FOREX TRADING

EUR/GBP

Current level – 0.8759

Longer term bias remains bullish for the pair, the pullback to the bearish trendline has been completed, testing bullish longer term trendline.

Intraday: capped by the 100MA in 4 hours, traders are taking this moving average as a reference to short the pair. Headed lower to re test 0,8750 to 0,8700 support

USD/CAD

Current level – 1-0115

Long term bias for the USD/CAD bearish, the weekly close below 1,0250 signals further declines. Forming a base around parity.

Intraday: reversal from 1,0200/20 resistance. Fib supports at 1,0110 and 1,0050, expect some bullish momentum at these levels.

GBP/JPY

Current level – 142.50

Long term bias remains bearish but since we reached 132,00 the pair is making higher highs indicating a possible short term bottom.

Intraday: holding above 4 hour 200MA is a good bullish sign. Facing 61,8% fib resistance at 142,90. Needs a brake above 144,90 to resume the trend.

DeltaStock Inc. – Online Forex & Securities Broker
www.deltastock.com

RISK DISCLAIMER: These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from generally accessible data sources. The forecasts made are based on technical analysis. However, Delta Stock’s Analyst Dept. also takes into consideration a number of fundamental and macroeconomic factors, which we believe impact the price moves of the observed instruments. Delta Stock Inc. assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon the information on this page. Delta Stock Inc. shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, losses or unrealized gains that may result. Any information is subject to change without notice.

EUR/USD closed lower on Wednesday as it consolidated some of the rebound off last week’s low. A short covering rally tempered early session losses and the high-range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are turning bullish signalling that sideways to higher prices are possible near-term. Closes above the 20-day moving average crossing are needed to confirm that a short-term low has been posted. If its renews this month’s decline, the 38% retracement level of the 2008-2009-rally crossing is the next downside target.

(more…)

Daily Technical Analysis

EURUSD Outlook

The EURUSD made indecisive movement on Friday. On daily chart below we can see that after made a false breakdown on November 03, price now retreat to the upside, traded above the trendline indicating potential further bullish scenario with 1.4950 – 1.5060 as nearest target before 1.5300. Immediate support at 1.4850 – 1.4800 area. Break below that area should diminish my bullish outlook but as long as the pair stay above the trendline, I prefer a bullish scenario.

(more…)

Daily Technical Analysis

EURUSD Outlook

We have a significant technical event yesterday. As you can see in my daily chart below, the trendline support has been violated to the downside, bottomed at 1.4625. This fact should trigger further weakness for the Euro with 1.4450 as technical target, but we need to be very careful here since the pair closed much higher at 1.4716 indicating limited bearish. Every time a trendline support is broken, oftenly price retreat to the upside and testing the trendline area, which is now become a resistance. So, as long as the pair stay below the trendline, expect further bearish scenario.

(more…)

Attention Turns To FOMC

U.S. Dollar Trading (USD) hit multi-week highs in Europe against a raft of currencies as banking worries put stock markets on the back foot. News of India buying gold and Warren Buffet making a large investment in US railways help the US reverse the market’s direction and helped gold to rally to fresh year highs above $1080. September Factory Orders forecast at 0.8% were actually 0.9%. In US Stocks, DJIA -17 points closing at 9771, S&P +2 points closing at 1045 and NASDAQ +8 points closing at 2057. Looking ahead, US FOMC Rate decision widely expected to remain at 0.25% but with the market focused on the accompanying statement. Also released, ADP October Employment Report is forecast at -190k vs. -254k previously.

The Euro (EUR) fell to fresh lows below 1.4650 as the Euro came under pressure from concerns about European and UK banking issues. Some analysts are beginning to view the recent Euro rally as nearing a top and are focusing on the downside for the first time in many months. Ongoing sovereign support is helping to slow the decent. EUR/JPY found support below 132 Yen. Overall the EUR/USD traded with a low of 1.4625 and a high of 1.4813 before closing at 1.4720. Looking ahead, October PMI services forecast at 52.3 vs. 50.9 previously. Also released, EU September PPI forecast at -0.4% vs. 0.4% previously.

(more…)

European Market Update

China’s PBoC sees 2009 GDP exceeding the 8.0% target

ECONOMIC DATA

(GE) German Sept Real Wholesale M/M: -1.7%, Y/Y: -9.8%
(GE) German Retail Sales M/M: -0.5% v 1.0%e; Y/Y: -3.9% v -2.2%e

(UK) Nationwide Oct House Prices M/M: 0.4% v 0.6%e; Y/Y: 2.0% v 1.8%e; First annual increase in 19 months since Mar 2008

(FR) French Producer Prices M/M: -0.3% v -0.3%e; Y/Y: -8.1% v -8.1%e

(HU) Hungarian Sept Producer Prices M/M: 0.1% v -0.5% prior; Y/Y: 3.4% v 3.7%e
(HU) Hungarian Aug Final Trade Balance: €254.3M v €229.4M prior

(CZ) Czech Sept Prelim Industrial Output: -11.9% v -12.8%e

(SP) Spain Aug current account: -€3.2B v -€2B prior

(IT) Italian Sept PPI M/M: -0.3% v -0.3%e; Y/Y: -7.9% v -7.9%e

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

In equities: European markets looked set to ignore the sharp US (and to a lesser extent Asian) equity rally on the back of weak tech earnings out of Alcatel Lucent [ALU.FR]. Equities flirted with the unchanged before trending lower through the 4:00EST hour. Indian equity markets added further negative sentiment following misses from [BHARTI.IN], [SAIL.IN] and [RIL.IN] in yesterday’s session. Downside sentiment was shook off, led by out performance on the FTSE100 into 5:00EST. Earnings and commentary out of WPP [WPP.UK] regarding the ad market sent shares higher. Financials recovered from earlier losses with Lloyds [LLOY.UK] receiving two broker upgrades. Pharma earnings continued to beat with Sanofi-Aventis [SAN.FR] trading higher. Earnings out of Renault [RNO.FR], and Luxotica [LUX.IT] after the close yesterday, provided further equity lightness. Following a furious weak of earnings releases, equity markets have continued to trade on higher volume on the last trading day of October.

(more…)

After a brief pause, China’s foreign exchange reserves have resumed their blistering pace of growth: “The reserves rose a record $178 billion in the second quarter to $2.132 trillion, the People’s Bank of China said today on its Web site. That dwarfs a $7.7 billion gain in the previous three months.” Considering that the global economy remains embroiled in the worst recession in decades, this is frankly incredible. [Chart below courtesy of WSJ].

As far as currency traders are concerned, this development has two important implications, the first of which concerns the Chinese Yuan (also known as RenMinBi or RMB). A quick parsing of trade and capital flows data reveals that the majority of the $178 Billion came from unconventional sources. “The trade surplus was $34.8 billion in the second quarter and foreign direct investment was $21.2 billion.” Currency fluctuations (i.e. the depreciation in the Dollar relative to other major currencies) can explain a small portion, “leaving the bulk of the increase in the reserves unaccounted for.”

In short, most of the capital now flowing into China is so-called “hot money,” chasing a piece of the action in China’s surging property and stock markets. The benchmark stock index has risen 75% this year, making it the world’s best performer. In short, China is once again “caught in a squeeze similar to the one that bedevilled policymakers earlier this century, with a flood of hot money trying to force the government’s hand on the currency.” Either it allows the RMB to resume its upward path against the Dollar, or it raises interest rates rapidly to head off inflation. With the money supply now growing at an annualized rate of 30%+, the government is running out of time on this front.

The second implication concerns the composition of China’s reserves. You can recall that in recent months, Chinese officials have become more vocal about ending the Dollar’s role as the world’s reserve currency, and have even taken token steps towards achieving that goal. But the latest analysis suggests that when push comes to shove, China is still firmly behind the Dollar: “Estimates suggest around 65% of China’s official holdings are in U.S. dollar assets, and the remainder are denominated in euro, yen, sterling and other currencies. This mix has been relatively stable as the Chinese government continues to place the bulk of its reserves in U.S. Treasury securities.”

In fact, “stable” is an understatement. While other Central Banks are gradually paring their holdings of US Treasuries, China is adding to its own stockpile. Already the world’s largest holder of Treasuries, China added another $38 billion in May, for a total of $800 Billion. “On the contrary, Japan, Russia and Canada were sellers of US assets in May. Japan, the second-biggest international investor, reduced its total holdings by $8.7 billion to $677.2 billion.” Meanwhile, Zhou XiaoChuan, governor of China’s Central Bank has endorsed the current composition of reserves: “Despite the $800 billion in U.S. Treasuries, it is a diversified portfolio overall.” This certainly represents a step backwards for Mr. Zhou, who only a couple months ago was leading the charge for a global reserve currency.

Perhaps over the longer-term, it can begin to take steps to dislodge the Dollar, but for now, it appears that China has accepted the status quo. As one analyst observed, “We do expect China to increase its purchase of gold and other commodities over time, but these markets are just not big enough to make a meaningful dent in the structure of the overall FX holdings. For example, if China decided to hold 5 percent of its current $2 trillion reserves in gold, it would need to buy …the equivalent to about one year of world production. For other hard commodities, the cost of storage is high and prices fluctuate wildly.”

China did recently appoint a new official (an economist trained in the US) to manage its reserves. “The move isn’t likely to fluster foreign-exchange markets or herald any change in China’s exchange-rate policy and reform.” Still, Chinawatchers are advised to continue to monitor the situation closely for any signs of discontinuity.