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OctaFX.Com - Dollar strength keeps gold gains in check

MADRID (MarketWatch) — Gold futures rose Monday to recover a fraction of recently lost ground last week, but further moves higher for the dollar were keeping a lid on gains as investors got jittery ahead of the U.S. presidential election.

Gold futures for December delivery GCZ2 ticked up $6.50 to $1,681.70 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange.

In regular trading hours on Friday, gold futures tumbled $40.30, or 2.4%, to settle at $1,675.20 an ounce, the metal’s lowest level since last August. See: Gold drops more than $40, suffers fourth weekly loss

“Gold continues in a consolidation phase within an ongoing bull trend,” said Ross Norman, chief executive officer at Sharps Pixley.

“A lot of people are frustrated by gold’s actions since last summer, but good jobs data last Friday translated into a stronger dollar,” he said.

“On the other side of that is gold weakness. The market is making a small, but steady recovery, but dollar strength continues to weigh heavily on gold at the moment.”

Gold losses were triggered by a better-than-expected report on U.S. employment, which showed payrolls rose 171,000 in October, well above the 120,000 new jobs that economists had expected. See: U.S. adds 171,000 jobs as hiring picks up

That news boosted the dollar. A stronger dollar tends to weigh on prices for dollar-denominated commodities such as gold, since it makes them more expensive for holders of other currencies.

The ICE dollar index DX-Y.NYB recently rose to 80.729, up from 80.600 in late North American trading Friday. See: Dollar rallies as jobs data spur QE doubts

The euro EURUSD dropped to a nearly two-month low against the greenback on Monday amid renewed uncertainty over Greece’s next tranche of bailout money.

Some caution ahead of the U.S. election also underpinned the greenback. U.S. stocks traded lower in early action and Europe and Asia stock markets also fell.

Julian Jessop at Capital Economics said that the drop for the precious metal on Friday underlined its sensitivity to expectations of further central-bank monetary support.

“Commodity markets are probably right to be thinking that they cannot rely both on a strong economic recovery in the U.S. and unlimited largesse from the Fed,” they said.

For a stronger rebound, gold will need a new catalyst, Jessop said.

“This is likely to come soon in the form of a renewed escalation of the crisis in the euro zone and a revival of safe-haven demand,” he said.

Deutsche Bank commodity strategists said that they expected a renewed weakening in the U.S. dollar to help precious-metal returns into the end of the year.

Reuters Gold edges higher Monday after dropping 2% in the previous session.

“We find a weak seasonal tendency for the U.S. dollar to display extreme weakness during December,” they said.

Across the rest of the metals complex, silver for December delivery SIZ2 rose 11 cents to $30.97 an ounce, palladium futures for delivery in the same month PAZ2 fell $1.45 to $598.20 an ounce, while platinum for delivery in January PAF3 fell $1.70 to $1,543.20 an ounce.

December copper futures HGZ2 edged down 2 cents to $3.46 per pound.

Nov 5, 2012

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OctaFX.Com - Forex Analysis: Dollar at Risk if US Election Yields Decisive Outcome

The US Dollar is likely to face selling pressure if the US general election yields a decisive outcome, opening the door for a re-focus on resolving the “fiscal cliff” fiasco.

Talking Points

 

  • All Eyes on US Election, Forex Traders to Welcome Any Decisive Result
  • Euro, Pound May Suffer as Data Boosts Bets on ECB and BOE Stimulus
  • Aussie Dollar Leads Comm Bloc Higher as RBA Leaves Rates Unchanged

 

A busy European economic calendar is likely to be overshadowed as traders await the outcome of the US general election. Financial markets appear broadly chipper, which likely reflects hopes for an easing to the deadlock in Washington DC in the months leading up to today’s ballot.

Indeed, a decisive victory by either candidate that opens the door for the current President and legislature to shift their focus toward addressing the fast-approaching “fiscal cliff” – a set of automatic spending cuts and tax hikes slated to trigger at the turn of the calendar year that may tip the US back into recession – is likely to be seen as broadly supportive for risk appetite. Indeed, S&P 500 index futures are pointing higher, warning the safe-haven US Dollar is vulnerable.

On the data front, the spotlight is on the final revision of October’s Eurozone PMI Composite reading. Expectations call for confirmation at a 40-month low, an outcome that may put downward pressure on the Euro as forex traders consider deepening recession to increase the probability of additional easing from the ECB.

UK Industrial Production is likewise on the docket, with forecasts pointing to another contraction in September. The result may weigh on the British Pound as markets consider the possibility of a QE expansion after the BOE completes the latest round of asset purchases this month.

The so-called “commodity bloc” currencies outperformed in overnight trade as risk appetite firmed across financial markets. The MSCI Asia Pacific regional stock index rose 0.2 percent, pulling the growth-geared Canadian and New Zealand Dollars higher against their US namesake.

The Australian Dollar outperformed its counterparts after the Reserve Bank of Australia opted to keep rates unchanged at 3.25 percent. RBA Governor Glenn Stevens said that while “risks to the outlook are still seen to be on the downside…prices data [turned out] slightly higher than expected and recent information on the world economy slightly more positive.”

Stevens added the effects of past rate cuts continue to filter into the overall economy, hinting that will offer ongoing stimulus even without an additional reduction this time around.

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Nov 6, 2012

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OctaFX.Com - Forex Analysis: US Dollar Stalls at Resistance as S&P 500 Bounces

THE TAKEAWAY:The US Dollar has stalled below technical resistance as the S&P 500 has once again managed to hold up above the stubbornly resilient 1400 level.

US DOLLAR TECHNICAL ANALYSIS– Prices narrowly edged though resistance-turned-support at 9963, the 38.2% Fibonacci retracement. Sellers now aim to target 9868-77 area, marked by a rising channel bottom set from mid-September and a falling channel top established from the June 1 high. Resistance is at the 10000 figure, with a break above that aiming for the 50% Fib at 10032.

Forex_Analysis_US_Dollar_Stalls_at_Resistance_as_SP_500_Bounces_body_Picture_5.png

Daily Chart - Created Using FXCM Marketscope 2.0

S&P 500 TECHNICAL ANALYSIS – Prices are retesting support-turned-resistance in the 1424.90-30.90 area, with a break higher aiming to challenge the underside of a rising channel set from the June 4 swing low (now at 1450.30). Near-term support lines up at the 1400 figure, with added reinforcement offered by the 38.2% Fibonacci retracement at 1394.30. A drop below the latter level targets the 50% Fib at 1369.40.

Forex_Analysis_US_Dollar_Stalls_at_Resistance_as_SP_500_Bounces_body_Picture_6.png

Daily Chart - Created Using FXCM Marketscope 2.0

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Nov 7, 2012

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OctaFX.Com - Forex Analysis: Dollar Slowly, Consistently Edges Lower as Equities Swing

Dollar Slowly, Consistently Edges Lower as Equities Swing

The US Presidential elections have a long standing influence over investor confidence. The outcome of political power in the world’s largest economy can significantly influence growth, trade and financial regulation. However, as with any economic event, this particular driver is set within a hierarchy of fundamental impact. Regardless of who wins the election, it would still be a struggle to answer the United States’ Fiscal Cliff. Furthermore, we have other big-ticket items such as the Euro-area crisis, Chinese regime change and Japanese fiscal countdown that all denote a distinctive impact on global markets. With that in mind, we recognize the market’s unusual activity over the past 24 hours. It is very similar to how we approach the average NFPs release: even though the event’s outcome is not likely to have a lasting influence over a fundamentally-crowded market, the uncertainty its presence carries pumps volatility and sidelines trend generation.

Now, as we move forward, we may very well see risk trends regain traction and revive cross-market correlations. Through the past trading session, we witnessed a significant deviation between the standard ‘risk’ measures. While the S&P 500 rallied sharply into resistance (13,300), the Forex’s safe haven US dollar was holding relatively steady. Soon after the NY market close, equities took to a quick reversal while the dollar accelerated into its decline with EURUSD moving back above 1.2825 – yet another contradictory sentiment move. As the election results started to take shape in the overnight, however, risk’s influence started to firm up. With the dollar holding onto its losses, the equity futures found a moderate bounce. Revived correlations are a strong step towards developing a lasting trend. Yet, does a resolution of the US vote equate to a better investment environment. The bigger, international concerns aside; the unconfirmed vote tally leaves the United States with a divided Congress that may struggle to force necessary budgetary changes to avoid the looming fiscal cliff.

Euro May Climb on US Crisis Distraction - Juncker

Most policy makers (fiscal and monetary) follow academic lines of thought in their expectations of how their efforts will impact their economies and currencies. However, every now-and-then there is an official that acknowledges the speculative influence in the market. Euro Group head Jean-Claude Juncker revealed a streak of ‘trader’ in his outlook when he remarked early Wednesday morning that the US Fiscal Cliff could direct negative attention away from the Euro-area (offsetting the more ‘cheerleading’ effort in suggesting Europe’s fundamentals were better than those of the US and Japan). From a real world market perspective, the countdown to the United States’ self-imposed deficit adjustment can paint a far less stable situation than the more measured austerity balance in the Eurozone.

That said, there are two variables in this austerity comparison. The euro’s own fundamental issues are more immediate than the end-of-the-year countdown for the US. This past session, Greece’s general strike set the backdrop to the Parliamentary vote on the new austerity bill (reportedly aiming to cut pensions by 15 percent and raise the retirement age). Spain’s Rajoy suggested he would not ask for a rescue unless forced to - saying he needed to be certain it would lower yields. Today is a Euro-risk lull. Thursday brings forecasts, meetings and the ECB decision.

Australian Dollar Presses Through Risk Trends on Improved Rate Outlook

Risk trends have shifted back and forth over the past 24 hours, yet the Aussie dollar maintained its bullish ambitions. While US equity futures took a dive through the early Wednesday trading session, AUDUSD held steady above 1.0400. This is partially due to the greenback’s own lack of commitment; but other, less investment-sensitive Aussie pairs (AUDNZD, AUDCAD, GBPAUD) have shown a consistent support for the commodity currency. This additional strength can be easily traced back to the RBA. The central bank held its benchmark lending rate yesterday morning to catch a significant portion of the market off guard. With the market pricing in a 47 percent probability of a cut and 20 of 27 economists in a Bloomberg poll expecting the same, there was a surprise quotient. The 12-month rate outlook now calls for only 50 bps worth of cuts.

Japanese Yen: Officials Want Risk Trends, Stimulus to Weigh Currency

With the volatility on risk trends elevated, the Japanese yen is under scrutiny. However, policy officials are no doubt hoping that the US election results can sustain a buoyant outlook. Yesterday, BoJ Executive Director Hayakawa (in charge of monitoring the financial system) stated his belief that the bank’s new lending program (unlimited at a marginal 0.1 percent) could weaken the currency. His supposition was that this effort would translate into a pickup in carry interest. However, carry is a global factor and rates are low worldwide. What they need is true risk appetite.

New Zealand Dollar Advances after RBNZ Financial Report, Ahead of Jobs Data

Green RBNZ Governor Graeme Wheeler is keeping up the effort of stirring speculative interest in the kiwi. The central banker released the Financial Stability Report this morning. In the statement, Wheeler said stated that he believed it was unlikely that the kiwi exchange rate would fall significantly going forward – adding weight to his dismissal of QE. Up next, we have jobs figures for hard data.

Swiss Franc: FX Reserves Expected to Build, Though Euro Share Under Scrutiny

The Swiss National Bank already holds 432 billion francs in foreign currency reserves – a record for the group and one of the highest amongst its counterparts. The update for October is due in the upcoming European session and a fresh high is expected. However, those monitoring the EURCHF will be more concerned about the possible composition of holdings. The central bank has slowly diversified away from euros recently.

Gold Surges During US Election, Trend is a Dollar Matter

There was some speculation amongst the gold bugs that if the US election went a certain way, Fed Chairman Bernanke would be ousted and the policy of stimulus expansion would be reversed with his exit. It is a stretch to say the metal rallied because this scenario was disproved; but it would be outright dangerous to trade on this belief carrying a lasting influence. The next move for gold will be based on the dollar.

Nov 7, 2012

OctaFX.Com News Updates

 

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OctaFX.Com - Forex Analysis: Dollar Slowly, Consistently Edges Lower as Equities Swing

Dollar Slowly, Consistently Edges Lower as Equities Swing

The US Presidential elections have a long standing influence over investor confidence. The outcome of political power in the world’s largest economy can significantly influence growth, trade and financial regulation. However, as with any economic event, this particular driver is set within a hierarchy of fundamental impact. Regardless of who wins the election, it would still be a struggle to answer the United States’ Fiscal Cliff. Furthermore, we have other big-ticket items such as the Euro-area crisis, Chinese regime change and Japanese fiscal countdown that all denote a distinctive impact on global markets. With that in mind, we recognize the market’s unusual activity over the past 24 hours. It is very similar to how we approach the average NFPs release: even though the event’s outcome is not likely to have a lasting influence over a fundamentally-crowded market, the uncertainty its presence carries pumps volatility and sidelines trend generation.

Now, as we move forward, we may very well see risk trends regain traction and revive cross-market correlations. Through the past trading session, we witnessed a significant deviation between the standard ‘risk’ measures. While the S&P 500 rallied sharply into resistance (13,300), the Forex’s safe haven US dollar was holding relatively steady. Soon after the NY market close, equities took to a quick reversal while the dollar accelerated into its decline with EURUSD moving back above 1.2825 – yet another contradictory sentiment move. As the election results started to take shape in the overnight, however, risk’s influence started to firm up. With the dollar holding onto its losses, the equity futures found a moderate bounce. Revived correlations are a strong step towards developing a lasting trend. Yet, does a resolution of the US vote equate to a better investment environment. The bigger, international concerns aside; the unconfirmed vote tally leaves the United States with a divided Congress that may struggle to force necessary budgetary changes to avoid the looming fiscal cliff.

Euro May Climb on US Crisis Distraction - Juncker

Most policy makers (fiscal and monetary) follow academic lines of thought in their expectations of how their efforts will impact their economies and currencies. However, every now-and-then there is an official that acknowledges the speculative influence in the market. Euro Group head Jean-Claude Juncker revealed a streak of ‘trader’ in his outlook when he remarked early Wednesday morning that the US Fiscal Cliff could direct negative attention away from the Euro-area (offsetting the more ‘cheerleading’ effort in suggesting Europe’s fundamentals were better than those of the US and Japan). From a real world market perspective, the countdown to the United States’ self-imposed deficit adjustment can paint a far less stable situation than the more measured austerity balance in the Eurozone.

That said, there are two variables in this austerity comparison. The euro’s own fundamental issues are more immediate than the end-of-the-year countdown for the US. This past session, Greece’s general strike set the backdrop to the Parliamentary vote on the new austerity bill (reportedly aiming to cut pensions by 15 percent and raise the retirement age). Spain’s Rajoy suggested he would not ask for a rescue unless forced to - saying he needed to be certain it would lower yields. Today is a Euro-risk lull. Thursday brings forecasts, meetings and the ECB decision.

Australian Dollar Presses Through Risk Trends on Improved Rate Outlook

Risk trends have shifted back and forth over the past 24 hours, yet the Aussie dollar maintained its bullish ambitions. While US equity futures took a dive through the early Wednesday trading session, AUDUSD held steady above 1.0400. This is partially due to the greenback’s own lack of commitment; but other, less investment-sensitive Aussie pairs (AUDNZD, AUDCAD, GBPAUD) have shown a consistent support for the commodity currency. This additional strength can be easily traced back to the RBA. The central bank held its benchmark lending rate yesterday morning to catch a significant portion of the market off guard. With the market pricing in a 47 percent probability of a cut and 20 of 27 economists in a Bloomberg poll expecting the same, there was a surprise quotient. The 12-month rate outlook now calls for only 50 bps worth of cuts.

Japanese Yen: Officials Want Risk Trends, Stimulus to Weigh Currency

With the volatility on risk trends elevated, the Japanese yen is under scrutiny. However, policy officials are no doubt hoping that the US election results can sustain a buoyant outlook. Yesterday, BoJ Executive Director Hayakawa (in charge of monitoring the financial system) stated his belief that the bank’s new lending program (unlimited at a marginal 0.1 percent) could weaken the currency. His supposition was that this effort would translate into a pickup in carry interest. However, carry is a global factor and rates are low worldwide. What they need is true risk appetite.

New Zealand Dollar Advances after RBNZ Financial Report, Ahead of Jobs Data

Green RBNZ Governor Graeme Wheeler is keeping up the effort of stirring speculative interest in the kiwi. The central banker released the Financial Stability Report this morning. In the statement, Wheeler said stated that he believed it was unlikely that the kiwi exchange rate would fall significantly going forward – adding weight to his dismissal of QE. Up next, we have jobs figures for hard data.

Swiss Franc: FX Reserves Expected to Build, Though Euro Share Under Scrutiny

The Swiss National Bank already holds 432 billion francs in foreign currency reserves – a record for the group and one of the highest amongst its counterparts. The update for October is due in the upcoming European session and a fresh high is expected. However, those monitoring the EURCHF will be more concerned about the possible composition of holdings. The central bank has slowly diversified away from euros recently.

Gold Surges During US Election, Trend is a Dollar Matter

There was some speculation amongst the gold bugs that if the US election went a certain way, Fed Chairman Bernanke would be ousted and the policy of stimulus expansion would be reversed with his exit. It is a stretch to say the metal rallied because this scenario was disproved; but it would be outright dangerous to trade on this belief carrying a lasting influence. The next move for gold will be based on the dollar.

Nov 7, 2012

OctaFX.Com News Updates

 

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OctaFX.Com - Forex Analysis: Dollar Selling on US Election Result May Be Fleeting

The US Dollar fell on waning haven demand as risk appetite firmed following a clear-cut outcome to the US election but markets’ chipper mood may be short-lived.

Talking Points

 

  • US Dollar Falls on Swelling Risk Appetite After US Election Outcome
  • S&P 500 Futures Hint Sentiment Likely to Stay Supported Near-Term
  • Markets’ Chipper Mood May Unravel as “Fiscal Cliff” Fears Resurface
  • Euro May Underperform if Greece Fails to Pass New Austerity Plan

 

The US Dollar weakened in overnight trade as risk appetite swelled across financial markets – weakening forex traders’ demand for the go-to haven currency – in the aftermath of the US general election. The ballot handed victory to President Barack Obama while challenger Governor Mitt Romney conceded. As we argued yesterday, any outcome that produced a clear winner was likely to be greeted by investors hopeful for a swift re-orientation toward resolving the looming “fiscal cliff” fiasco.

Looking ahead, a quiet economic calendar is likely to keep the election front and center as financial markets around the world take their opportunity to respond to the results. S&P 500 stock index futures have erased earlier losses ahead of the opening bell on Wall Street, suggesting the risk-on bias into the hours ahead. Investors’ chipper mood may not prove lasting however, opening the door for the greenback to mount a swift recovery.

All signs appear to point to an extension of the status quo in the US political landscape, with President Obama’s victory matched by another Democrat-controlled Senate and Republican-dominated House of Representatives. That may spark fears of renewed deadlock as markets tremble at the thought that a set of automatic spending cuts and tax hikes slated to trigger at the turn of the calendar year will tip the US back into recession. Such prospect bodes ill for global growth in an environment where the Eurozone is contracting while China slows.

In Europe, all eyes are on Greece where the parliament will vote on an austerity package agreed-upon by the Samaras administration and the EU/ECB/IMF troika. Fears that opposition parties will torpedo the poll and delay the release of the latest tranche of bailout funds has scope to trim risk appetite and dent the ability of the Euro to capitalize on the post-US election festivities.

On the data front, German Industrial Production is seen falling for a second consecutive month in September while Eurozone Retail Sales snap four months of gains to yield a negative print in the same period.

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Nov 7, 2012

OctaFX.Com News Updates

 

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OctaFX.Com - Forex Analysis: Dollar Selling on US Election Result May Be Fleeting

The US Dollar fell on waning haven demand as risk appetite firmed following a clear-cut outcome to the US election but markets’ chipper mood may be short-lived.

Talking Points

 

  • US Dollar Falls on Swelling Risk Appetite After US Election Outcome
  • S&P 500 Futures Hint Sentiment Likely to Stay Supported Near-Term
  • Markets’ Chipper Mood May Unravel as “Fiscal Cliff” Fears Resurface
  • Euro May Underperform if Greece Fails to Pass New Austerity Plan

 

The US Dollar weakened in overnight trade as risk appetite swelled across financial markets – weakening forex traders’ demand for the go-to haven currency – in the aftermath of the US general election. The ballot handed victory to President Barack Obama while challenger Governor Mitt Romney conceded. As we argued yesterday, any outcome that produced a clear winner was likely to be greeted by investors hopeful for a swift re-orientation toward resolving the looming “fiscal cliff” fiasco.

Looking ahead, a quiet economic calendar is likely to keep the election front and center as financial markets around the world take their opportunity to respond to the results. S&P 500 stock index futures have erased earlier losses ahead of the opening bell on Wall Street, suggesting the risk-on bias into the hours ahead. Investors’ chipper mood may not prove lasting however, opening the door for the greenback to mount a swift recovery.

All signs appear to point to an extension of the status quo in the US political landscape, with President Obama’s victory matched by another Democrat-controlled Senate and Republican-dominated House of Representatives. That may spark fears of renewed deadlock as markets tremble at the thought that a set of automatic spending cuts and tax hikes slated to trigger at the turn of the calendar year will tip the US back into recession. Such prospect bodes ill for global growth in an environment where the Eurozone is contracting while China slows.

In Europe, all eyes are on Greece where the parliament will vote on an austerity package agreed-upon by the Samaras administration and the EU/ECB/IMF troika. Fears that opposition parties will torpedo the poll and delay the release of the latest tranche of bailout funds has scope to trim risk appetite and dent the ability of the Euro to capitalize on the post-US election festivities.

On the data front, German Industrial Production is seen falling for a second consecutive month in September while Eurozone Retail Sales snap four months of gains to yield a negative print in the same period.

yy-1.png

Nov 7, 2012

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OctaFX.Com -Forex Analysis: US Dollar Hovers at Support as S&P 500 Crumbles

THE TAKEAWAY: The US Dollar managed to hold near support, reversing earlier losses, as the S&P 500 turned sharply lower to boost demand for the go-to haven currency.

US DOLLAR TECHNICAL ANALYSIS– Prices continue to flirt with 9963, the 38.2% Fibonacci retracement. A move lower from here aims to target 9864-79 area, marked by a rising channel bottom set from mid-September and a falling channel top established from the June 1 high. Resistance is at 10002, with a break above that aiming for the 50% Fib at 10032.

Forex_Analysis_US_Dollar_Hovers_at_Support_as_SP_500_Crumbles_body_Picture_5.png

Daily Chart - Created Using FXCM Marketscope 2.0

S&P 500 TECHNICAL ANALYSIS – Prices turned sharply lower from support-turned-resistance in the 1424.90-30.90 area to test the 38.2% Fibonacci retracement at 1394.30 once again. A drop below that targets the 50% Fib at 1369.40. Alternatively, a reversal above 1430.90 aims to challenge the underside of a rising channel set from the June 4 swing low (now at 1452.50).

Forex_Analysis_US_Dollar_Hovers_at_Support_as_SP_500_Crumbles_body_Picture_6.png

Daily Chart - Created Using FXCM Marketscope 2.0

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Nov 8, 2012

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OctaFX.Com -Euro weakens as eyes turn to ECB meeting

LONDON (Reuters) - The euro fell to a two-month low on Thursday despite approval of a crucial austerity package by Greece, with investors focused on a European Central Bank policy meeting later in the day.

The ECB is widely expected to leave interest rates on hold, but comments by President Mario Draghi on the weak economic outlook and gloomy European Commission forecasts have raised speculation it might just cut its main rate from 0.75 percent.

"If you wander around the trading floors they are flirting with the idea we could get a cut from the ECB today," said Daragh Maher, director of FX strategy at HSBC.

The common currency was down 0.1 percent at $1.2765, not far from Wednesday's two-month low of $1.2736.

The euro was under pressure even though the Greek parliament approved in the early hours of Thursday an austerity package needed to unlock international aid and avert bankruptcy, defying political rifts and violent protests.

CLIFF EDGE LOOMS

The dollar was up 0.1 percent, near a two-month high against a basket of major currencies of 80.924 (.DXY) hit on Wednesday, as concerns about U.S. fiscal problems raise its safe-haven appeal.

Investors fear the preservation of the status quo in Washington after this week's elections means may make it hard to reach a deal on about $600 billion in spending cuts and tax increases due to start early next year, and that this could derail the U.S. economic recovery.

The "fiscal cliff", which can be avoided only if Democrats and Republicans settle their differences in Congress, provoked a selloff on Wall Street on Wednesday. Asian markets followed suit, pushing the MSCI world equity index <.MIWD00000PUS> down 0.2 percent at 326.13 points.

"The fiscal cliff is here and it will reveal itself to be very real," said Jeffrey Sica, president of Sica Wealth Management.

Sica said higher capital gains taxes could form part of a Congressional deal to tackle the budget deficit, and this may be encouraging investors to sell equities. "The strong likelihood that capital gains (could) double will force investors to take profits now to avoid paying higher capital gains taxes later," he said.

In Europe the FTSEurofirst 300 index (.FTEU3), which lost 1.4 percent in Wednesday's selloff, recovered slightly on Thursday to be up 0.15 percent at 1,100.85 points. London's FTSE 100 (.FTSE), Paris's CAC-40 (.FCHI) and Frankfurt's DAX (.GDAXI) all traded around 0.25 percent higher. (.L) (.EU)

U.S. stock futures were also higher, up 0.2 percent, pointing to a recovery when Wall Street opens. (.N)

SPANISH TEST

In the fixed income market the approaching ECB meeting kept most prices little changed. Much attention focused on a Spanish sale of 4.8 billion euros ($6 billion) of new debt, which included a 20-year bond - the longest dated issue to be auctioned since mid-2011.

The sale drew good demand as Spain's debt has been trading in relatively narrow ranges since the ECB promised to step in buy unlimited amounts of the bonds, provided Madrid requests help and agrees to a closely-monitored economic reform programme.

Spanish 10-year bond yields gained 5 basis points after the auction at 5.77 percent, but German 10-year bonds, often an indicator of any change of sentiment in the euro zone, were largely unchanged at 1.38 percent.

Commodities markets focused on developments in China where the government has begun a once-in-a-decade leadership change against a backdrop of growing social unrest and public anger at corruption and a gap between rich and poor.

Traders are looking for hints from the Communist Party Congress on future policy direction that may affect demand from the world's biggest consumer of many industrial commodities.

"So far, contents of speeches from the 18th Party Congress have been within expectations. There hasn't been anything particularly encouraging to investors," said Orient Futures derivatives director Andy Du.

Oil rose after tumbling more than $4 on Wednesday amid concerns about weak demand for fuel as the U.S. and European economies face the risk of a prolonged slowdown.

Brent Crude traded 56 cents higher at $107.35 per barrel after posting its steepest fall since 2011 on Wednesday. U.S. crude rose 56 cents to $84.99 a barrel. (O/R) ($1 = 0.7840 euros)

Nov 8, 2012

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OctaFX.Com - Forex Analysis: New Zealand Dollar To Maintain Range-Bound Price On RBNZ Policy

The New Zealand dollar pared the rebound from 0.8100 as the economic calendar instilled a weakened outlook for the region, but we may see the high-yielding currency preserve the range-bound price action carried over from the previous month as the Reserve Bank of New Zealand (RBNZ) persistently strikes a neutral tone for monetary policy. Indeed, the NZDUSD quickly fell back from a fresh monthly high of 0.8307 as New Zealand’s jobless rate advanced to 7.3% - the highest since 1999 – and the ongoing weakness in the real economy may continue to drag on the exchange rate as it spurs bets for a rate cut.

However, RBNZ Governor Graeme Wheeler argued that lowering the benchmark interest rate further would have a limited impact in triggering a ‘major depreciation in the exchange rate in the short term,’ and continued to highlight the risk for a higher exchange rate should ‘New Zealand’s relative growth outlook continued to be perceived as favorable despite the lower terms of trade.’ At the same time, the central bank head warned ‘excessive credit growth could hinder rebalancing of the economy and accentuate existing vulnerabilities’ as household and businesses take advantage of record-low borrowing costs, and the uptick in private sector borrowing will certainly limit the RBNZ’s scope to ease policy further as it heightens the risk for an asset bubble.

As the RBNZ sees the persistent strength in the local currency having a dampening effect on the real economy, we may see Governor Wheeler continue to rely on the transmission mechanisms to talk down the exchange rate, and we should see the central bank carry its wait-and-see approach into the following year as policy makers anticipate the rebuilding efforts from the Christchurch earthquake to spur domestic growth. Despite the dismal data coming out of the region, Credit Suisse overnight index swaps reflect a 22% chance for a 25bp rate cut at the December 5 meeting, and the central bank may continue to endorse a neutral policy stance in 2013 in order to mitigate the threat for an asset bubble.

As the 10, 20, 50 and 100 Day moving averages on the NZDUSD start to converge with one another, the indicators instill a neutral outlook for the pair, and the kiwi-dollar may continue to track sideways ahead of the December meeting as it trades above the 0.7900 figure.

However, we will keep a close eye on the relative strength index as it comes up against interim support around the 42 figure, and the oscillator may paint a bearish outlook for the NZDUSD should it continue to approach oversold territory.

Nov 10, 2012

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OctaFX.Com - Forex: Dollar Looks for Breakout Under Fiscal Cliff Insecurity

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Even the most optimistic investor has to be nervous about the state of risk appetite. This past week, the benchmark US equity indexes (Dow Jones Industrial Average and S&P 500) broke critical levels of support and plunged to three-month lows.

That is a considerable warning that a bigger speculative deleveraging effort is under way. The shift from this particular market is particularly remarkable. Not only are equities the average investor’s ‘risky’ or growth-sensitive asset, but the Federal Reserve has further backstopped the market through stimulus. In other words, a turn here speaks to the kind of concern that not even a central bank guarantee can prevent. Under this kind of pressure, we would expect the Forex market’s preferred safe haven currency (the US dollar) to surge. So why hasn’t it taken off yet?

Looking back at the greenback’s performance this past week, we see that progress has been uneven at best. The benchmark EURUSD has slipped to two-month lows below 1.2750 and GBPUSD has followed suit. That said, the far more risk-sensitive AUDUSD and NZDUSD have refused to definitively reverse their respective bull trends – an odd thing for carry pairs that should be exceptionally sensitive to sentiment trends. Furthermore, pulling back from the ebb and flow of risk, USDJPY has retreated sharply even though the yen faces immediate fundamental troubles with its fiscal health.

Ultimately, it is the Dow Jones FXCM Dollar Index (ticker = USDollar) that best illustrates the reticence of the world’s reserve currency. Congestion has been tamed by the 100-day moving average and pulsating 10,000 figure above.

Over the past months, we have seen a few disconnects between benchmark measures – though they haven’t been quite as flagrant. In most of those cases, the grounds for the divergence were a lack of conviction. Risk aversion (or risk appetite) wasn’t fully established, so either one asset was moving because it was extremely sensitive to sentiment or there was otherwise a completely different fundamental driver in play.

There is an element of disbelief to this move as well. While there is plenty of fundamental fuel to raze sentiment to the ground (slowing growth, a downturn in earnings growth, Euro-area debt crisis, Asian financial troubles, US fiscal crisis, etc), we need the spark from the speculative ranks to ensure the spark catches.

While hesitation is certainly an aspect, deleveraging is starting to give an active face to otherwise intangible fundamental worry. The moves we are starting to see should have leveraged more of a response from the dollar. Something else was acting against this straightforward speculative reaction – a buffer. That extra facet is the primary source of the fear that has developed - the ‘Fiscal Cliff’. This is a media-derived term that refers to a sudden expiration of tax cuts and implementation of spending cuts – activated at the end of the year if the US government cannot find a solution to rein the budget in.

The $600 billion impact the cliff entails would easily drive the US economy to recession and carry serious ramifications for the global markets that are already on shaky footing. Normally, this would be a significant booster for the dollar. Why? Though the US would be the point of origin, the backdraft would be a global event that sent investors the world over seeking safety in the most liquid and trustworthy assets – ironically enough, the dollar and Treasuries. Yet, not this time. There is another element to this explosive mix. If the fiscal cliff scenario plays out, it would likely lead to a US downgrade. That would lower (marginally, but substantive) the dollar’s safe haven status.

As we must often do as speculators, tracking out the path from here runs on the most probable outcomes and expectations as to how speculators will respond. It is highly unlikely that the US plummets over the fiscal cliff – though even if it did, the backlash of the diminished safe haven status would be short-lived and the dollar would rally back eventually.

The more contentious scenario is that the budgetary issue is solved and the market expects it. As the most prolific threat to stability, the absence of this risk could lead to a rebound in risk and dollar tumble. There are other issues however. The dollar needs fiscal cliff uncertainty and broad risk aversion.

Nov 10, 2012

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Forex: Commodity Currencies Rally, but Euro Remains Lower

ASIA/EUROPE FOREX NEWS WRAP

A quiet US trading session is on the horizon in light of the Veteran’s Day holiday, which has bond markets closed and lower volumes expected throughout the day on Monday. Nevertheless, with Asian and European markets fully online, there are have been some noteworthy developments that have influenced price action today worth discussing.

Yesterday, the Samaras-led Greek government had its 2013 budget passed in parliament, clearing the way for Euro-zone finance ministers to vote on the next tranche of Greek aid later on today.

Although the event would typically yield a more positive risk horizon, it appears that the measures passed will fall short of pan-European approval. A meeting is set for later today that should provide insight into this process. We expect some sort of intermediate measures to be proposed that keeps Greece afloat over the next few weeks, as the country is expected to run out of money (again) in the next week or so.

The Euro seems to be reflecting this lack of enthusiasm, as the European currencies have trailed their Asia and North American counterparts for most of the day. With the US fiscal cliff squarely in focus – and freshly reelected President Barack Obama convening with Congressional leaders later this week – the Japanese Yen remains well-supported, while Gold and Silver continue to outperform and lead the broader market, as they have since their mid-September highs.

Taking a look at credit, Euro weakness has been reflected by weakness in periphery bonds. The Italian 2-year note yield has increased to 2.318% (+2.5-bps) while the Spanish 2-year note yield has increased to 3.139 % (+8.7-bps). Likewise, the Italian 10-year note yield has increased to 4.995% (+3.4-bps) while the Spanish 10-year note yield has increased to 5.842% (+5.0-bps); higher yields imply lower prices.

Nov 12, 2012

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OctaFX.com- Forex: Dollar So Close to a Bullish Surge, What Does it Take?

 

  • Dollar So Close to a Bullish Surge, What Does it Take?
  • Euro Finds Little Bounce From Greece Hole Plug, Spain Rescue Rumors
  • British Pound Rallies Briefly After CPI Data, Right Back Towards 1.5850
  • Japanese Yen: Risk Aversion May have Wavered but the Yen Hasn’t
  • Swiss Franc at Two Month High Versus Euro, 1.2000 in Sight
  • Australian Dollar Losing Steam on Rate Outlook, Bullishness Deflating
  • Gold Makes a Bearish Turn but Commitment Lacking Without Dollar

 

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Dollar So Close to a Bullish Surge, What Does it Take?

The Dow Jones FXCM Dollar Index (ticker = USDollar) has held just below critical resistance and fresh two month lows since risk-trends were rejected despite the otherwise ‘better-than-expected’ October payrolls. Taking a look at the chart of the Dollar Index, we find the big-ticket 10,000 figure is complimented by the 100 and 200-day moving averages – considerable weight to any technical trader. However, the most remarkable technical read on the greenback is also a very telling fundamental consideration: the average true range (ATR). Measuring the average of the currency’s daily range (on a rolling 10-day basis), we find that the dollar has carved out the smallest rate of activity since high and low data have been recorded – so since at least January 2011. Altogether, that tells us a significant swell of volatility is soon at hand.

These measures of activity on the technical level are mirrored with what we have seen fundamentally. As the US benchmark equities have led a questionable march higher for riskier assets over the past months and years, we have also seen the FX Volatility Index slide to lows not seen since before the financial crisis in 2008 (the index is currently at 7.41 percent). The standard volatility indicators are both measures of insurance costs against adverse price movements and more elementally ‘fear’ gauges. Therefore, when these measures of risk rise, it is generally in response to a more active move towards risk aversion. That is a strong factor for the greenback – if and when it happens. Yet, we have seen the volatility measures continuously trend lower against a trend of more obvious troubles in growth trends, financial crises and fiscal imbalances.

Though it doesn’t necessarily have to jump start a watershed event in speculative positioning, a sudden return of volatility through the immediate future is a particularly credible threat. That being said, this may be a pickup in activity that defies the common convention that a big swing in price action necessarily translates into risk aversion (a disconnect that would most likely bypass the traditional volatility readings). Markets are currently positions such that they reflect the ‘tail risk’ (low probability, but high impact potential) that the Euro-area crisis will hit critical mass and / or the US will hit the wall that is its Fiscal Cliff. Recently, however, EU officials have managed to by Greece a few more weeks and lawmakers on both sides of the US political spectrum have voiced confidence in a budget resolution. Winding down those factors could boost risk trends – and likely will. The critical question is how much is the market weighing this possible short-term relief against the obviously, long-term problems…

Euro Finds Little Bounce from Greece Hole Plug, Spain Rescue Rumors

European officials are struggling to put out fires as the flames come progressively closer with each swell. The newswires have been crowded by headlines that are clearly aimed at provoking fear in a rapidly deteriorating financial situation in the Eurozone. Yet, through all the countdowns to Greece running out of money, the questions over whether the Spain will ask for an official rescue and other (lesser) concerns that have intensified this past week; the euro has posted limited – though consistent – downside progress. In contrast, recent positive developments / speculation have yielded just as little return in the Euro’s favor. Between a bill auction yesterday and allowance of Asset Backed Securities use as collateral, Greece looks like it will be able to cover the bond maturity that happens on Friday. On another front, rumors were running in the speculative circles that Spain would soon seek a bailout. Neither risk (EURUSD) nor anti-risk (EURAUD) pair closed in the green for the euro. Perhaps the market is awaiting today’s event risk: Greek and Portuguese 3Q GDP. There is no misinterpret ting these reports.

British Pound Rallies Briefly After CPI Data, Right Back Towards 1.5850

In quiet trading conditions, traditional fundamental releases – that would otherwise struggle for face time in market influence against larger themes like risk trends – can have a bigger impact on price action. That was the case with the pound and CPI data this past session. The headline CPI reading for October rose 2.7 percent on a year-over-year basis – a pickup from the lowest reading since November 2009. GBPUSD and other pound pairs responded with a brief bounce, but it wouldn’t hold. The BoE will not be hiking rates anytime soon.

Japanese Yen: Risk Aversion May have Wavered but the Yen Hasn’t

We have seen a strong risk aversion move this past week – though it may have been uneven across the markets – and the yen has certainly benefit the safe haven seeking. The only problem is that policy officials are trying to push the currency lower to offer some relief to the economy through exports. It is likely doubly frustrating that with recent hints over the past 24 hours at a possible bounce in risk trends that the yen has continued to gain ground against all of its counterparts. We have to wonder at what point, Japanese authorities will mimic the SNB.

Swiss Franc at Two Month High Versus Euro, 1.2000 in Sight

SNB President Jordan must not be happy. Two months ago, the EURCHF exchange rate finally picked up from the central bank’s force-imposed 1.2000-floor without the express influence of policy authority. Tail risk on the Euro-crisis seemed to ease and the safe haven flows reversed. Today, however, we are only 35 pips off that floor once again. After this brief jaunt, the market may realize the SNB will have to push it higher.

Australian Dollar Losing Steam on Rate Outlook, Bullishness Deflating

The Australian dollar seems to be relentless. The currency has climbed against the dollar and yen despite risk aversion moves from US equities this past week. And, despite the even footing, it has also advanced against fellow safe haven – the New Zealand dollar. The market hasn’t fully committed to risk aversion, but the Aussie’s true strength is the reduction of expected rate cuts. Well, that rebound seems to be fizzling out…

Gold Makes a Bearish Turn but Commitment Lacking Without Dollar

Gold has put in for three consecutive bearish days through Tuesday’s close. Though we haven’t moved very far on this retreat, it is still the worst trend for the metal in over a month. Until the dollar commits to a clear run – the anti-fiat / anti-inflation appeal of gold is put into the spotlight. Meanwhile, ETF holdings are at record highs and the CBOE’s gold volatility index has plunged back to multi-year lows (14.5 percent).

Nov 14, 2012

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OctaFX.com- Dollar soars to 6-month high versus Japanese yen

FRANKFURT (MarketWatch) -- The U.S. dollar soared to its highest level versus the Japanese yen in more than six months Thursday, rising as the leader of Japan's main opposition party continued to push for a further loosening of monetary policy by the Bank of Japan. The dollar soared as high as 81.25 yen and changed hands in recent action at 81.15 yen, up from 80.20 yen in North American trade late Wednesday.

The yen last traded above 81 yen in late April. News reports said Shinzo Abe, leader of the main opposition Liberal Democratic Party, urged the Bank of Japan to push official interest rates below zero. Abe is seen as likely to become Japan's next prime minister in elections expected next month.

Nov 15, 2012

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OctaFX.Com - Euro rises but vulnerable to Greece uncertainty

Prices took out resistance at the top of a rising channel established from mid-September, exposing the 61.8% Fibonacci retracement at 10038. A push above that targets the 76.4% retracement at 10109. The channel top – now at 10021 – has been recast as support, with a push back below that aiming for the 50% level at 9982.

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Nov 16, 2012

 

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OctaFX.Com - Forex Analysis: NZD/USD Classic Technical Report 11.16.2012

ASIA/EUROPE FOREX NEWS WRAP

Prices are testing support in the 0.8064-0.8101 area, with a break lower exposing the 0.80 figure and the 50% Fibonacci retracement at 0.7962. Near-term resistance is at 0.8222, the underside of a previously broken rising channel set from late May, with a push above that targeting the 0.83 mark.

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Nov 13, 2012

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OctaFX.Com -Forex Analysis: US Dollar Classic Technical Report 11.19.2012

Prices edged through resistance at 10038, the 61.8% Fibonacci retracement, with buyers now aiming to challenge the 76.4% level at 10109.

The first layer of significant support lines up at 10020, the top of a formerly broken rising channel set from mid-September, with a drop below that targeting the 50% retracement at 9982.

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Nov 19, 2012

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OctaFX.Com -Forex Analysis: US Dollar Classic Technical Report 11.19.2012

Prices edged through resistance at 10038, the 61.8% Fibonacci retracement, with buyers now aiming to challenge the 76.4% level at 10109.

The first layer of significant support lines up at 10020, the top of a formerly broken rising channel set from mid-September, with a drop below that targeting the 50% retracement at 9982.

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Nov 19, 2012

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OctaFX.Com -FOREX Technical Analysis: British Pound Slips in Early Week Trading

FOREX Trading and Technical Analysis Observations

EUR/USD-As focused in FX Technical Weekly, the EUR/USD decline from Thursday’s high (12801) is impulsive which suggests that the larger downtrend has resumed. I am short as of this morning with a 12805 stop. Exceeding 12801 would shift focus to former supports at 12824 and 12882.

AUD/USD-is nearing resistance from the 61.8% retracement of the decline from 10480 at 10406. I’m on the lookout for a top and reversal but understand that RBA minutes are due tonight. Exceeding 10480 would shift focus to 10550 (again).

USD/JPY-is showing signs (JS Spike bars on multiple time frames) of topping. The rally from 9/13 may be complete in 5 waves. Wave 5, from the 11/9 low, is also in 5 waves. Considering the 61.8% retracement of the decline from March at 8148, risk is to the downside.

AUD/JPY-is approaching a potentially HUGE pivot near 8500.

EUR/USD – 60 Minute Bars

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READ MORE

Nov 19, 2012

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OctaFX.Com - Dollar Rebounds after Greece Decision Delayed, EUR/USD Ranges

 

  • Dollar Rebounds after Greece Decision Delayed, EUR/USD Ranges
  • Euro Rally Halted in its Tracks after Officials Fail to Advance Crisis Fight
  • Australian Dollar: Reserve Currency Status vs Risk Sensitivities
  • Japanese Yen Can Drop Slow or Drop Fast Depending on Vote
  • British Pound: Traders Await BoE Minutes to Gauge QE Appetite
  • US Oil Tumbles on Expectations of Gaza Strip Cease Fire
  • Gold Trading Lower after EU Delays Rescue, Dollar Guiding

 

Dollar Reboundsafter Greece Decision Delayed, EUR/USD Ranges

The dollar spent Tuesday slowly drifting higher as the sharp risk aversion move over the open 24 hours of trading this week consolidated. That slow drift found a considerable accelerant early this morning, however, as the market learned that European policy officials had once again deferred making a decisive call on how to proceed with Greece’s financial aid – the linchpin to one of the financial market’s greatest fundamental threats. Without a solution on hand to a market-wide threat, the comfort of dollar liquidity looks considerably more appealing. From a risk assessment, we find S&P 500 futures have taken a quick turn lower having held the well-worn resistance at 1,390/88. On the FX side, EURUSD collapsed 80 pips while the AUDUSD dropped 40 pips. For the safe haven dollar itself, the Dow Jones FXCM Dollar (ticker = USDollar) has extended its climb from Tuesday’s 10,000-mark test. A turn in risk is one thing. A sustained trend is something else completely though…

News that Eurozone officials have prolonged the uncertainty surrounding their weakest link is a clear bearish weight on speculators shoulders. The longer this situation continues unsolved (or more appropriately, unprogressed), the less likely it is that global investors will be satiated by a lackluster solution. The underlying reality is that the long-term situation in Europe, Asia and the United States is murky and not being met with clear and lasting reform (instead, officials seem to be betting on a ‘general improvement’ in market conditions or other external development like exports or stimulus). Yet, traders are willing to overlook the lack of a long-term solution so long as they see the opportunity to speculate for short-term gain in the interim. With each temporary effort to buy time and subsequent return to critical structural issues, we find the market less willing to play along with the short-lived risk rally. That speaks to a fundamental shift where deleveraging and dollar advance grow more permanent.

A lack of confidence in genuine improvement for growth, yields and financial operation is a critical concern for traders heading forward. That said, such concerns may be muted the rest of this week. Active risk aversion – the necessary ingredient for dollar strength – requires an active catalyst. However, we have seen the Euro-area crisis put on ice and the Fiscal Cliff has grown scarce amongst the financial headlines. Furthermore, the liquidity drain and disruption in risk transmission with the US Thanksgiving holiday is fast approaching.

Euro Rally Halted in its Tracks after Officials Fail to Advance Crisis Fight

In the lead up to what was arguably this week’s most prominent event risk – the EU Finance Ministers’ funding decision on Greece – euro activity collapsed. In fact, the average hourly range just before the announcement was an incredible 10 pips. Why was this event so influential? Greece has had to return to the funding well numerous times, but this particular iteration has seen greater reticence and a many more delays than what we have seen in the past. Yet another postponement was announced early this morning.

After more than 11 hours of debate over the next steps for the Eurozone’s most troubled member, officials reneged on their vow to offer a definitive resolution. Officials offered hollow remarks about progress in discussions and idea sharing, but these comments offer little reassurance. The statement that was released has set the next meeting on November 26 as the firm date for a verdict on Greece’s aid needs. Looking ahead, the situation is tense with some EU members troubled about offering more support and the IMF wavering on further participation with the debt-to-GDP forecasts for 2020 projected well above the level deemed ‘sustainable’. One thing is certain: Monday’s risk trend bearing has been significantly altered. Rather than return to a clear sentiment bearing, we will have another wait-and-see Monday.

Australian Dollar: Reserve Currency Status vs Risk Sensitivities

The IMF’s announcement that it was considering adding the Australian (and Canadian) dollar to the official list of reserve currencies offers a substantive change in fundamental bearing for the currency. A high-yielding, safe haven would be the Holy Grail for FX traders. Yet, the Aussie dollar doesn’t fit that ideal. The fund’s label wouldn’t represent an official change for traders – rather it’s a reaction to central banks already buying. This ‘reserve’ status is flimsy. With enough momentum, the carry currency would quickly fall back into line in with a risk aversion move.

Japanese Yen Can Drop Slow or Drop Fast Depending on Vote

Heading into the December 16 Parliamentary vote in Japan, growth and a high yen will be a centerpiece of both the LDP and DPJ’s campaign. As such, stimulus and proactive currency devaluation will be a shared objective. However, there is a different rate of attrition for the yen. Under Noda (DPJ), the BoJ’s independence looks more secure. With Abe (LDP), unlimited stimulus and foreign bond buying is on the table.

British Pound: Traders Await BoE Minutes to Gauge QE Appetite

Bank of England Governor Mervyn King is very concerned about the state of the English economy if his statements are to be believed. And yet, his efforts to bolster growth (and offset government austerity measures) have fallen well short of what his counterparts in the US, Eurozone and Japan have pursued. Is the MPC ready to augment its efforts? We will have another update from the upcoming BoE minutes.

US Oil Tumbles on Expectations of Gaza Strip Cease Fire

US oil prices collapsed Tuesday on early news that a cease fire would be called in the active engagement in the Gaza Strip. Such a move would help curb supply fears in the oil-rich Middle East. However, that calm never seemed to fully materialize. Crude prices began to rebound from 85.50 as that realization dawned. However, more general risk trends are a major factor here as well. With Greece, risk aversion is a weight.

Gold Trading Lower after EU Delays Rescue, Dollar Guiding

Under a purely academic interpretation of how fundamental roles play out, gold should have rallied after news that EU officials were delaying a decision on Greece. That maintains a sense of uncertainty and is a considerable threat to financial market stability. And yet, the metal dropped after the news. Why? With the euro under pressure, the world’s most liquid currency receives a boost. And gold is priced primary in dollars.

Nov 21, 2012

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OctaFX.Com - Forex: Euro Relief Rally At Risk, Sterling Looks Higher On BoE Policy

Talking Points

 

  • Euro: EU Fails To Deliver Greek Deal, IMF Says More Needs To Be Done
  • British Pound: BoE Votes 8-1 on QE, Curbs Bets For Lower Borrowing Costs
  • U.S. Dollar: Continues To Gain Ground Ahead Of Thanksgiving Holiday

 

Euro: EU Fails To Deliver Greek Deal, IMF Says More Needs To Be Done

The Euro pared the overnight decline to 1.2735 as European policy makers floated different options to save Greece, but the reactionary approach held by the EU continues to encourage a bearish outlook for the EURUSD as the debt crisis dampens the fundamental outlook for the region.

Indeed, the EU unveiled a EUR 10B bond-buyback plan for Greece, which would be financed through the European Financial Stability Facility, while the group is also looking to suspend Greece’s interest payment on the bailout program through 2020 in an effort to keep the periphery country within the monetary union.

As the EU prepares a bundled aid package to avert a Greek default, International Monetary Fund Managing Director Christine Lagarde argued that ‘a bit more’ needs to be done to find a credible solution for Greece, and the ongoing rift within the troika – the EU, ECB, and IMF – may produce further weakness in the EURUSD as European policy makers struggle to restore investor confidence.

As European policy makers increase their pledge to avoid a credit event in Greece, headlines coming out of the region may keep the single currency afloat over the coming days, but we may see the EURUSD struggle to hold above the 23.6% Fibonacci retracement from the 2009 high to the 2010 low around 1.2640-50 as the fundamental outlook for the euro-area turns increasingly bleak.

As the short-term rebound in the EURUSD fails to keep the exchange rate above the 20-Day SMA (1.2820), the pair may consolidate going into the holiday trade, and we will maintain our bearish forecast for the euro-dollar as the weakening outlook for the region is expected to put additional pressure on the European Central Bank to ease monetary policy further.

British Pound: BoE Votes 8-1 on QE, Curbs Bets For Lower Borrowing Costs

The British Pound climbed to a fresh weekly high of 1.5948 as the Bank of England (BoE) Minutes sapped bets for additional monetary support, and the rebound from 1.5822 may continue to gather pace over the near to medium-term as the central bank appears to be slowly moving away from its easing cycle.

Although the Monetary Policy Committee voted 8-1 to keep its asset purchase program at GBP 375B, the board argued against a further reduction in the benchmark interest rate, while a growing number of central bank officials turned their attention to the stickiness in price growth as the central bank warned that ‘above-target inflation in the near term increased the chance that any pick-up in productivity would result in higher wage demands.’

As the BoE strikes a more neutral tone for monetary policy, we’re seeing the relatives strength index on the GBPUSD breakout of the downward trend carried over from September, and the technical development encourages a bullish outlook for the GBPUSD as the pair appears to be carving out a higher low in November.

U.S. Dollar: Continues To Gain Ground Ahead Of Thanksgiving Holiday

The greenback continued to gain ground on Wednesday, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) advancing to a high of 10,059, and the reserve currency may track higher ahead of the holiday trade as the developments coming out of the EU meeting fails to generate an improved landscape for risk-taking behavior.

As U.S. traders go offline ahead of the Thanksgiving holiday, the drop in market participation may produce choppy price action over the next 24-hours of trading, but the bullish sentiment surrounding the reserve currency looks poised to gather pace over the remainder of the year as the Federal Reserve adopts an improved outlook for the world’s largest economy.

Nov 21, 2012

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OctaFX.Com - Euro, global shares gain as Greek deal seen closer

LONDON (Reuters) - The euro hit a three-week high on Friday after an unexpected rise in German business sentiment for November and on signs of progress in efforts to help Greece secure fresh funding.

Companies in Europe's powerhouse economy have turned slightly more optimistic about the outlook despite the euro zone crisis, breaking a six-month run of worsening sentiment, the Munich-based Ifo think-tank said.

"The unexpected rise in November's German Ifo survey provides some relief, but doesn't alter the big picture of near stagnation in the euro zone's growth engine," said Jonathan Loynes, chief European economist at Capital Economics.

The euro climbed to $1.2913 following the data and is on track to gain 1.2 percent against the dollar this week.

European equity markets showed less reaction as many investors chose to end one of the best weeks of 2012 so far by booking some of their profits.

The pan-European FTSEurofirst 300 index (.FTEU3) edged up 0.1 percent at 1,102.35 points, on course for its best week since May and the second biggest weekly gain of the year.

London's FTSE 100 (.FTSE), Paris's CAC-40 (.FCHI) and Frankfurt's DAX (.GDAXI) were between flat and 0.2 percent higher. (.EU) (.L)

GREEK OPTIMISM

The gains across European markets were supported by optimism that Greece will get the money needed to avoid bankruptcy when euro zone finance ministers, the International Monetary Fund and the European Central Bank meet again on Monday.

A Greek government official told Reuters the IMF and the European Union have narrowed their differences over the target for Greek debt reduction by 2020.

Agreement on a new debt target and how it can be reached is a key stumbling bock in agreeing the release of 44 billion euros ($57 billion) of funds from the bailout package Greece desperately needs to avoid bankruptcy.

"The market is getting a bit confident that a Greek deal will be struck. This will remove one of the near-term uncertainties in the euro zone," said Paul Robson, currency strategist at RBS.

Greek government bond yields, however, were 5 basis points higher at 16.49 percent, but a relatively small move for the volatile paper and still close to its lowest level since the country's debt was restructured in March.

"It's not the first time we have this type of news. The market knows there is a disagreement," said ING rate strategist Alessandro Giansanti. "Until there is an official statement, detailing what they want to do, especially in terms of a debt restructuring, we're not going to see so much of a reaction."

Ten-year German government bonds, a barometer of investor sentiment on the euro zone crisis were 2 basis points lower at 1.42 percent.

YEAR END OUTLOOK

The potential for a Greek deal and signs lawmakers in the United States will eventually agree steps to avoid a fiscal crisis there have been behind a strong rally in share markets around the world this week and have supported commodities.

"These two positive drivers should make for a strong month of December, which traditionally is a fairly good month anyway," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

MSCI's world equity index <.MIWD00000PUS> was up 0.15 percent on Friday at 326.75 points, on course for a gain of nearly 3 percent this week. That will be its best weekly performance since mid-September.

U.S. stock index futures also point to modest gains when Wall Street trading resumes for a short post-Thanksgiving trading day. (.L)(.EU) (.N)

Earlier, MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> rose 0.7 percent for a weekly gain of 2.6 percent, its best week for two months.

Gold edged up 0.1 percent to $1,731.36 an ounce and looks set to post its second weekly rise in three, while three-month copper on the London Metal Exchange was up 0.18 percent a tonne at $7,729.

On the other hand Brent crude slipped towards $110 a barrel as the fragile ceasefire between Israel and Gaza eased supply concerns.

On Thursday Israel began withdrawing its army, which had been poised to invade the Gaza Strip in pursuit of militants firing rockets into Israel.

"Oil prices will probably be under pressure as long as the ceasefire holds," said Filip Petersson, a commodity strategist at SEB Commodity Research.

Nov 23, 2012

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OctaFX.Com - Forex: US Dollar Weakest on Friday; Euro Up After German Data, ECB Speak

ASIA/EUROPE FOREX NEWS WRAP

The final day of the three day liquidity drawdown has arrived, and price action on Friday has been moderately bullish for high beta currencies and risk-correlated assets. There’s been decent follow-through on yesterday’s advances by the Australian and New Zealand Dollars, as well as the Japanese Yen and the Euro, as the US Dollar is the worst performing currency across the board.

Mainly, there’s been some positive news flow out of Europe allowing for the continued rebound in risk-appetite, as any such headlines out of the United States are absent amid the Thanksgiving holiday.

On the data front, a German business confidence reading outperformed expectations, helping ease concerns that the Euro-zone’s largest economy was starting to slide towards recession; perhaps this pace has been stalled.

On the European news side, there have been a few more reports that Spain is inching towards a bailout agreement, which is bullish for the EUR/USD has it means the European Central Bank’s OMTs would be active, essentially placing a cap on short-term Spanish yields. ECB President Mario Draghi reminded market participants of this today, saying ‘if and when’ (paraphrasing) the OMTs need to be implemented, the ECB stands ready to go.

Furthermore, the developments on Greece have been frustrating yet hopeful, with another Euro-zone finance ministers’ meeting on November 26. Round the clock negotiations this week fell short of any major compromise, although it was agreed upon that Greece would receive another two years to fulfill its obligations; another round of elections resulting from brinksmanship could be a major setback.

Taking a look at European credit, peripheral bond yields are mostly higher, preventing the Euro from rallying further. The Italian 2-year note yield has decreased to 1.977% (-3.3-bps) while the Spanish 2-year note yield has increased to 2.983% (+1.0-bps). Similarly, the Italian 10-year note yield is unchanged at 4.771% while the Spanish 10-year note yield has increased to 5.648% (+2.3-bps); higher yields imply lower prices.

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Nov 23, 2012

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OctaFX.Com -FOREX Trading: US Dollar Support Probably at Slightly Lower Levels

As focused in FX Technical Weekly on Friday, the confluence of technical levels across multiple markets suggests that recent moves may extend for one or two days before markets reverse yet again.

The mid 1420s should produce a top in the S&P. The 61.8% retracement of the decline from the top comes in at 1424.20. The 100% extension of the rally from the low (1342.10-1390.90 from 1379.10) is at 1427.80. More importantly, 1424.90 is the April high and within the vicinity of pivots since August (circled). Weakness below 1388.90 would suggest that top is in place.

I’m on the lookout for a low and opportunity to turn bullish again near 9945 in the USDOLLAR.

The EURUSD has responded to the 61.8% retracement of the decline from 13172, trading sideways to open the week. Near term pattern suggests slightly higher prices in stair step fashion (4th and 5th waves) before exhaustion. Resistance extends to 13070.

The AUDUSD is little changed to begin the week. Expect the current move to extend slightly higher. 10550, the 9/14 reversal day close and 161.8% extension of 10287-10424, is a level that may produce the next top. I remain long from last week (10340 entry) but am looking to reverse the position near 10550.percent at 106.12 yen.[/b]

Nov 26, 2012

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OctaFX.Com - Forex Analysis: S&P 500 Chart Setup Hints US Dollar Support to Hold

THE TAKEAWAY: S&P 500 technical positioning warns of a turn lower ahead, hinting the safe-haven US Dollar may manage to hold up at support and position for recovery.

US DOLLAR TECHNICAL ANALYSIS– Prices broke below the 23.6% Fibonacci retracement at 9993 to challenge the bottom of a rising channel set from mid-September (now at 9970). A break below this boundary initially exposes the 38.2% level at 9945. Alternatively, a break back above 9993 aims for the November 16 high at 10071.

Forex_Analysis_SP_500_Chart_Setup_Hints_US_Dollar_Support_to_Hold_body_Picture_4.png

Daily Chart - Created Using FXCM Marketscope 2.0

S&P 500 TECHNICAL ANALYSIS – Prices are showing a Hanging Man candlestick below resistance at 1408.50, the 50% Fibonacci retracement. This barrier is reinforced by a falling trend line set from mid-October. A turn lower sees initial support at 1392.80, the 38.2% retracement, with a break below that aiming to challenge the 23.6% level at 1373.40. Alternatively, a push above resistance exposes the 1424.90-30.90 area.

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Nov 27, 2012

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OctaFX.Com - Forex News: Euro Fails to Maintain Greece Deal Gains

The Europe we saw at the beginning of today’s session was very different than the Europe of yesterday, at least from a trader’s perspective.

Per the overnight announcement in forex news sources, Euro-zone leaders came to an agreement on Greece that lowered interest rates, returned some of the money made off of previous loans, and setup the release of the next 34.4 billion Euro aid tranche in December. What we heard from European officials following the announcement was overwhelmingly positive. German Economy Minister Roesler said the Greek Deal is a positive sign for the Euro. EU’s Barroso welcomed the deal, while German FM Westerwelle said the aid plan is a good result that is based on reforms. German lawmakers will vote on the Greek plan on November 29.

However, the Euro rally following the news of the Greece deal couldn’t even sustain 1.3000 against the USD, as the key level quickly returned to providing resistance after being briefly broken. To see some of the criticisms of the deal, please look at DailyFX Currency Strategist Ilya Spivak’s Euro Open.

The other major piece of news was the appointment of Bank of Canada Governor Mark Carney as the new governor of the Bank of England starting in July. Current BoE Governor King said the UK chose a really outstanding candidate, and Carney is the first foreigner to be chosen for the position. Sterling rallied thirty points higher from 1.6000 following the announcement.

Current BoE Governor King was speaking today at an inflation report to the UK parliament. He said that the BoE outlook is for a slow economic recovery, and UK inflation to remain above target for some time. The UK GDP grew 1% in Q3 according to a second estimate released today. The BoE has previously said that the sudden growth was due to one time factors and the economy may slip back into negative growth during Q4.

Also today, the US Dollar rose a bit when Fed member Fisher said during a speech in Berlin that he advocates setting limits to QE as soon as the next meeting. Fisher said that the US’s biggest problem is unemployment and that inflation is under control in the US. He also said that he was never in favor of operation twist.

The Euro has now erased all of the gains following the Greece announcement and is trading slight above 1.2950 against the US Dollar in currency markets. Resistance could now be provided by the key 1.3000 line, and support could be provided at the recent support level of 1.2824.

EURUSD Daily: November 27, 2012

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Nov 27, 2012

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OctaFX.Com - Forex Analysis: US Dollar Classic Technical Report 11.27.2012

Prices broke below the 23.6% Fibonacci retracement at 9993 to challenge the bottom of a rising channel set from mid-September (now at 9970). A break below this boundary initially exposes the 38.2% level at 9945.

Alternatively, a break back above 9993 aims for the November 16 high at 10071.

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Nov 27, 2012

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OctaFX.Com - Forex Analysis: NZD/USD Classic Technical Report 11.27.2012

Prices are testing resistance at the underside of a previously broken rising channel set from late May (0.8264).A push above that targets a falling trend line at 0.8292. Initial support lines up in the 0.8051-82 area, with a drop below that exposing the 0.80 figure and the 50% Fibonacci retracement at 0.7962.

Forex_Analysis_NZDUSD_Classic_Technical_Report_11.27.2012_body_Picture_1.png

Daily Chart - Created Using FXCM Marketscope 2.0

Nov 27, 2012

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OctaFX.Com -Forex Analysis: Euro May Fall as Soft German CPI Drives ECB Easing Bets

The Euro may face further selling pressure as German inflation slows to the weakest in four months, driving ECB monetary easing expectations.

Talking Points

 

  • Japanese Yen Gains as Asian Stocks Drop on Greece Deal Rethink, “Fiscal Cliff” Jitters
  • Euro May See Selling Pressure as German CPI Drop Drives ECB Easing Expectations
  • US Home Sales, Beige Book May Buoy Dollar vs. Yen, Drive Weakness vs. Comm Bloc

 

The Japanese Yen outperformed in overnight trade as a drop in Asian stocks drove demand for the regional safe-haven currency. The MSCI Asia Pacific benchmark index lost 0.5 percent, with the newswires citing ominous comments from the OECD warning a global recession could follow a failure to avert the US fiscal cliff as the catalyst.

A reconsideration of yesterday’s Eurogroup summit outcome likely added to negative cues. A knee-jerk reaction to the headline claiming a deal on Greece had been reached buoyed risk appetite yesterday but sentiment was quick to unravel as markets digested the details of the arrangement, as expected. Indeed, the Euro lagged its top counterparts in Asian hours.

Looking ahead, the preliminary set of November’s German CPI figures headlines the calendar. Expectations call for the headline inflation rate to drop to 1.9 percent, the lowest in four months. The outcome may weigh on the Euro as forex traders take softening price pressure to mean the ECB has added room for further easing amid signs of deepening recessionin the wake of deteriorating economic data (particularly the recent run of region-wide PMI figures).

Later in the day, the spotlight turns to the Federal Reserve Beige Book survey of regional economic conditions. Separately, US New Home Sales are expected to hit 390,000 in October, marking the highest reading since April 2010. Signs of firming recovery in the US may prove supportive yields and boost the US Dollar against the Japanese Yen while weighing on the greenback against the growth-geared commodity bloc currencies (Australian, Canadian and New Zealand Dollars).

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Nov 28, 2012

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OctaFX.Com - Forex News: Euro Trading Steady Above 1.2900 Ahead of German Inflation

Now that more than 24 hours have passed since the Greece bailout agreement, most of the responding chatter has already been exhausted, and we have been left in today’s European session without a major fundamental story to guide trading. The major story currently affecting asset markets is the impending US fiscal cliff, and Harry Reid’s comments, that not much progress on a deal has been made, sent US equities lower in yesterday’s session.

Furthermore, despite the lack of an upcoming major market moving event, a lot of analysts are calling for a reversal of recent Euro gains, as EURUSD trading showed a false break of 1.3000 in yesterday’s session. DailyFX Currency Strategist Ilya Spivak said he continues to hold the pair short, and Chief Strategist John Kicklighter said in his daily market wrap-up that he initiated a EURJPY short.

The only European data release that could possibly affect trading is the German inflation for November; the average expectation among Bloomberg surveyed analysts is for a 1.9% annual rise in consumer prices.

Also, there has been some small amounts of chatter in today’s session about the Greece deal. ECB member Nowotny said that the agreement was the best of all alternative solutions. Nowotny said that there are no ideal solutions for Greece and that a debt cut is not on the table anymore. He also remarked that Greece has implemented massive reforms, but it is still not enough.

Additionally we heard a prediction from the Bank of Spain that data indicates that the Spanish GDP will continue to fall in Q4, and that ECB measures are starting to wear out. France Finance Minister Moscovici said that the French GDP will rise by 0.8% in 2013. In England, MPC member Bean said the Bank of England hasn’t shut the door on further quantitative easing and that uncertainty is limiting stimulus effectiveness.

The Euro is currently trading above 1.2900 against the US Dollar in forex markets. Resistance might continue to be provided by the key 1.3000 line, and support could be provided by a previous support line around 1.2824.

EURUSD Daily: November 28, 2012

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Nov 28, 2012

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OctaFX.Com - Banks see decline in profits from currency trading, WSJ reports

The banking industry is seeing a significant decline in profits from currency trading, as once-lucrative businesses are eroded by electronic trading and the proliferation of new platforms, reports the Wall Street Journal.

Nov 28, 2012

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OctaFX.Com - Forex: Euro Looks Lower Amid Bets For Further Greek Aid- Eyes 1.2650

Talking Points

 

  • Euro: Germany To Vote On Greek Deal, Schaeuble Sees Further Assistance
  • British Pound: BoE Keeps Door Open For More QE Amid Ongoing Slack
  • U.S. Dollar: Benefits From Risk Aversion, Fed’s Beige Book In Focus

 

Euro: Germany To Vote On Greek Deal, Schaeuble Sees Further Assistance

The EURUSD weakened to an overnight low of 1.2880 as German Finance Minister Wolfgang Schaeuble kept the door open to provide further support for Greece, but the reactionary approach in dealing with the debt crisis may continue to dampen the appeal of the single currency as the governments operating under the monetary union become increasingly reliant on external assistance.

As the Bundestag, Germany’s lower house, prepares to vote on the new aid package for Greece, Mr. Schaeuble showed a greater willingness to shore up the periphery country as long as the coalition government continues to meet all of its obligations, but we may see the EU put increased pressure on the European Central Bank (ECB) to ease monetary policy further as the debt crisis drags on the real economy.

The Bank of Spain warned that the extraordinary efforts taken by the ECB ‘has started to show some symptoms of wearing out’ as the periphery countries struggle to get their house in order, and we should see the Governing Council carry its easing cycle into the following year in order to tackle the deepening recession. As the ECB stands ready to implement the Outright Monetary Transactions (OMT), the weakening outlook for growth and inflation may prompt the central bank to target the benchmark interest rate in 2013, and we may get some hints for a rate cut at the December 6 meeting as the economic downturn threatens the outlook for price stability.

As the EURUSD carves out a lower top ahead of December, the reversal from 1.3007 should gather pace in the days ahead, and the pair looks poised to fall back towards the 23.6% Fibonacci retracement from the 2009 high to the 2010 low around 1.2640-50 as it searches for support.

British Pound: BoE Keeps Door Open For More QE Amid Ongoing Slack

The British Pound extended the decline from earlier this week, with the GBPUSD slipping to a low of 1.5961, but the recent weakness in the sterling may be short lived as the Bank of England (BoE) looks to carry its wait-and-see approach into the following year.

Although the BoE expects inflation to hold above the 2% target over the next two-years, board member Charles Bean argued that the Monetary Policy Committee (MPC) should keep the door open to expand its balance sheet further amid the persistent slack in the real economy. However, above-target inflation may become a pressing concern for the central bank as price growth has held above 2% since 2008, and we may see a growing number of MPC change their tune in 2013 as the U.K. emerges from the double-dip recession.

As the GBPUSD appears to be carves out a higher low in November, the rebound from 1.5822 may gather pace going into December, and we are still looking for a run at the 23.6% Fib from the 2009 low to high around 1.6190-1.6200 as the relative strength index breaks out of the bearish trend.

U.S. Dollar: Benefits From Risk Aversion, Fed’s Beige Book In Focus

The greenback extended the advance from the previous day, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) climbing to a high of 9,998, and the reserve currency may track higher throughout the North American trade as market participants scale back their appetite for risk.

As new home sales are expected to increase another 0.3% in October, the budding recovery in the housing market may spark a bullish reaction in the USDOLLAR, but we may see market volatility taper off ahead of the Fed’s Beige Book as market participants weigh the outlook for monetary policy. Indeed, the district banks should continue to highlight a more broad-based recovery in the world’s largest economy, and the report may sap bets for more easing as the recovery gradually gathers pace.

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Nov 28, 2012

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OctaFX.Com -Forex Analysis: US Dollar Classic Technical Report 11.29.2012

Prices are stalling at the bottom of a rising channel set from mid-September (now at 9971). A break below this boundary initially exposes the 38.2% level at 9945. Near-term resistance lines up at 9993, the 23.6% Fibonacci retracement, with a push above that aiming to challenge the November 16 high at 10071.

Forex_Analysis_US_Dollar_Classic_Technical_Report_11.29.2012_body_Picture_1.png

Daily Chart - Created Using FXCM Marketscope 2.0

Nov 29, 2012

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OctaFX.Com - FOREX Technical Analysis: British Pound Slips in Early Week Trading

A EURJPY short was taken last night at 10640 (released via Twitter @JamieSaettele). 10642 is the 61.8% of the decline from 10712 at 10640. Price has extended slightly beyond this level but the stop is above the 11/26 high. Once (if) the market turns lower again, objectives are 10458 and 10375 (former is former resistance and 38.2% of rally from 10031 and latter is middle of former congestion and 50% level).

The USDJPY is little changed from yesterday. Near term structure has evolved to the point that the rally into 8221 may compose wave B within the A-B-C corrective decline from 8283. I remain of the mind that the 4th wave of one less degree at 8088-8158 will produce the next low. 8113/16, which the 4th wave terminus (triangle) and 11/15 JS Thrust close, is of specific interest.

The AUDJPY is the weakest of the Yen crosses today, although losses are minimal. Risk remains to the downside in the near term as long as the Sunday night high is in place. Levels of interest as eventual support are 8485 and 8414.

EURJPY – 240 Minute

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Nov 29, 2012

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  • Dennis#MD changed the title to Financial News And Analysis by Octafx.com

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