FOREX TRADING

Gold Tops $1200 An Ounce

U.S. Dollar Trading (USD) never gained traction as global stocks markets roared back to life and risk was put ‘back on’. November ISM Manufacturing was weaker than forecast at 53.6 vs. 55.7 but this offset by October Pending Homes Sales at +3.7%. DJIA +126 points closing at 10471, S&P +13 points closing at 1108 and NASDAQ +31 points closing at 2175. Looking ahead, ADP National Employment forecast at -155k vs. -203k previously. Also released, Crude Oil Inventories forecast at -0.4% vs. 1% previously.

The Euro (EUR) was strong after testing support below 1.5000 in Early Europe went on to trade above 1.5100 resistance. EUR/JPY was extremely well supported in Asia on BOJ speculation and held those gains to close comfortably above 130. October German retail sales were +0.5% as forecast. Overall the EUR/USD traded with a low of 1.4970 and a high of 1.5119 before closing at 1.5090. Looking ahead, October PPI forecast at 0.0% vs. -0.4% previously.

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Gold Rush Continues

U.S. Dollar Trading (USD) with the FOMC minutes confirming a low rate outlook for some time the market took this as a signal to sell the USD and during the day key levels were broken across the board whilst Gold continued to surge higher. October Durable Goods Orders were -0.6% vs. 2% previously. Also released, Weekly Jobless Claims at 455k vs. 501k previously. In US Stocks, DJIA +30 points closing at 10464, S&P +5 points closing at 1110 and NASDAQ +7 points closing at 2176. Looking ahead, Thanks Giving Holidays.

The Euro (EUR) Broke through the Key 1.5000 in late Asia and then kicked on to break major resistance and year highs at 1.5060 in the US session to finish the day at 1.5140. Broad USD weakness and strength in Gold and Oil helped underpin the move higher which opens up potential further gains. Overall the EUR/USD traded with a low of 1.4960 and a high of 1.5146 before closing at 1.5130. Looking ahead, October Private Loans are forecast at -0.5% vs. -0.3%.

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European Market Update

USD finds it hard to be loved; Gold hits fresh all-time highs near $1,1170/oz; Stocks aided by rising risk appetite

ECONOMIC DATA

(HU) Hungary Sept Retail Trade Y/Y: -7.3% v -6.8%e

(TT) Taiwan Oct Industrial Production Y/Y: 6.6% v 5.6%e; Export Orders Y/Y: 4.4% v 4.0%e
(TT) Taiwan Oct Unemployment rate: 6.0% v 6.1%e

(FR) France Nov PMI Manufacturing: 54.2 v 56.0e; PMI Services: 60.4 v 57.8e

(SZ) Swiss Oct Money supply M3 Y/Y: 7.7% v 7.7% prior

(GE) Germany Nov Advanced PMI Manufacturing: 52.0 v 51.6e; PMI Services: 51.5 v 51.2e

(IC) Iceland Oct Wage Index M/M: 0.3% v 0.3% prior; Y/Y: 1.9% v 1.9% prior

(EU) EU Nov Advanced PMI Manufacturing: 51.0 v 51.2e; PMI Services: 53.2v 52.9e; PMI Composite: 53.7 v 53.4e

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities: European markets have entered the abbreviated US week on a light tone. Rebounding from last week’s equity declines, markets have been supported across the board by the ‘global recovery’ story and new multi-year and all time highs in commodity prices. Corporate news, much like trading volumes have been thin with a relatively quiet weekend and pre-market session. Lloyds [LLOY.UK] announced the completion of the first stage in its multi-stage capital raise plan and Heritage Oil [HOIL.UK] confirmed sale of certain Ugandan license stakes to Italian firm ENI [ENI.IT]. Following commodity rises, basic resources and heavy industrial names have been the outstanding players throughout the session.

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Positive Equities, And The Dollar Holds On

Overall, after a positive Asian equity trading session, in which the dollar index was pushed to a new low, the currency market started retracing throughout the morning European trade. Interestingly, this is happening on a day that equity markets are trading deep in the green, something that does not happen very often. The recent pattern has been that equity markets trade higher, which pulls the dollar lower.

Over the last two weeks of trading the currency market saw a general lack of momentum and volume, which usually appears near the end of an uptrend, signaling that the market needs a short-term retracement of the dollar selling. The currency market is trading in an overbought condition against the dollar.

Dollar Index Technical View: TheLFB Member Charts

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Majors Yearly High Swing Point

Overall, the dollar index strengthened throughout the Asian session, but as the market headed towards the European open, the dollar gave up to most of its gains. The pair most affected by the selling was the pound, which plunged 150 pips from the Asian session open. Right now, the currency market is close to the high of the current year, just waiting for a trigger to push the price action one way or the other.

Dollar Index Technical View:

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USD Lower, Stocks Surge, G-20 to Maintain Stimulus

• USD: Lower, IMF says USD still on the strong side, G-20 pledged to maintain stimulus, low Fed yields
• JPY: Higher, Japan tops China as biggest buyer of US debt, reserves rise to a new record
• EUR: Higher, EU Sentix rises, German exports surge, strong German industrial output
• CHF: Higher, unemployment at 11 year high, consumer prices fall, rising risk of intervention
• GBP: Mixed, supported by improving risk appetite
• CAD and AUD: AUD &CAD higher, tracking stocks, risk appetite, higher crude and record price of gold

Overview

USD traded sharply lower Monday pressured by a number of factors which included, stronger global equity markets, a pledge by the G-20 to continue with stimulus and a statement from the IMF that the USD is overvalued. The USD was also pressured by G-20 silence on USD decline. Speculation that the Fed will maintain low yields for an extended period coupled with the G-20 pledge to not withdraw stimulus until the global recovery is secure fueled demand for equities and sparked an improvement in risk appetite.

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Forex Market Stalls In U.S. Trade

Overall, the U.S. session proved to be rather dull, even though the dollar index set a new low for the current year. At the same time, the currency market failed to follow the equity and the commodity markets, which continued to advance during the U.S. session. Over the last few days of trading, the major pairs had small price ranges and very small trading volume; something that is not usually seen as positive.

Dollar Index Technical View:

4 Hour Chart: Short. Main price points: 75.00. Looking for: Wave V)

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Up And Down European Trade

Overall, the dollar strengthened during the first part of the overnight session, but the currency market turned around once the London session opened, when the European cash markets and the S&P futures started rallying to the upside. However, the market momentum was still somehow light, as the Japanese market was closed and ahead, the U.S. and Canadian markets share a Bank holiday.

The euro (Eur/Usd 1.4730) had a range of approximately 60 pips during the overnight session, between the neutral pivot point and the 20-day moving average. Over the last five days of trading, the 20-day moving average proved to be an important price point, which until now, the euro was unable to break at 1.4685.

The pound (Gbp/Usd 1.5770) broke below the 1.5800 support area during the European session, and reached the lowest value since late May. The pound has been in a downtrend for about a month, a time in which it lost almost 1000 pips, even though the other major pairs made new highs for the current year over the same period. The pound’s weakness comes as the BoE tries almost every possible method to fight deflation.

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Dollar Weakens Late In The Session

Overall, the price action seen during the U.S. session was fairly muted despite numerous high level reports being released. The only pairs to make significant changes on the day were the cad, which strengthened by 0.79 percent, and the pound which weakened by 0.55 percent. Manufacturing in the New York region has increased during September while retail sales surged during August, exceeding analysts’ initial forecasts.

The euro (Eur/Usd 1.4663) bumbled along the neutral pivot point at 1.4595 for most of the U.S. session. However, the dollar started to weaken near the middle of the session which pushed the euro above the recent ceiling at 1.4652 to test the R1 level at 1.4673. The pair was rejected shortly thereafter and began using the previous resistance at 1.4652 as support. (more…)

U.S. Reversal Holding During Asian Session

Overall, Forex Market trade desks in the U.S. session and the Asian desks seem all too happy to continue that trend during the session. It will be interesting to see what happens in the following European and U.S. sessions. A report released from RICS showed that house prices in the U.K. continued to rise in August.

The euro (Eur/Usd 1.4636) has found some strength during the Asian session for the second time. The pair is running into near term resistance at the 1.4650 level which was also the high of the previous day.

The pound (Gbp/Usd 1.6621) has strengthened by 31 pips or 0.19 percent in the early Asian session. The pair is finding intermediate resistance at the 1.6629 level which also acted as resistance during the previous session. Should this strength continue the pair will find more resistance at the 1.6740 area while the 20 and 50 day moving averages at 1.6420 and 1.6468 respectively, will provide support. (more…)

September Blow-Out Top

As has been previously reported in recent LFB headlines, the month of September equity trade is 50/50 at best in regard to ending in the green. “The Stock Market handbook goes back to the time that dirt was young, and records September as a poor month in equities” TheLFB Trade Team said. “$1000 invested just in September since 1919 was worth $800 in the year 2000, and interestingly, the first week or so is not so bad, it is weeks three and four that have done the damage” they added.

At this time the Japanese fiscal half year-ends, (September is the final month of Japan’s fiscal first half), and is when Japanese corporations have accounting incentives to repatriate funds back to Japan from overseas investment. This is also the time of year that the U.S. Mutual Fund year end on October 31st comes into focus. “Outside of historical trends, we start to see reasons behind the pattern of trade” TheLFB Trade team said.

“The fact that we go into September at yearly highs may help in regard to forward momentum, but the moment greed is replaced with fear of loss, the automated sell button tends to get jammed down.”

There is nothing that a 95% automated trading environment likes more than to overshoot a target, just for good measure, and with liquidity still being kept in very tight circles, there is a high probability chance that a blow-out reversal day is coming. “Hopefully it will be a one-off, and things quickly stabilize.” they added.

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New York Session Recap

The risk trade remained in vogue in NY trading and the greenback ultimately suffered the consequences. Equities extended what we deem to be a rather unsustainable rally and rose 1% for the fifth consecutive session. This was not confirmed by the bond market, which also rallied. The 10-year yield collapsed more than -12 basis points to 3.35% as a strong 30-year auction showed robust demand for US paper. Gold trended higher in NY trading after a downbeat overnight but the $1000 level remains elusive nonetheless.

Economic data were mixed and murky. US and Canadian trade both printed lower than expect with the US deficit now -$32.0 billion while Canada slipped into a -1.4 billion shortfall. Initial jobless claims in the US sank to 550K from a prior 576K (revised from 570K) but the report was fraught with seasonal adjustment difficulties surrounding the Labor Day Holiday. In other words, we could see a snap back up next week. The other piece of important news was oil inventories and they sank -5.9 million on the week. The market was looking for a -1.8 million draw, so the surprise was palpable. Oil actually traded lower, however, as buying was prevalent ahead of the number and profit taking dominated once the news was out.
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