FOREX TRADING

USD Lower, UAE Offers to Provide Liquidity to Dubai

FX Highlights

• The USD is trading lower as UAE Central Bank provides emergency liquidity to Dubai and global equity markets trade mixed, risk appetite improves as the UAE action helps to provide stability to the financial markets reducing fears of contagion from the Dubai debt crisis, GBP trades mixed initially pressured by report of a unexpected decline in UK consumer confidence with downside limited by report of an increase in mortgage approvals, EU consumer prices rise more than expected in November, JPY higher despite Japanese threats to take action against the JPY rise, commodity currencies trade higher as risk appetite improves and fears of significant fallout from the Dubai debt crisis fade
• Focus turns to today’s release of Chicago PMI and Canada’s IPPI/ RMPI and GDP
• Japan’s October industrial production rose 0.5%, November manufacturing PMI falls to 52.3 from 54.3 last month, October housing starts fall 27.1%, Japan’s PM says that Japan should act swiftly in regard to the Yen rise, Japan’s National Strategy Minister says the Japanese government has agreed to try to stop the JPY’s appreciation, JPY higher (more…)

UK’s Mortgage Approvals Rises To The Highest In 18 Months, While CPI Beat Estimates In The Euro Zone

Today U.K. released important data reflecting the economic situation in the economy after the improvement signaled recently. The British economy managed to moderate the pace of contraction in the third quarter to 0.3% from 0.6% in the second quarter thanks to the stimulus measures adopted by the BoE to stall the deterioration.

Mortgage approvals for October, after touching its highest in 18 months in September, it continued its upside rise in October to from 56.2 thousand. It seems that the housing market which was responsible for the crisis is emerging from a rout.

(more…)

Daily Technical Analysis

EURUSD

The pause in Euro rally triggered by Dubai World debts payment delay so far expected to be temporary as after hit bottom at 1.4827, Euro recovered quickly, closed much higher at 1.4985 on Friday and the trendline support still did a good job prevented further bearish attack thus technically keep the bullish scenario intact, especially if price able to move consistently above 1.5062 today, which is technically potential to be tested after rebound from 1.4827. However, note that the false breakout from 1.5062 area (see my daily chart below) also hide a potential bearish view and price could make another downside attempt testing the trendline support and 1.4827 once again, especially if price break below 1.4920/00 area today. No one knows whether the impact of Dubai World is only a temporary panic reaction last week or will continue to shake world stocks market thus could bring the Dollar higher this week. The bias is bullish in nearest term testing 1.5062. Valid break above that area should trigger further bullish momentum towards 1.5140/50 area

(more…)

UAE Central Bank Steps In To Help Dubai

U.S. Dollar Trading (USD) was extremely volatile as stock markets around the world went on a roller coaster ride with Asia stocks down over 3% and then European and US stock recovering late in the day. Large stops across the board sent EUR, AUD, Gold and Oil plummeting at the European opening but with Analysts calling the Dubai crisis not as bad as some feared and speculation that Abu Dhabi will step in and help its smaller state, the markets mood recovered from fear and panic. DJIA -154 points closing at 10309, S&P -19 points closing at 1091 and NASDAQ -37 points closing at 2138. Looking ahead, November Chicago PMI forecast at 53.7 vs. 54.2 previously.

The Euro (EUR) broke through 1.4900 at the height of the panic and fell quickly to lows of 1.4830 before recovering with Gold and Oil. EUR/JPY was extremely volatile as the pair tracked USD/JPY lower to 127 Yen before recovering to close at 129.50. Overall the EUR/USD traded with a low of 1.4830 and a high of 1.5025 before closing at 1.4990. Looking ahead, November EU Inflation forecast at 0.4% vs. -0.1% previously.

(more…)

FX Technical Commentary

Euro 1.5000

Initial support at 1.4802 (Nov 20 low) followed by 1.4702 (Nov 4 low). Initial resistance is now located at 1.5020 (Nov 27 high) followed by 1.5144 (Nov 25 high)

Yen 86.60

Initial support is located at 85.00 (key level) followed by 84.80 (Nov 27 low). Initial resistance is now at 87.48 (Nov 26 low) followed by 88.01 (Oct 7 former low).

(more…)

USD Erases Some Gains, Markets Rebound from Lows

• USD: Higher, erases some gains as markets recover from early lows, overreaction to Dubai World news
• JPY: Lower, trades at 14 year high versus USD, Japan steps up threat of intervention
• EUR: Lower, EU economic and business sentiment rose for the eighth consecutive month
• GBP: Lower, Dubai may be forced to sell UK assets, BOE’s Posen and Bean expect UK growth in Q4
• CAD and AUD: AUD higher, CAD lower, tracking commodity prices and equity markets, gold off lows

Overview

The USD traded higher Friday supported by safe haven demand sparked by fears about a Dubai debt crisis. Two major Dubai firms seek to delay debt payments ahead of plans to restructure Dubai World. Dubai World’s debt is estimated at 80 to 90bln. Dubai is seeking to raise billions in bonds to repay the debt and has asked for a temporary standstill from its creditors. The Dubai World news surprised investors and fueled a reduction in risk exposure.

JPY surged to a 14 year high versus the USD supported by safe haven demand sparked by concern about a Dubai debt default. JPY upside was partly limited by threat of intervention and rumors that the BOJ was checking for rates. Commodity currencies traded lower pressured by weaker crude and gold prices with crude initially tumbling $4 a barrel and gold dropping by 2%. The decline in commodities was attributed to a spike in risk aversion generated by concern that the Dubai debt crisis could spark a new global financial crisis.

(more…)

Canada’s Current Account Deficit Hits Record High

The current account deficit was C$13.1 billion in the third quarter, slightly smaller than market expectations. The second-quarter deficit was revised to C$11.9 billion from the previous estimate of C$11.2 billion. A widening in the goods deficit more than offset a marginal narrowing in the services deficit and smaller investment income shortfall.

Canada’s traded goods balance moved further into deficit in the third quarter as the increase in exports was significantly slower than the rise in imports. This increase in the deficit marked the second quarter in a row that the goods account has been in deficit.

(more…)

Euro Zone Confidence Continues Up The Ladder

Confidence levels around the euro zone continues to improve which is what the European Central Bank (ECB) President Jean-Claude Trichet was projecting especially as the 16-nation region is showing increasing signs of recovery while the zone expanded by 0.4 percent in the third quarter.

The euro zone business climate indicator rose to -1.56 from revised prior -1.79 from -1.78 which is higher than the forecasted -1.65. Consumer confidence for November improved to -17 which is better than the prior -18 inline with expectations

Economic confidence rose to 88.8 from revised 86.1 from 86.2, higher than the expected reading of 88.0, this reading marked the highest level since September 2008. As consumers have higher confidence in the euro zone outlook is a good sign for the economy, since this might mean higher spending because consumers usually tend to spend when they are confident with the outlook.

(more…)