FOREX TRADING

USD Gains as Stocks Remain Weak

• USD: Higher, investors are reducing risk exposure & deleveraging as equity markets trade lower
• JPY: Higher, Japan’s economy is back in deflation, BOJ upgrades its assessment of Japan’s economy
• EUR: Lower, Trichet says too early to say if the crisis is over
• GBP: Lower, CBI warns on UK public debt, calls on the government to balance the budget by 2016
• CAD and AUD: AUD & CAD lower, tracking weaker equity and commodity prices, Canada’s Q3 growth slows

Overview

The USD continued to rally into the weekend supported by deleveraging as investors are reducing risk exposure in reaction to a drop in equity and commodity markets. Weaker than expected earnings at Dell, coupled with a statement from ECB President Trichet that it’s too early to tell if the financial crisis is over and fresh warnings about UK debt appear to be the catalyst for the latest wave of selling in global equity markets and liquidation of high yield currencies. It’s not clear whether this weeks recovery in USD is a reflection of liquidation and booking of profits by investors and funds for year-end or if the USD recovery reflects concern about strength and sustainability of the global recovery. Next week’s focus turns to the release of US preliminary Q3 GDP and the FOMC minutes for this month’s policy meeting. US Q3 GDP is expected to see a downward revision from the advanced report of a 3.5% rise. The FOMC minutes are expected to confirm that the Fed is not yet ready to signal a timeframe for tightening of monetary policy. The Fed’s Plosser says now is not the time for the Fed to begin to hike rates. The FOMC minutes are expected to confirm that he Fed will maintain low yields for an extended period. The question is whether the continuation of low Fed yields will encourage more participation in USD funded carry trades before year end or if Fed policy outlook has been discounted by the sharp rallies in the equity and commodity markets since March of this year. Pimco’s Gross is recommending that investors move to defensive sectors of the economy because of expectation that growth will be sluggish at best.

Today’s US data:

There were no major US economic reports released in today’s trade.

Upcoming US data:

Next week’s US economic calendar includes the November 23rd release of existing home sales for October expected at 5650k compared to 5570K last month. FOMC minutes for the October meeting are also due for release on the 23rd.On November 24th Q3 preliminary GDP will be released expected at 3.3% compared to 3.5% in the advanced report. September Case Shiller house price index and November consumer confidence will also be released on November 24th. The Case Shiller index is expected at -9.9 compared to -11.3 last month and consumer confidence is expected to improve to 49 from 47.7 in October. On November 25th initial jobless claims for week ending 11/21 will be released expected at 501k compared to 505k last month along with personal income and personal consumption expected at 0.1% and 0.4% respectively. November final University of Michigan sentiment and October new home sales will be released on November 25th as well. Michigan consumer sentiment is expected unchanged at 66 and new home sales are expected at 410k compared to 401k a last month.

JPY

JPY edged higher supported by safe haven flows sparked by a drop in global equity markets. The BOJ elected to hold rate policy unchanged as expected and upgraded its economic assessment of Japan’s economy. The BOJ statement said that the economy is picking up and the decline in CAPEX spending continues to slow. The BOJ expects a moderate recovery in 2010/11 JPY gains were limited by report that the Japanese government says that the Japanese economy is back in deflation and by diminished Yuan revaluation speculation as China’s Zhou says that the Chinese government is passive on the USD value. Japan’s Finance Minister Fujii is encouraging the BOJ to maintain accommodative monetary policy and expressed concern that deflationary pressures will hinder the Japanese government’s efforts to boost the economy. JPY firmed in cross trade gaining over 1% versus the GBP with GBP pressured by concern about rising UK government debt and gaining against the AUD as investors continue to deleverage positions in high-yield assets.

Next week’s Japanese economic calendar includes the November 25th release of the October trade balance expected at 165bln compared to 521bln last month. On November 27th, October CPI will be released expected at -0.4% compared to flat last month. On November 27th October household spending will be released expected at -0.5% compared to 0.1% along with October unemployment expected unchanged at 5.3% and October retail sales expected at -0.7% compared to 0.9% last month.

Key technical levels to watch in USD/JPY include support at 88.01 the October 7th low with resistance at 90.40 the November 13th high.

EUR

EUR traded lower pressured by the weaker equity markets, a statement from ECB President Trichet that it’s too early to declare the crisis over and in reaction to weaker German producer prices. Trichet’s comments contributed to diminishing risk appetite and demands for riskier assets. German producer prices were flat in October. This report confirms that inflationary pressures are well in check in Germany. There was limited reaction to Trichet’s comments that the ECB will gradually withdraw from its covered bond purchases and he restated commitment to quickly remove nonconventional policy measures that threaten price stability. Recent EU economic data points to a continuation of steady ECB policy outlook. Wednesday, the EU reported that the current account slipped to deficit last month and construction output fell sharply since in September. These reports suggest that the EU recovery is likely to be weak. Thursday a German think tank warned Germany may face a double dip recession in late 2010. The OECD expects the US economy to expand by 2.5% in 2010 in the EU economy to expand by 0.9%. The EUR may be horrible to speculation that the US economy will expand faster than the EU economy in 2010 according to the OECD. In addition, the OECD says that the ECB should maintain accommodative policies in 2010 and withdraw the emergency support measures gradually as the economy recovers. The German Finance Minister Schauable says that the global economy is far from self sustainable recovery.

Next week’s EU economic calendar includes the November 23rd release of EU flash manufacturing and service PMI. The Manufacturing PMI is expected at 51.5 compared to 50.7 last month and service PMI is expected at 53 compared to 52.6 last month. On November 24th German November IFO index will be released expected at 92.1 compared to 91.9 last month. Also on November 24th, EU September industrial orders will be released expected at 0.7% compared to 1% last month. On November 26th,EU October M3 will be released expected 2% compared to1.8% last month along with German November CPI expected unchanged at 0.1%.

The technical outlook for the EUR is mixed as the EUR falls below is 1.4900. Expect EUR support at 1.4702 the November 4th low with resistance at 1.4999 the November 17th high.

GBP

GBP traded sharply lower pressured new concerns about the UK budget outlook and sell stops triggered on the break of 1.6500. Officials at the Confederation of British Industries (CBI) are calling on the UK government take aggressive steps to reduce the budget deficit. The CBI warns that if the UK government does not take action to reduce its debt, the UK debt rating will be at risk of a downgrade and the BOE may not be able to maintain yields at record low levels. Thursday the UK reported that public sector borrowing rose sharply. The UK public sector borrowing rose to £11.4bln in October, a rise to 6.1 billion was expected. Earlier in the quarter ratings agencies warned that the UK AAA debt rating may be at risk if debt continues to rise. UK budget data may revive fears about the UK government debt rating. The MPC minutes for the November BOE policy meeting were released Wednesday and the minutes showed that the BOE is split on whether to expand its asset purchases or leave the asset purchases at the current level. BOE board member Myles called for a £40bln expansion in asset purchases to help ensure UK economic recovery. BOE board member Dale warned about the risk of expanding purchases and how it may be costly to undo the impact of the additional stimulus. The OECD says that the BOE should hold rates at record low level until 2011 to ensure a sustainable recovery.

Next week’s UK economic calendar includes the November 25th release of revised Q3 GDP expected at -0.4%.On November 26th November CBI distributive trade will be released On November 26th expected at 5% compared to 8% last month.

The technical outlook for GBP is negative as GBP trades below 1.6500. Expect near-term support at 1.6400 the November 3rd low with resistance at 1.6725 for November 19th high.

CAD

CAD traded lower pressured by a spike in risk aversion as equity markets slide and in reaction to a statement from the BOC that Canadian growth was softer in Q3. The BOC went on to say that the strength of the CAD is slowing growth and CAD strength could cause further setbacks in Canada’s recovery. Thursday, Canada’s Finance Minister Flaherty said that the Canadian economy has not yet recovered. BOC governor Carney gave no indication whether the BOC will take action to try to slow the rate of the CAD rally. The BOC however expects that the economy will expand in the fourth quarter and went on to say that it will keep rates at record low until June 2010. The OECD says they expect Canada’s Q3 GDP flat. BOC Governor Carney also said that he expects the USD to remain the global reserve currency for the foreseeable future. This week’s Canadian economic data was mixed with report of a sharp increase in investment flows to Canada and a slight uptick in Canada’s core inflation. Net investment flows to Canada rose by 13.6bln, an inflow of just 3bln was expected. Wednesday, Canada reported that core inflation rose for its first time in five months. BOC members are focused on Canada’s core inflation rate attorneys statements indicate that the BOC has no plans to change monetary policy at this time

No major Canadian economic data is due this week.

The technical outlook for CAD is mixed as USD/CAD trades above 1.0600. Look for near-term support at 1.0547 the November 19th low with resistance at 1.0780 the November 9th high.

AUD

AUD traded sharply lower pressured by weaker equity market trade and stop loss selling triggered on the break of 9100. As noted above, equity markets and commodities traded lower pressured by concern about UK debt outlook and weaker than expected earnings at Dell. In addition, the Fed’s Fischer warned that unemployment in the US was unlikely to fall below 10% for some time. AUD has been weakening for most of the week pressured by a drop in risk appetite and deleveraging of high-yield assets as investors question the sustainability of the global recovery and look to book profits before year end. Uncertainty about RBA policy outlook is an additional source of selling pressure for the AUD. The RBA policy minutes released Tuesday appeared to have a less hawkish bias. The RBA policy minutes released suggest that the pace of tightening is open to question. RBA rate hike speculation is already discounted by the recent rally in AUD. Cash sources note that demand for the AUD appears to be re-emerging above 9000. Focus turns to next week’s release of Australia’s auto sales and CAPEX spending. AUD price direction will hinge on whether investor deleveraging continues.

Next week’s Australian economic calendar includes the November 23rd release of October new car sales expected at 1% compared to 2.9% last month. On November 26th Q2 Capex will be released expected at 4% compared to 3.3% last month.

The technical outlook for the AUD is mixed as the AUD drops below 9100. Expect AUD support at 8951 the November 4th low with resistance at 9216 the November 20th high.

By Michael J. Malpede

Easy Forex

Michael J. Malpede is Chief Market Analyst with Easy-Forex® and has previously been featured on Bloomberg TV, Bloomberg radio, Reuters, MarketWatch, Wall Street Journal, Chicago Tribune, Chicago Sun Times, Toronto Star and Nikkei press. In analyzing the markets, he draws from 29 years of Foreign Exchange Research as a Foreign Exchange Analyst.

Please note that Forex trading (OTC Trading) involves substantial risk of loss, and may not be suitable for everyone. This report is provided by Easy- Forex® for informative purposes only. In no way it is a recommendation by Easy-Forex® for you to engage in any trade. It is your sole responsibility and you will have no claims with regards to this report against Easy-Forex®. If you do not agree to this, you are strongly advised not to use this report. Hence, Easy-Forex® shall not be held responsible for any outcome of trading decisions, in regards with this report or similar reports.

Euro Set for Further Losses

The main attention over the past few weeks has been on the US economy and dollar. There has been a tentative shift in sentiment over the past few days and there is a strong probability that the Euro-zone will be in greater focus over the next few weeks. The structural weaknesses are still very important and the bad-debt situation in the banks has not been dealt with during 2009. Credit conditions are also liable to deteriorate.

Option expiry is liable to trigger further volatility in the very short term with immediate Euro support at 1.48, but the net risks suggest that the Euro will weaken to 1.4650 against the dollar next week.

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BoJ Holds Rates Steady

Market Brief

Risk appetite stayed weak in the Asian session, after Wall Street closed lower but, overall, most of the trading in currencies and commodities was well in their ranges. The EURUSD traded between 1.4880 and 1.4940, while spot Gold traded between $1140 and $1147. With no first tier economic releases scheduled today, we don’t expect any one way trade of break out of the monthly ranges. But ranges can also be very profitable, especially the EURCHF. The USDJPY remains heavy below 90.61 high, with the break of 88.74 low opening the 88.01 key support.

As was universally expected, the BoJ held its uncollateralized overnight cash rate at 0.1%. The decision was unanimous and the BoJ statement stated that the domestic economy was improving but would continue with its ‘extremely accommodative’ monetary policy. Finance Minister Fujii warned about the dangers of rising bond yields, which could counteract the ultra loose monetary policy and small business improvement initiatives.

Today, China’s Central Bank Governor, Zhou Xiao Chuan, said ‘It’s like watching a tournament,…We just watch the game. Regardless who wins or loses, the issue of whether the winner or loser benefits the spectator doesn’t arise.’ In short, don’t expect pressure from the West to have any influence on China’s exchange rate mechanism.

There is little economic data of note today. More significantly, speakers in Frankfurt today include ECB President Trichet and Bundesbank President Weber. Outside the euro area, SNB President Roth will speak in Fribourg.

ACM FOREX

Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

Daily Technical Analysis

EURUSD Outlook

The EURUSD attempted to push lower yesterday, bottomed at 1.4842 but bearish pressure was limited as the pair closed higher at 1.4915. The bias is neutral in nearest term. My technical focus remains at the bearish channel, which is still valid indicating bearish correction remains intact with the upper line of the bearish channel as key resistance area. As you can see in my daily chart below, the upper line has been doing a good job to keep the bearish correction intact since the rejection to move above 1.5062 area (peaks). Immediate resistance at 1.4965 area. Break above that area could be a serious threat to the bearish correction scenario re-testing 1.5062 area. Initial support at remains at the key support level around 1.4850/20 area.

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U.S. Midday Currency Market Hit By Risk Aversion

The dollar index strengthened across the board in Thursday trade, as the market traded in a classic risk-aversion phase that mirrored a drop in global equity trade. The major pairs headed lower from the start of the Asian session, and continued to so during the following sessions.

The sell-off on the major currencies against the Usd was driven by equity and commodity market trade, which also posted substantial declines. In the current economic climate of questionable global growth, risk aversion means lower stocks, higher bonds, and stronger Usd as Treasury notes are bought.

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USD Extends Gains as Risk Appetite Falls

• USD: Higher, risk appetite drops as stocks and commodities decline, fear of double dip recession
• JPY: Higher, supported by safe haven demand, gains in cross trade
• EUR: Lower, German Wiseman said Germany may be at risk to double dip recession in late 2010
• GBP: Lower, retail sales improve and public-sector borrowing rose more than expected
• CAD and AUD: AUD & CAD lower, tracking weaker equity and commodity prices, RBA policy uncertainty

Overview

A wave of pessimism hit the global equity and commodity markets Thursday sending the USD sharply higher as investors trim risk exposure. President Obama’s warning that too much US debt could increase the risk of a double dip recession, a similar warning from the German Wiseman that Germany could be at risk for a double dip recession in late 2010 and a statement from Treasury Secretary Geithner that the credit crunch is not over appeared to have dented enthusiasm about the global recovery.

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Yields Grind Lower as Stock Markets Weaken

Interest rate futures are higher across the globe as investors continue to tread further and further down the seemingly endless red carpet rolled out by global central banks. Recent accentuation by various political and monetary chiefs confirming the period of low rates is practically a permanent fixture in the global house of cards is again a key factor today. With jobless claims in the U.S. coming in at an in-line 505,000 reading bond and short term yields continue to heed the words of central banks as interest rate yield curves flatten out.

An OECD report overnight predicts firmer growth than at the time of its previous June survey but still expects no change in Fed or ECB policy until one year from now. The OECD forecasts growth across its leading 30-member nations will be 1.9% next year and 2.5% in 2011. Underscoring the impact of the healing banking crisis is the fact that they don’t predict the pace of growth last seen during the first quarter of 2008 until the third quarter of 2011.

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Daily Technical Analysis

EURUSD Outlook

The EURUSD had a bullish momentum yesterday, topped at 1.4989 and closed at 1.4959 after rejected to move consistently below 1.4820 key support area and even after Trichet said that he support a strong Dollar. However, on my daily chart below the bearish channel remains valid and the upper line of the bearish channel provide a good resistance. So I think the bearish correction even a bearish reversal scenario (double top) is still intact. Once again, we need violation to the bearish channel to end this bearish correction and valid break above 1.5062 to confirm the bullish scenario towards 1.5150 and 1.5300

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USD Lower, Housing Starts Fall 10.6% and Stocks Slide

• USD: Mixed, housing starts and building permits drop sharply, CPI rises
• JPY: Lower, JAL may be on the verge of bankruptcy, monitoring the debate over the Yuan
• EUR: Higher, current account slipped to deficit, construction output falls, gains in cross to GBP
• GBP: Lower, MPC split on quantitative ease, discussed possible cut in the remuneration rate
• CAD and AUD: AUD lower & CAD higher, Australia’s leading indicators rise, Canada’s CPI turns higher

Overview

After a two-day rally the USD was back on the defensive Wednesday pressured by the return of risk appetite as equity markets rally in Europe and gold trades at a new record high. A statement from Fed Chairman Bernanke that US interest rates would remain low for extended period and maybe longer if unemployment continues to rise appears to be the latest catalyst for the USD selloff. The fact that the Fed is not prepared to withdraw stimulus at this time fuels demand for commodities and contributes to improving risk sentiment.

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Positive Equity Markets Weaken Dollar

Overall, the positive European equity markets have helped the majors push the Ysd lower. Following the major’s strength seen during the Asian and the European sessions, the dollar index broke again below the 75.00 area, which has been an important swing point over the last few weeks of trading. A break below this level might send the dollar to much lower values.

Ahead, the market will focus on the U.S. and Canadian CPI numbers and on the U.S. Building Permits. These three releases are scheduled during the U.S. open, with the Canadian CPI at 07:00 EST, while the U.S. reports scheduled at 08:30 EST.

Dollar Index Technical View: TheLFB Member Charts

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Another Day Brings Another Direction for the Greenback. Bank of England Minutes Show Diverging Views within the MPC

Fundamental market inputs tell confusing story for the USD – perhaps a reason for its erratic behavior of late.

MAJOR HEADLINES – PREVIOUS SESSION

• US Nov. HAHB Housing Market Index out at 17 vs. 19 expected and 17 in Oct.
• US Weekly ABC Consumer Confidence rose to -45 vs. -46 the previous week
• Australia Q3 Wage Cost Index rose 0.7% QoQ as expected
• EuroZone Sep. Current Account was -5.4B vs. +0.6B in Aug.
• UK BoE Minutes showed split vote of 1-7-1 for latest monetary policy decision
• EuroZone Sep. Construction Output fell -8.0% YoY vs. -10.0% in Aug.
• UK Nov. CBI Industrial Trends Total Orders rose to -45 from -51 in Oct.
• Canada Oct. CPI fell -0.1% MoM vs. +0.1% expected
• Canada Oct. Core CPI rose +0.1% vs. 0.0% expected
• US Oct. CPI rose +0.3% MoM and fell -0.2% YoY vs. +0.2%/-0.3% expected, respectively
• US Oct. CPI ex Food and Energy rose +0.2% MoM and +1.7% YoY vs. +0.1%/+1.6% expected, respectively
• US Oct. Housing Starts fell to 529k vs. 600k expected and 592k in Sep.
• US Oct. Building Permits fell to 552k vs. 580k expected and 575k in Sep.

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Daily Technical Analysis

EURUSD Outlook

The EURUSD had a significant bearish momentum yesterday, bottomed at 1.4807 but failed to stay below key support area 1.4820, closed higher at 1.4860 and traded around 1.4887 at the time I wrote this comment. As you can see in my daily chart below, it’s a fact that after peaked at double top formation around 1.5062 area the pair keep moving lower in a bearish channel indicating significant downside correction and even potential bearish reversal, especially if we have a consistent move below 1.4820 area with 1.4625 and 1.4450 as technical targets.

Right now, after failed to stay below 1.4820 yesterday, the pair bouncing to the upside with 1.4950 as potential resistance to be tested. Break above that area should trigger further bullish momentum testing the bearish channel. Bearish correction can only be canceled if the bearish channel violated to the upside, but for me the real bullish continuation scenario can only triggered by a movement above 1.5062.

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USD Consolidates Gains on Soft PPI

• USD: Higher, core PPI falls more than expected, industrial production & capacity use rise less than expected
• JPY: Lower, tertiary index activity drops more than expected, concern about deflationary pressures
• EUR: Lower, trade surplus widens as exports rise, pressured by a drop in risk appetite
• GBP: Lower, consumer inflation rises more than expected, tracking risk appetite
• CAD and AUD: AUD & CAD lower, RBA may pass on a December rate hike, crude, gold stocks lower

Overview

USD traded higher Tuesday as risk appetite takes a sudden turn down as equity markets decline in reaction to a warning from the IMF that the global recovery will be sluggish. The USD may be also benefiting from comments from Fed Chairman Bernanke that Fed would help ensure that the USD is strong and a source of global financial stability and comments from ECB President Trichet calling on the US to confirm that strong USD is in the best interest of the US. Bernanke also said that the Fed is watching USD price movements closely.

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Dollar Index Finds Buyers

Overall, the dollar index started slowly to add points during the Asian session and continued doing so throughout the first part of the European session. Right now, every major currency is trading below Tuesday’s opening price against the dollar, even thought the U.K. sterling and Japanese yen currencies showed some resilience. The dollar’s uptrend seen overnight reflects the selling from the equity markets, and echoes Mr. Bernanke’s latest comments, which called for a stronger dollar.

Dollar Index Technical View: TheLFB Member Charts

4 Hour Chart: Mixed. Main price points: 74.70, and 75.77. Looking for: Wave V)

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European Market Update

Two-way risk returns to the market

ECONOMIC DATA

(FI) Finland Oct PPI M/M 0.1% v 0.1%e; Y/Y; -8.4% v -8.0%e

(HU) Hungary Sept Avg Gross Wages Y/Y: 0.7% v 0.1%e

(SZ) Swiss Sept Retail Sales-Real Y/Y: -1.6% v -1.0% prior

(SW) Sweden Q3 Total Number of Employees Y/Y: -2.8% V -1.9% prior

(SP) Spain Sept Industrial Orders Y/Y: -18.8% v -18.6% prior; Service Sector Sales Y/Y: -10.6% v -13.4% prior; Service sector employment Y/Y: -6.0% v -6.3% prior

(HK) Hong Kong Oct Unemployment Rate: 5.2% v 5.3% prior

(RU) Russian Oct Industrial Production M/M: 0.8% v 5.1% prior, Y/Y: -11.2% v -8.1%e

(UK) Oct CPI M/M: 0.2% v 0.1%e; Y/Y: 1.5% v 1.4%e; Core CPI Y/Y: 1.8% v 1.8%e

(UK) Oct RPI M/M: 0.3% v 0.1%e; Y/Y: -0.8% v -1.0%; Retail Price Index Y/Y: 1.9% v 1.8%e

(EU) Euro-Zone Sept Trade Balance 3.7B v -2.3B prior; Trade Balance sa: 6.8B v 2.2B prior

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