hailed as a breakthrough, the leaders outlined plans in June to establish a central banking regulator and increase budgetary oversight.

"Expectations are quite low," said Marie Diron, senior economic adviser at Ernst & Young in London. "If there was to be a significant agreement, we would normally hear about it in advance, but it's been very quiet on that front."

While talks in Greece continue, EU leaders are expected to praise the government in Athens for making difficult reforms and taking steps to modernize the deeply depressed Greek economy.

 

The Greek government is struggling to nail down all of the →11 billion of spending cuts it needs to satisfy the conditions of its bailout. Athens is also reportedly at odds with the IMF over the outlook for the economy and the likelihood it will achieve its deficit reduction targets.

Greek Prime Minister Antonis Samaras is pushing for a two-year extension of the nation's bailout program, which the previous government agreed to in March. In a show of support, German Chancellor Angela Merkel met earlier this month with Samaras in Athens, suggesting that Berlin is softening its stance on Greece.

 

"A political position has been reached to keep Greece in the eurozone," said Nicholas Spiro, director of London-based consultancy Spiro Sovereign Strategy.

 

"But nothing is being done to secure Greece's future in the single currency area."

 

 

 

Oct 17, 2012 01:51 PM

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OctaFX.Com - British Pound Forecast to Strengthen versus Yen

 

 

 

 

GBPJPY – Retail traders are now net-short the British Pound against the Japanese Yen for the first time since September, and the sharp shift in sentiment gives us contrarian signal that the pair may continue to further highs. Short interest has jumped 40 percent since last week, while long interest has fallen by the same amount.

 

This lines up well with our USDJPY-bullish bias, and indeed it seems as though the Japanese Yen has further room to fall against broader counterparts.

 

 

 

Oct 18, 2012 03:39 PM

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OctaFX.Com - Canadian Dollar Trading Bias Moderates

 

 

 

 

 

 

 

USDCAD - The ratio of long to short positions in the USDCAD stands at 2.89 as approximately 74% of traders are long. Yesterday the ratio was 1.97; 66% of open positions were long. In detail, long positions are 12.9% higher than yesterday and 2.7% below levels seen last week. Short positions are 22.8% lower than yesterday and 2.1% above levels seen last week.

 

We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are long gives signal that the USDCAD may continue lower. Current SSI is higher than yesterday and lower from last week. The combination of current sentiment and recent changes gives a further mixed trading bias.

 

 

 

Oct 18, 2012 03:39 PM

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Oct 19, 2012

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OctaFX.Com -Australian Dollar Forecast Remains Bearish Despite Faster Inflation

 

 

 

 

The Australian dollar fell back from a fresh monthly high of 1.0410 as market participants curbed their appetite for risk, but the high-yielding currency may regain its footing next week as price growth in the $1T economy is expected to bounce back in the third quarter. The consumer price report highlights the biggest event risk for the aussie, and we may see a bullish reaction to the print as the headline reading for inflation is expected to increase 1.6% after expanding 1.2% during the three months through June.

 

However, the policy outlook continues to instill a bearish forecast for the AUDUSD as the Reserve Bank of Australia scales back its fundamental assessment for the region, and we should see the central bank continue to embark on its easing cycle in an effort to encourage a stronger recovery. Indeed. the RBA

 

Minutes sounded more dovish this time around as the board sees the resource boom peaking ‘a little earlier, and at a somewhat lower level,’ and we should see the central bank continue to target the benchmark interest rate as the softer outlook for growth gives the central bank scope ‘to be a little more accommodative.’ As commercial banks remain reluctant to pass on the RBA’s rate cuts, investors are pricing a 77% chance for another 25bp reduction at the November 5 meeting, while borrowing costs are anticipated to fall by at least 75bp over the next 12-months according to Credit Suisse overnight index swaps. As the interest rate outlook remains tilted to the downside, speculation for additional monetary support should continue to dampen the appeal of the Australian dollar, and the high-yielding currency remains vulnerable to further headwinds as China –

 

Australia’s largest trading – continues to face a risk for a ‘hard landing.’

Faster price growth in Australia should help to prop up the AUDUSD in the week ahead, but we will maintain a bearish forecast for the pair as it preserves the downward trend carried over from 2011. At the same time, the aussie-dollar appears to be carving out a lower top in October as the exchange rate fails to hold above the 23.6% Fibonacci retracement from the 2010 low to the 2011 high around 1.0370, and we may see the Australian dollar threaten the monthly low (1.0148) should market sentiment deteriorate further.

 

Oct 20, 2012 03:48 AM

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OctaFX.Com - Canadian Dollar At Risk For Further Losses As BoC Turns Dovish

 

 

 

 

 

 

The Canadian dollar struggled to hold its ground against its U.S. counterpart, with the USDCAD advancing to a fresh monthly high of 0.9939, and the loonie may face additional headwinds in the days ahead should the Bank of Canada soften its tone to raise the benchmark interest rate from 1.00%. Although the BoC is widely expected to maintain its current policy next week, the fresh batch of central bank rhetoric may dampen the appeal of the loonie as the government sees a slowing recovery in the region.

 

Indeed, Finance Minister Jim Flaherty warned that the government may reduce its growth forecast as it prepares to release its updated budget, and we may see BoC Governor Mark Carney follow suit amid the ongoing slack in the real economy. As price growth holds near the lowest level since 2010, the central bank should sound more dovish time this around, and Mr. Carney may no longer see scope to withdraw monetary stimulus as growth and inflation tapers off. In turn, the BoC may strike a more neutral tone for monetary policy, and the protracted recovery in the United States – Canada’s largest trading partner – may keep the BoC on the sidelines given the historical ties between the two economies.

 

According to Credit Suisse overnight index swaps, market participants see the central bank keeping the benchmark interest rate on hold over the next 12-months, and Governor Carney may look to carry the wait-and-see approach into the following year in an effort to further shield the world’s 10th largest economy from external shocks.

 

As the relative strength index on the USDCAD finally clears interim resistance around the 58 figure, the upside break in the oscillator should pave the way for a higher exchange rate, but the pair may come up against trendline resistance as it maintains the descending channel from June. Nevertheless, should the BoC talk down speculation for a rate hike, the shift in the policy outlook may threaten the bearish trend in the USDCAD, and we will look for a close above the 200-Day SMA (0.9996) to encourage a bullish forecast for the dollar-loonie.

 

 

Oct 20, 2012 03:52 AM

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FOREX - Dollar Vulnerable if Firm US Economic Data Buoys Risk Appetite

 

 

 

The Dollar rose on haven flows in Asia but the move may be short-lived if another improvement on the US data front offers renewed support to risk appetite.

 

 

Talking Points

 

 

• Forex Traders May Sell US Dollar if Firm Richmond Fed Print Buoys Risk Appetite
  
• Cycle-Sensitive Names in Focus on Earnings Docket as Markets Refine Growth Bets
  
• Dollar, Yen Rise on Haven Flows After Moody’s Downgrades Five Spanish Regions
  

 

 

Another quiet day on the European economic data front keeps the focus on US event riskas traders weigh the ability of a cautious pickup in North America to offset sluggish performance in Europe and Asia. The Richmond Fed manufacturing activity gauge is in the spotlight. Expectations call for an improvement in October, hinting the positive cues seen in September’s releases are carrying forward.

 

As we discussed in our weekly Dollar forecast, forex traders are likely to respond to US economic data in terms of its implications for market-wide sentiment trends. With that in mind, a firmer Richmond Fed print may boost risk appetite, weighing on greenback against most of its top counterparts (with the notable exception of the Yen) as haven-seeking capital flows dry up. Needless to say, a disappointing outcome is likely to produce the opposite dynamic.

 

Turning to the corporate earnings docket, cycle-sensitive names with a global footprint including United Parcel Service, EI du Pont de Nemours and Ryder System are in focus as markets continue to fine-tune their global growth outlook.

 

Guidance from these companies is likewise likely to be interpreted in terms of their implications for the global recovery as investors fine-tune broad-based growth expectations. S&P 500 index futures are pointing lower in late Asian trade, hinting at a lean toward risk aversion heading into the European session.

 

The US Dollar and Japanese Yen rose against the majors in overnight trade as Asian stocks declined, boosting safe-haven demand. The MSCI Asia Pacific regional benchmark equity index fell 0.4 percent. The rout followed a Moody’s ratings downgrade of five Spanish regions. The Yen outperformed, adding as much as 0.3 percent on average, as prices digested the previous day’s aggressive sell off.

 

The Japanese unit slumped 0.9 percent in the 24 hours through the closing bell on Wall Street, marking the sharpest one-day decline in seven weeks.

 

 

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Oct 23, 2012 06:25 AM

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FOREX ANALYSIS: Canadian Dollar Forecast to Decline

 

 

 

 

USDCAD –An aggressive shift in forex retail crowd positioning warns that the US Dollar (ticker: USDOLLAR) may be staging a larger rally against the Canadian Dollar.

 

Retail short interest in the USDCAD surged 61 percent since last week, while long positions are down a comparable 35 percent through the same period.

A positive technical forecast for the USDCAD and a sharp turn in retail sentiment leave us in favor of further gains.

 

 

Oct 25, 2012 03:10 PM

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OctaFX.com-FOREX ANALYSIS: Dollar up on signs US economy slowly improving

Dollar rises against euro, yen on signs that the US economy is slowly improving

 

 

 

 

NEW YORK (AP) -- The dollar is rising against the euro on signs that the U.S. economy is slowly improving.

 

The Labor Department says that weekly applications for U.S. unemployment benefits fell last week to 369,000. That's consistent with modest hiring.

 

The Commerce Department says orders for durable goods rose 9.9 percent in September, mostly due to a spike in aircraft orders. And the National Association of Realtors says its index of home sale agreements rose in September.

 

The euro fell to $1.2954 in afternoon trading from $1.2973 late Wednesday.

 

In Britain, the government says the country has emerged from a nine-month recession. The British pound rose to $1.6118 from $1.6036

The dollar rose to 80.11 Japanese yen from 79.78 yen.

 

 

Oct 25, 2012 04:48 PM

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OctaFX.com-FOREX - Sentiment Buckles Under Heavy Euro After Spanish Downgrades

News Summary: European Central Bank says private companies borrow less in ongoing weak economy

 

 

 

ASIA/EUROPE FOREX NEWS WRAP

 

 

 

CREDIT CRUNCH: The European Central Bank said Thursday that loans to non-bank businesses in the 17-nation eurozone shrank 1.4 percent year-on-year in September, double the contraction reported the month before.

 

FRACTURE FEARS: The numbers show the economy is struggling despite efforts by the central bank to stimulate credit and calm financial markets fearful that the eurozone might break up.

 

NEITHER A BORROWER, NOR A LENDER: Businesses see no reason to borrow to invest in expanding production. Meanwhile, banks in some countries have less to lend AS they struggle to recover from losses on real estate loans and on government bonds.

 

Oct 25, 2012

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OctaFX.Com - FOREX: Japanese Yen to Resume Down Trend on BOJ Stimulus, US Data

 

 

 

 

The Japanese Yen marked its largest five-day drop in nine weeks against the US Dollar at the close of trade on Friday. Much of the selloff reflected speculation about an expansion of stimulus efforts from the Bank of Japan at the October 30 policy meeting, with various sources including Morgan Stanley / Mitsubishi UFJ and Nikkei News tossing around a ¥10 trillion yen estimate for the size of the increase.

 

While Japanese authorities attempted to pour cold water on reports identifying a specific size of a stimulus, they didn’t specifically talk down the possibility of further accommodation in general.

 

In the context of recent disappointments on the economic data front, this hints that an expansion of asset purchases may indeed be on the horizon.

 

On the fiscal side of the equation, the government unveiled a ¥750 billion spending package meant to prevent a sharp retrenchment in public-sector spending as officials struggle to reach a deal on financing legislation that would pave the way for continued bond issuance.

 

The government spends about ¥2.3 trillion per quarter on average however, hinting the modest size of the fiscal boost will not stave off the impact of forced austerity on economic growth for very long.

 

That seemingly gives the BOJ further encouragement to act.

 

Besides homegrown headwinds, the Yen continues to face downward pressure from the overall risk appetite landscape.

 

The currency’s average value continues to show a significant inverse correlation with the S&P 500, meaning it is likely to broadly rise at times of risk aversion and fall when investor sentiment is on the upswing.

 

That points the spotlight to the US economic calendar as another potential source of Yen volatility, with a busy docket of top-tier event risk including the ISM Manufacturing print and the all-important Employment report on tap.

US economic data has increasingly topped economists’ expectations over recent weeks, feeding hopes that firming growth in the world’s top economy will help offset a slowdown in Asia and a recession in Europe.

 

Consensus forecasts call for broad-based improvement across most of the week’s headline data releases, suggesting the path of least resistance favors a pickup in risk appetite that amplifies existing domestically-derived Yen selling pressure.

 

 

Oct 27, 2012

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FOREX: OctaFX.Com - Dollar Ends Week Unchanged, What Will Force a EURUSD Break Out?

 

 

 

 

 

 

• Dollar Ends Week Unchanged, What Will Force a EURUSD Break Out?
  
• Euro Hopes Seek Spain Bailout, Fear Centered on Greece
  
• Japanese Yen: Japan’s Fiscal Cliff Could Drive USDJPY to 85, Beyond
  
• Canadian Dollar Sensitive to Jobs Data as Policy Wavers
  
• New Zealand and Australian Dollar: Rely on Risk Trend, If that Fails Intervention
  
• Oil Traders Watch Hurricane Sandy but Supplies Already Topped Off
  
• Gold Posts First Three-Week Decline in 13 Months, Next Break 1700?
  

 

 

New to FX?Watch thisVideo; For live market updates, visitDailyFX’s Real Time News Feed

 

Dollar Ends Week Unchanged, What Will Force a EURUSD

 

Break Out?

 

With the close this past Friday, the Dow Jones FXCM Dollar Index (ticker = USDollar) closed the week out less than a point from where it opened. In fact, this measure of the currency has progressed less than 0.1 percent through each of the past three weeks. There is no better measure of congestion and indecision. The lack of progress fits the fundamental backdrop of a market that grows increasingly concerned about the outlook for growth, yields and financial stability yet doesn’t deflate risky assets due to unrelenting hope for more stimulus. This lack of conviction has left the S&P 500 with a critical reversal of the most recent phase of its rally from June but without the commitment to build momentum on a move below 1400. Similarly, the same uncertainty has kept EURUSD anchored to congestion between 1.3100 and 1.2825.

If we want to see a clear and lasting move from the dollar – we need a development that plays to its most basic role: ultimate safe haven and liquidity provider. Given the low level of participation in the capital markets (many investors have kept their money on the sidelines due to the extremely low yields and persistent of financial risks), it is rather easy to spur volatility with economic indicators. Yet, turning the tides of sentiment is an order that few of the ordinary indicators and releases can accomplish. The October NFPs due Friday are the pinnacle for scheduled economic data on the US docket; yet its already-lukewarm fundamental impact has been further diminished. We learned this past week that the Fed would not move to increase its stimulus efforts until at least the expiration of the Operation Twist program, and its ‘growth proxy’ role has been diminished by the release of 3Q GDP. That said, the typical slowdown into its release will likely reply.

To break the cycle of indecision and hesitation ahead of never-ending event risk (we can wait for NFPs, then the US election, then the Fiscal Cliff, etc), we need a serious withdrawal of capital from risky exposure or mass influence of sidelined funds into the system. It would be extremely difficult to line up the necessary events to spur lasting rally (another interim stimulus, a move towards permanent fix for the Euro-zone, a turn in growth, slow recovery in benchmark rates, etc), but that doesn’t preclude another temporary rally on another short-term fix. Meanwhile, the backdrop has deteriorated enough that all it would take is the infectious belief that stimulus has reached is limits to spark fear.

 

Euro Hopes Seek Spain Bailout, Fear Centered on Greece

 

Europe’s two greatest threats carry opposing high-impact possibilities. While both Greece and Spain can see their situations improve or deteriorate, there is a greater influence over the euro and investor sentiment depending on which way they fall. Considering Spain is the Eurozone’s fourth largest economy, a fully engaged crisis can cause severe problems for the region’s future. However, there are still a number of interim steps that the country would have to go through before the market considered it hopeless. In fact, should Spain ask for a full rescue, it would very likely spur a substantial rally and perhaps even sentiment rally. It wouldn’t solve the underlying issues but it would delay the pain. Alternatively, Greece has passed through too many iterations of rescue for investors to be fooled by temporary measures. Furthermore, the country is struggling just to receive aid to keep running. Amid a lot of data, there is also a Troika-Greece meeting on Monday and Wednesday.

 

Japanese Yen: Japan’s Fiscal Cliff Could Drive USDJPY to 85, Beyond

 

The market is well aware of the fiscal shortfalls of Japan, but the country’s troubles on this front have not received as much press (from financial news and traders) as its US counterpart. This was at least partially due to the fact that there was a hard time frame to the United States’ trouble (the Fiscal Cliff that can cut $600 billion from GDP at the end of year) while the world grew accustomed to Japan’s debts. Well, that passive acceptance may come to an end as the government struggles to pass a bill necessary to keep operating. The recently announced stimulus program will tap reserve funds. But, by the end of November – with a scheduled debt sale – the country may run out of cash.

 

Canadian Dollar Sensitive to Jobs Data as Policy Wavers

 

Loonie skeptics have long warned that the Canadian economy is facing the same sort of troubling housing bubble and consumer debt that led so many other country’s to crisis. Yet, if it isn’t an immediately pressing problem, why not take advantage of the currency’s relative yield and stability. That ideal mix of safety and return may be coming to an end. Moody’s this past Friday placed six large Canadian banks on downgrade reviews. Next week, we have Canadian employment figures which can further weigh BoC Governor Carney’s concerns about ‘growing risks’.

 

New Zealand and Australian Dollar: Rely on Risk Trend, If that Fails Intervention

 

Both the Aussie and kiwi dollars have shown exceptional resilience through a questionable risk environment. Both are investment currencies for global Forex and interest rate traders; but their historically low yields are bolstered by a severe lack of alternative options with positive, real return. Central banks have recognized this and started to diversify into these funds. To offset this stubborn inflow, RBA and RBNZ central bankers are likely hoping that risk aversion drops carry to offer exchange rate relief. If that doesn’t happen, they have to cut rates / intervene.

 

Oil Traders Watch Hurricane Sandy but Supplies Already Topped Off

 

Risk aversion and a long building supply-demand imbalance pushed US crude to its lowest close in three months this past week. Having fallen five out of the past six weeks, a clear trend is starting to develop (though futures volume and open interest are dropping). With the speculative appeal of the commodity tarnished, the market recognizes production at 17-year highs. Not even Hurricane Sandy can change that glut.

 

Gold Posts First Three-Week Decline in 13 Months, Next Break 1700?

 

The bear trend that began for gold at the beginning of this month just below 1800 is proving just as consistent as the climb that preceded it. The metal is now eyeing 1700 with something that looks like hesitation. A dollar tumble and/or stimulus for Spain are among the few events that can turn this tide. Meanwhile, we are seeing the most consistent bear trend in 13-months, a drop in speculative interest and building volume.

 

Oct 27, 2012

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OctaFX.Com - Forex Analysis: Dollar Waits for Catalyst as S&P 500 Hints at Rebound

 

 

 

THE TAKEAWAY: The US Dollar has pulled back as prices digest last week’s upward breakout. Traders now look to the S&P 500 for direction cues amid signs of a rebound.

 

US DOLLAR – Prices continue to retest resistance-turned-support at the upper boundary of a falling channel set from the June 1 high (9897) having broken higher after forming a bullish Piercing Line candlestick pattern.

 

A rebound sees initial resistance remains at 9963, the 38.2% Fibonacci retracement, with a push above that exposing the 50% Fib at 10032. Alternatively, a drop below support targets rising trend line support at 9859.

 

Daily Chart - Created Using FXCM Marketscope 2.0

 

 

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Oct 29, 2012

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Forex News: Euro Rises on Surprising Spanish GDP

 

 

 

 

THE TAKEAWAY: Spanish GDP drops by 0.3% in Q3, better than expected -> Better GDP could lower expectations for bailout -> Euro rises

The Spanish economy shrank by 0.3% in the third quarter, marking 4 straight quarters of economic contraction.

 

However the drop in gross domestic product was better than the expected 0.4% decline, as predicted by forex news sources, and better than the previous quarter’s 0.4% drop in GDP. The third quarter saw a 1.6% drop in GDP from Q3 of 2011, according to National Statistics Institute.

 

Spain is said to be considering a bailout from the EU via the ESM bailout fund, but has thus far resisted asking for the aid. An improving economy could lower our expectations for a Spanish bailout request.

 

In forex markets, the Euro climbed on the positive economic news, despite its effect on bailout expectations, rising close to 1.2950 against the US Dollar.

 

EURUSD has since erased those gains following disappointing German employment data. Support could be provided by a rising month-long trend line which is currently near 1.2843.

 

EURUSD 15-minute: October 30, 2012

 

 

 

October 30, 2012

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Forex News: Euro Erases Gains on Intense Rise in German Unemployment

 

 

 

 

THE TAKEAWAY: German unemployment rises by 20,000 in October -> German unemployment rate at 6.9% -> Euro reverses gains

 

The amount of people looking for work in Germany has increased at the fastest pace in 6 months as the unemployment rate remained at an 11-month high.

 

The rise in unemployment during October was 20,000 (seasonally adjusted), double the expected 10,000 person rise in those unemployed, and significantly higher than last month’s revised 12 thousand rise in amount of people looking for work.

 

The unemployment rate remains at 6.9% for the second month, as last month’s rate was revised higher from 6.8%, according to the Federal Labor Agency.

 

 

The amount of people out of work in Germany now totals 2.94 million. The German economy has suffered because of the Euro debt crisis, and the GDP only rose 0.3% in the second quarter. Germany is the biggest economy in the Euro and signs of economic suffering are Euro negative in forex markets.

 

 

In currency trading, EURUSD erased earlier gains that were made following a Spanish GDP release and retracted from a short term 1.2950 resistance. Support could now be provided by a rising month-long trend line, which is currently near 1.2843.

 

EURUSD 15-minute: October 30, 2012

 

 

 

October 30, 2012

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Forex News: Italian Benchmark Bond Prices Soar, and so Does the Euro

 

 

 

 

Following a meeting in Berlin, France Finance Minister Moscovici and German Finance Minister Schaeuble announced that they are aiming for a solution to Greece by November. They said that they both want to see Greece remain in the Euro-zone, and that the solution will be discussed further in tomorrow’s Euro-group meeting tomorrow.

 

 

Schaeuble declined to comment on the size of the funding gap in Greece, but added that they can’t go in the opposite direction on debt reduction. Moscovici said he doesn’t want to reopen the discussion on Euro bonds. Greece has previously said that the government might run out of money by November. The release of these statements had little effect on forex markets.

 

Obviously, the biggest story of the day is Hurricane Sandy and its impact on the East Coast of the US. Bloomberg is reporting estimates of 20 billion dollars of damages from the hurricane and US stock markets will remain closed today.

 

The US markets may reopen as soon as tomorrow, and there has been no noticeable effect on currency trading from the hurricane since some early losses to EURUSD on Monday morning.

 

The big catalyst in today’s trading was the BoJ decision to expand asset purchases. The stimulus expansion barely met expectations and therefore had a positive effect on Yen trading. BoJ’s Shirakawa and a government official speaking after the meeting both agreed that the central bank must continue to act until an end of deflation.

 

In Spain, the GDP in Q3 was reported to have contracted less than expected and therefore gave a brief boost to the Euro to just a bit short of 1.2950 in trading.

 

That gain was soon erased by higher than expected unemployment in Germany.

 

Finally, an Italian bond sale saw a drop in 10-year bond yields to 4.92% from 5.24% in September’s sale. EURUSD bounced back towards 1.2950 following the sale news, where the currency is still trading.

 

The North American session calendar is light and traders should keep an eye out for updates relating to Greece or any serious changes to damage estimates from the hurricane.

 

EURUSD Daily: October 30, 2012

 

 

 

October 30, 2012

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OctaFX.Com - Forex Analysis: Euro Vulnerable on CPI Print, Yen May Fall on US Data

 

 

 

 

The Euro may face selling pressure on swelling ECB rate hike bets as inflation hits a three month low. The Yen is vulnerable if US economic data boosts risk appetite.

 

Talking Points

 

• Euro Vulnerable as CPI Slowdown Fuels ECB Interest Rate Cut Expectations
  
• Dollar, Yen May Extend Losses as Chicago PMI Rebound Boosts Risk Appetite
  

 

 

 

The preliminary estimate of October’s Eurozone CPI reading headlines the economic calendar in European hours. Expectations call for the annual inflation rate to tick lower to 2.5 percent, marking the lowest print in three months. The outcome may weigh on the Euro as forex traders interpret fading price pressure as leaving the door open for the ECB to cut interest rates amid signs of deepening recession in the single currency area.

 

Later in the day, the spotlight turns to the US data docket and the Chicago PMI report. Expectations call for an uptick to 51.0 in October after a disappointing 49.7 print in the prior month, putting the gauge back above the 50 “boom-bust” level. The result stands to reinforce the recent improvement in US economic data and could boost overall risk appetite, a scenario that is likely to put downward pressure on the safe-haven Japanese Yen and US Dollar.

 

The two anti-risk currencies already came under pressure overnight as Asian stocks pushed higher, sapping demand.

 

The MSCI Asia Pacific regional benchmark equity index added 0.7 percent after a gauge of US home prices rose to the highest since September 2010. The release buoyed hopes that a firming recovery in the world’s largest economy will help support demand for Asian exporters.

 

 

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Oct 31, 2012

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OctaFX.Com - ECB: Loan demand sags in slack eurozone economy

Eurozone central bank reports 'pronounced' fall in demand for loans as businesses hold back

 

 

 

 

 

FRANKFURT, Germany (AP) -- The European Central Bank has more dismal numbers about the slack eurozone economy.

 

 

The chief monetary authority for the euro reports a "pronounced net decline" in business demand for credit in the third quarter. Its quarterly bank lending survey shows that companies are not asking for money.

 

 

Credit shows signs of shrinking even though banks are themselves finding it easier to raise money as the turmoil from the eurozone debt crisis has eased.

The key figure showed a minus 28 percent balance, reflecting the difference between banks reporting more and less loan demand. The figure worsened from 25 percent in the second quarter.

 

 

The eurozone economy shrank 0.2 percent in the second quarter and many fear it could sink into recession when third quarter figures come out Nov. 15.

 

 

 

Oct 31, 2012

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OctaFX.Com - ECB: Loan demand sags in slack eurozone economy

Eurozone central bank reports 'pronounced' fall in demand for loans as businesses hold back

 

 

 

 

 

Unemployment for the 17 countries that use the euro rose to a record high of 11.6 percent in September.

 

 

 

 

Oct 31, 2012

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OctaFX.Com - Forex Analysis: US Dollar Classic Technical Report 11.01.2012

 

 

Prices remain wedged between resistance-turned-support at the upper boundary of a falling channel set from the June 1 high (9884) and the 38.2% Fibonacci entrancement at 9963.

 

A break higher exposes the 50% Fib at 10032. Alternatively, a drop below support targets rising trend line support at 9867.

 

 

 

 

 

 

 

 

Nov 1, 2012

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OctaFX.Com - Forex News: Sterling Rises as UK Construction Activity Expands

 

 

 

 

THE TAKEAWAY: UK construction PMI for October rises to 50.9 -> Report is very pessimistic despite expansion -> Sterling rises

 

Following two months of reduction, UK construction activity expanded in October according to Markit’s Purchasing Managers’ Index. The construction PMI was reported at 50.9, beating expectations for an index result of 49 and higher than last month’s 49.5 index result. A PMI result below 50.00 indicates deterioration in activity.

Civil engineering saw a rise in construction output, while residential output was the weakest area of construction, and commercial activity was marginally reduced. New order volumes for construction were lower which led to lower employment in the industry.

 

Markit’s Senior Economist Tim Moore said that, ‘the bigger picture remains bleak given ongoing falls in new orders alongside renewed job cuts across the sector over the month.’

 

Yet despite some of the pessimism in the report, Sterling climbed higher in forex trading on the surprising index level. GBPUSD climbed above 1.6100 following the release of the forex news. Resistance could be provided by a two week high around 1.6174.

 

 

GBPUSD 15-minute: November 2, 2012

 

 

Nov 2, 2012

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OctaFX.Com - Dollar strength keeps gold gains in check

 

 

MADRID (MarketWatch) — Gold futures rose Monday to recover a fraction of recently lost ground last week, but further moves higher for the dollar were keeping a lid on gains as investors got jittery ahead of the U.S. presidential election.

 

Gold futures for December delivery GCZ2 ticked up $6.50 to $1,681.70 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange.

 

In regular trading hours on Friday, gold futures tumbled $40.30, or 2.4%, to settle at $1,675.20 an ounce, the metal’s lowest level since last August. See: Gold drops more than $40, suffers fourth weekly loss

“Gold continues in a consolidation phase within an ongoing bull trend,” said Ross Norman, chief executive officer at Sharps Pixley.

 

“A lot of people are frustrated by gold’s actions since last summer, but good jobs data last Friday translated into a stronger dollar,” he said.

“On the other side of that is gold weakness. The market is making a small, but steady recovery, but dollar strength continues to weigh heavily on gold at the moment.”

 

Gold losses were triggered by a better-than-expected report on U.S. employment, which showed payrolls rose 171,000 in October, well above the 120,000 new jobs that economists had expected. See: U.S. adds 171,000 jobs as hiring picks up

That news boosted the dollar. A stronger dollar tends to weigh on prices for dollar-denominated commodities such as gold, since it makes them more expensive for holders of other currencies.

 

The ICE dollar index DX-Y.NYB recently rose to 80.729, up from 80.600 in late North American trading Friday. See: Dollar rallies as jobs data spur QE doubts

The euro EURUSD dropped to a nearly two-month low against the greenback on Monday amid renewed uncertainty over Greece’s next tranche of bailout money.

 

Some caution ahead of the U.S. election also underpinned the greenback. U.S. stocks traded lower in early action and Europe and Asia stock markets also fell.

Julian Jessop at Capital Economics said that the drop for the precious metal on Friday underlined its sensitivity to expectations of further central-bank monetary support.

 

“Commodity markets are probably right to be thinking that they cannot rely both on a strong economic recovery in the U.S. and unlimited largesse from the Fed,” they said.

 

For a stronger rebound, gold will need a new catalyst, Jessop said.

“This is likely to come soon in the form of a renewed escalation of the crisis in the euro zone and a revival of safe-haven demand,” he said.

 

Deutsche Bank commodity strategists said that they expected a renewed weakening in the U.S. dollar to help precious-metal returns into the end of the year.

 

Reuters Gold edges higher Monday after dropping 2% in the previous session.

“We find a weak seasonal tendency for the U.S. dollar to display extreme weakness during December,” they said.

 

Across the rest of the metals complex, silver for December delivery SIZ2 rose 11 cents to $30.97 an ounce, palladium futures for delivery in the same month PAZ2 fell $1.45 to $598.20 an ounce, while platinum for delivery in January PAF3 fell $1.70 to $1,543.20 an ounce.

 

December copper futures HGZ2 edged down 2 cents to $3.46 per pound.

 

 

 

 

Nov 5, 2012

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OctaFX.Com - Forex Analysis: Dollar at Risk if US Election Yields Decisive Outcome

 

 

 

 

The US Dollar is likely to face selling pressure if the US general election yields a decisive outcome, opening the door for a re-focus on resolving the “fiscal cliff” fiasco.

 

Talking Points

 

• All Eyes on US Election, Forex Traders to Welcome Any Decisive Result
  
• Euro, Pound May Suffer as Data Boosts Bets on ECB and BOE Stimulus
  
• Aussie Dollar Leads Comm Bloc Higher as RBA Leaves Rates Unchanged
  

 

 

A busy European economic calendar is likely to be overshadowed as traders await the outcome of the US general election. Financial markets appear broadly chipper, which likely reflects hopes for an easing to the deadlock in Washington DC in the months leading up to today’s ballot.

 

Indeed, a decisive victory by either candidate that opens the door for the current President and legislature to shift their focus toward addressing the fast-approaching “fiscal cliff” – a set of automatic spending cuts and tax hikes slated to trigger at the turn of the calendar year that may tip the US back into recession – is likely to be seen as broadly supportive for risk appetite. Indeed, S&P 500 index futures are pointing higher, warning the safe-haven US Dollar is vulnerable.

 

 

On the data front, the spotlight is on the final revision of October’s Eurozone PMI Composite reading. Expectations call for confirmation at a 40-month low, an outcome that may put downward pressure on the Euro as forex traders consider deepening recession to increase the probability of additional easing from the ECB.

 

UK Industrial Production is likewise on the docket, with forecasts pointing to another contraction in September. The result may weigh on the British Pound as markets consider the possibility of a QE expansion after the BOE completes the latest round of asset purchases this month.

 

The so-called “commodity bloc” currencies outperformed in overnight trade as risk appetite firmed across financial markets. The MSCI Asia Pacific regional stock index rose 0.2 percent, pulling the growth-geared Canadian and New Zealand Dollars higher against their US namesake.

 

The Australian Dollar outperformed its counterparts after the Reserve Bank of Australia opted to keep rates unchanged at 3.25 percent. RBA Governor Glenn Stevens said that while “risks to the outlook are still seen to be on the downside…prices data [turned out] slightly higher than expected and recent information on the world economy slightly more positive.”

 

Stevens added the effects of past rate cuts continue to filter into the overall economy, hinting that will offer ongoing stimulus even without an additional reduction this time around.

 

 

 

 

Nov 6, 2012

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OctaFX.Com - Forex Analysis: US Dollar Breaks Resistance as S&P 500 Rally Fizzles

 

 

 

 

THE TAKEAWAY:The US Dollar continued to grind through layers of technical resistance as an upside surge in the S&P 500 failed to produce meaningful follow-through.

 

US DOLLAR TECHNICAL ANALYSIS– Prices are pulling back to retest resistance-turned-support at 9963, the 38.2% Fibonacci retracement. A break below this boundary exposes the 9874, a level marked by the intersection of a rising channel bottom set from mid-September and a falling channel top established from the June 1 high. Channel resistance is at 9998, with a break above that aiming for the 50% Fib at 10032.

 

 

Daily Chart - Created Using FXCM Marketscope 2.0

 

 

Nov 6, 2012

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OctaFX.Com - Forex Analysis: US Dollar Stalls at Resistance as S&P 500 Bounces

 

 

 

 

THE TAKEAWAY:The US Dollar has stalled below technical resistance as the S&P 500 has once again managed to hold up above the stubbornly resilient 1400 level.

 

US DOLLAR TECHNICAL ANALYSIS– Prices narrowly edged though resistance-turned-support at 9963, the 38.2% Fibonacci retracement. Sellers now aim to target 9868-77 area, marked by a rising channel bottom set from mid-September and a falling channel top established from the June 1 high. Resistance is at the 10000 figure, with a break above that aiming for the 50% Fib at 10032.

 

 

Daily Chart - Created Using FXCM Marketscope 2.0

 

S&P 500 TECHNICAL ANALYSIS – Prices are retesting support-turned-resistance in the 1424.90-30.90 area, with a break higher aiming to challenge the underside of a rising channel set from the June 4 swing low (now at 1450.30). Near-term support lines up at the 1400 figure, with added reinforcement offered by the 38.2% Fibonacci retracement at 1394.30. A drop below the latter level targets the 50% Fib at 1369.40.

 

Daily Chart - Created Using FXCM Marketscope 2.0

 

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Nov 7, 2012

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