FOREX TRADING

Majors Running On Sentiment

Overall, the major pairs were testing immediate support and resistance areas during the overnight session. Some volume entered the market as the dollar began to weaken. There were no major news reports released during the session so the pairs are currently running on sentiment until the European session begins.

The euro (Eur/Usd 1.4857) is currently testing the 20 day moving average as resistance after falling below during the last half of the US session. Just above the moving average is the neutral swing point at 1.4892 which will add to the resistance.

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European Market Update

Markets subdued ahead of US payroll report; EU Commission Report calls for vigilance as protectionist measures are adopte

ECONOMIC DATA

(SZ) Swiss Unemployment Rate: 4.0% v 4.0%e; Unemployment Rate seasonally adj: 4.1% v 4.2%e

(FI) Finland GDP Indicator: -8.4% v -8.5%e

(FR) French Sept Trade Balance: -€1.8B v -€3.0Be, Central Gov’t Balance: -€126M v -€128M prior

(RU) Russia Oct Reserves at $434.4B v $430.5Be

(HU) Hungarian Sept Trade Balance: €486M v €370Me

(CZ) Czech Sept Trade Balance (CZK) 17.8B v 16.3Be

(SW) Swedish Oct Budget Balance (SEK): -19.6B v -40.4B prior

(NO) Norwegian Sept Industrial Prod Manufacturing M/M: 2.2% v 0.4%e; Y/Y: -4.4% v -7.0%e
(NO) Norwegian Sept Industrial Production M/M: 0.9% v 1.5% prior; Y/Y: -1.2% v 0.0% prior

(UK) Oct PPI Input M/M: 2.6% v 1.5%e; Y/Y: +0.1% v -1.3%e
(UK) Oct PPI Output M/M: 0.2% v 0.2%e; Y/Y: 1.7% v 1.9%e
(UK) Oct PPI Output Core M/M: 0.3% v 0.2%e; Y/Y: 2.0% v 2.0%e

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities: European markets are seeking to print three consecutive days of positive trading, taking their cue from Australian RBA commentary during the Asian session and continued earnings rotation. Equity market ranges and levels have been erratic as a markets anticipate the release of US non-farm payrolls at 8.30EST. H1 earnings from British Airlines [BAY.UK] posted the groups worst pretax loss since the firm’s privatization in 1987. Despite this, the numbers were ‘less bad’ than some worst case scenarios and shares, along with its European airline peers moved higher. In further ‘less bad’ news, RBS [RBS.UK] reported its Q3, which showed improvements in its Net loss and loan loss provision figures. Solid figures from German insurance name Hannover Re [HNR1.GE] in contradicted yesterday’s disappointing earnings from Munich Re [MUV2.GE]. Into 5:30EST European equity markets trended sharply lower, surrendering the majority of their erratic gains. Health care and oil/gas names are leading under performers on the EuroStoxx 50 on lighter than average trading volumes.

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Dollar Weakens After Employment Reports

Overall:

The forex market saw a large amount of volatility during the U.S. session. After the U.S. employment reports were released most major pairs quickly reversed the trend that had been put in place during the earlier European session. The major pairs are going through swing changes at the moment so volatility is increasing while momentum shifts.

Dollar Index Technical View:

4 Hour Chart: Long possibilities. Main price points: 75.83, and 77.25. Looking for: Break through the 77.25

The index has bounced higher from our Fibonacci support area, discussed recently. Wave c of wave II) has found the bottom somewhere around the 76.50 area, which must hold for an up-trend continuation. If the 77.25 highs is taken out over the next sessions, then we will look for a higher wave III) move with the first target at 78.00 area.

Any break of 75.83 support will invalidate the wave count.

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ADP Signals Ongoing Weakness in Jobs, While Chicago PMI Signals Activity Remains Weak!

The U.S. economy continued to show signs of improvement in the second quarter of this year, as the pace of contraction eased noticeably from the first quarter of this year, as the economy contracted by an annual rate of 6.4% back in the first quarter, however, conditions improved drastically since then and the U.S. economy seems to be on its way to recover from the worst recession since WWII.

The U.S. economy contracted by 0.7% according to the final GDP estimate for the second quarter of this year better than median estimates of a 1.2% contraction and revised from the prior 1.0% contraction, whereas personal consumption declined by 0.9% only revised lightly higher from the prior reported 1.0% drop. (more…)