Forex Fundamental Analysis for November 2, 2011

EUR/USD Fundamental Analysis for November 2, 2011

The EUR/USD extended the slump on Tuesday after the Greece unexpectedly called for a referendum on the new bailout, which triggered a wave of selling across the board on a highly anticipated no vote that will force Greece to default. In an unexpected move Papandreou called for a confidence vote on his policies which is expected this Friday and also called for a national referendum on the new bailout which is expected by the end of this year or in January which warnings for started to rise. Fitch Ratings warned that a no vote will force Greece into a disorderly default and eventually might force it to drop out of the euro area. The EU leaders have gone out of their way to find a good package to restore confidence but eventually the unexpected decision in Greece reversed all the progress made and sent markets to expecting the worst. The EUR/USD is surely biased south with this new chapter now and the outlook does not look pretty now, as a disorderly default is all that the market has been trying to fight, and as soon as markets tried to normalize the new selloff started. We still expect Wednesday to be focused on the debt crisis and the Greek fate as with time the fear of default is priced into reality. The FOMC will be a major focus for investors as well, as now the expected steady decision from the Federal Reserve is behind the curve with the evident threat and after the first victim in the US fell assuring that more will follow if the situation remains at the current new pessimistic expectations. Investors now expect the Feds to say something about the developments in Europe and assure markets that they are willing to take more steps to secure their markets and the recovery. Germany will start the session at 08:55 GMT with the unemployment figures for October, where the unemployment change gauge is predicted to show drop of 10 thousands from the previous 26 thousands. In addition, the unemployment rate is expected unchanged at 6.9%. At 08:55 GMT Germany will also release the PMI manufacturing index final reading for October with expectations for unrevised index of 48.9. At 09:00 GMT the euro zone will release the PMI manufacturing index final reading for October, where the index is expected to linger at 47.3. The United States will join the session at 12:15 GMT with the ADP employment change for October, as employment is expected to increase by 101 thousand jobs from 91 thousand. At 16:30 GMT the United States will release the FOMC rate decision, with expectations for a steady rate of 0.25%. At 18:15 GMT, the Fed’s Chairman Ben Bernanke will speak at a Fed Conference to discuss the latest projections and outlook for the U.S. economy.

USD/JPY Fundamental Analysis for November 2, 2011

The USD/JPY pair continued trading near its highest level in three months, after the BOJ intervened in the FX market for the third time this year to sell the yen, which drove the pair up sharply. The central bank’s intervention could force the yen over the short term to trade lower against the dollar and other major currencies, as the yen didn’t reflect the Japanese fundamentals. Profit taking pushed the USD/JPY pair down early Tuesday, while the greenback consolidated before the FOMC decision and amid renewed fears in Europe which might again negate all the efforts by Japan to weaken the yen amid fears and risk aversion. On Wednesday, the U.S. economy will release the ADP employment change for August at 12:15 GMT, where it’s expected at 101 thousands from the previous reading of 91 thousands. At 16:30 GMT, the Federal Open Market Committee will announce its Rate Decision, which is expected to be steady between 0.0% and 0.25%; and at 18:15 GMT Fed’s Governor Bernanke will speak at the Fed Press Conference.

GBP/USD Fundamental Analysis for November 2, 2011

The pair slipped sharply despite the release of better-than-estimated growth figures amid concerns the British economy may relapse into another recession.

Still, the outlook for the British economy is worrying; noting that the latest announcements by BoE policymakers revealed that the economy could witness another contraction or recession in the coming quarters and the BoE may add further to stimulus after the current round is completed.

The British economy expanded of 0.5% in the three months ended September, according to the GDP advanced reading, beating estimates of 0.3% and compared with the 0.1% expansion recorded in the second quarter.

However, the optimistic report’s effect was offset by the drop in U.K. PMI manufacturing to 47.4 in October from the prior expansion of 51.1 in September.

By the same token, China’s PMI manufacturing showed an ease in expansion to 50.4 in October from 51.2. U.S. manufacturing sector growth also slowed to 50.8 in October from 51.6.

Moreover, the pair was affected by the general sentiment which was fuelled with tensions after the Greek Prime Minister called for a referendum on the euro area’s latest bailout package.

The announcement by Papandreou ignited fears after the debt relief accord announced last week by European leaders which included that private sector bondholders will bare 50% losses of Greek debt to cut it by 100 billion euros, while leveraging the firepower of the EFSF to 1 trillion euros from the current 440 billion euros.

In the case of the rejection of the bailout, the debt-laden country would be vulnerable to a default.

Concerns aggravated in markets this week amid worries regarding the implementation of the measures announced by European leaders last week.

On Wednesday, as of 09:30 GMT, the U.K. will release PMI construction for the month of October, where the U.S will release important data. As of 11:00 GMT, MBA mortgage approvals for Oct. 28 will be available. At 12:15 GMT, the U.S economy is to release ADP employment change where it is expected to show an increase to 101,000 in Oct. from the previous 91,000. Thereafter, specifically at 16:30 GMT, eyes will be on FOMC rate decision which is expected to show no change as the Fed will probably leave borrowing cost at its low level of 0.25%.

The U.S. data will be awaited, especially ADP employment as it will provide some indication about the status of the labour sector before the release of the non-farm payrolls on Friday.  Also, data from the U.K. may have an impact on the pound after the drop in manufacturing, where services gauge will be released on Thursday.

USD/CHF Fundamental Analysis for November 2, 2011

The pair continued its rise for the third straight session after Greek Prime Minister called for a referendum on the euro area’s latest bailout package. The announcement by Papandreou ignited fears after the debt relief accord announced last week by European leaders which included that private sector bondholders will bare 50% losses of Greek debt to cut it by 100 billion euros, while leveraging the firepower of the EFSF to 1 trillion euros from the current 440 billion euros. In the case of the rejection of the bailout, the debt-laden country would be vulnerable to a default. Concerns aggravated in markets this week amid worries regarding the implementation of the measures announced by European leaders last week. Moreover, fundamentals increased doubts regarding global recovery asChina’s PMI manufacturing showed an ease in expansion to 50.4 in October from 51.2. By the same token, U.S .manufacturing sector growth slowed to 50.8 in October from 51.6. The downbeat sentiment boosted the dollar against the franc that was damped has been damped by many investors as a safe harbor after the SNB several interventions. On Wednesday, while the Swiss economy lacks fundamentals, the U.S will release important data. As of 11:00 GMT, MBA mortgage approvals for Oct. 28 will be available. At 12:15 GMT, the U.S economy is to release ADP employment change where it is expected to show an increase to 101,000 in Oct. from the previous 91,000. Thereafter, specifically at 16:30 GMT, eyes will be on FOMC rate decision which is expected to show no change as the Fed will probably leave borrowing cost at its low level of 0.25%. The data will be awaited, especially ADP employment as it will provide some indication about the status of the labour sector before the release of the non-farm payrolls on Friday.

EUR/CHF Fundamental Analysis for November 2, 2011

The EUR/CHF moved to the upside mainly on Tuesday amid evident pressure on the franc versus the dollar and surely not to any strength for the euro which was losing grounds across the board. In an unexpected move Papandreou called for a confidence vote on his policies which is expected this Friday and also called for a national referendum on the new bailout which is expected by the end of this year or in January which warnings for started to rise. Fitch Ratings warned that a no vote will force Greece into a disorderly default and eventually might force it to drop out of the euro area. The EU leaders have gone out of their way to find a good package to restore confidence but eventually the unexpected decision in Greece reversed all the progress made and sent markets to expecting the worst. Heavily volatility is still expected on Wednesday with the market now controlled by the dollar and risk aversion which is fueling the gains for greenback as a safe bet amid the ongoing uncertainty and rising risk. Investors will also watch the comments from the Federal Reserve as the FOMC announces their monetary policy decision as they are expected to stay aside this month with no changes, yet after the turn of events in Europe now, investors look for any comfort comments and support to battered markets, especially after MF Global in the United States marked as the first official victim of the debt crisis. The euro area final PMI Manufacturing for October is due at 09:00 GMT and expected unrevised at 47.3.

AUD/USD Fundamental Analysis for November 2, 2011

The AUD/USD pair dropped early Tuesday after the Reserve Bank of Australia cut its cash target by 25 points to 4.50% for the first time since 2009. On the other hand, the greenback consolidated against other majors before the FOMC rate decision. The RBA indicated that slowing demand and high rates have anchored inflation pressures and with overall moderate growth and subdued confidence inflation is likely to remain contained and a normal monetary stance is warranted to support growth with inflation as well between 2 per cent and 3 per cent. Despite that the rate reduction was widely expected, Aussie retreated against the US dollar as investors sentiment is turning negative again on fears over the outlook especially after the weak Chinese PMI and worsening outlook for Europe again after Greek prime minister unexpectedly called for a referendum on the new bailout. The fears supported haven demand on the dollar and risk aversion which further pressured the Australian dollar to the downside. At 00:00 GMT, Australia will release the monthly new home sales figures for September which had a prior reading of 1.1%. At 00:30 GMT will be the release of the monthly building approvals for September, where the prior reading rose 11.4%, and on the year it had a previous of 5.5%. The U.S. economy will release the ADP employment change for August at 12:15 GMT, where it’s expected at 101 thousands from the previous reading of 91 thousands. At 16:30 GMT, the Federal Open Market Committee will announce its Rate Decision, which is expected to be steady between 0.0% and 0.25%; and at 18:15 GMT Fed’s Governor Bernanke will speak at the Fed Press Conference.

USD/CAD Fundamental Analysis for November 2, 2011

The USD/CAD pair extended its gains on Tuesday, as the U.S. dollar gained strong momentum amid the ongoing pessimism that continued to dominate global financial markets, where Greek Prime Minister George Papandreou surprised markets by calling a referendum on the bailout package that was approved last week by EU leaders. Moreover, the failure of MF Global Holdings continued to weigh down on confidence, as traders sold higher yielding assets and targeted lower yielding ones, which provided the U.S. dollar with strong bullish momentum that pushed the USD/CAD pair higher. Moreover, the Institute for Supply Management released the manufacturing index for the month of October, where the ISM manufacturing index eased to 50.8 from the prior estimate of 51.6 and below median estimates of 52.0, the worse than expected expansion in the manufacturing index also spread jitters across markets over the outlook for growth in the world’s largest economy, and boosted demand for the U.S. dollar against higher yielding currencies. Traders will be eyeing the FOMC rate decision on Wednesday, where the majority of analysts expect the FOMC to leave the current monetary policy unchanged, although few analysts expect the Fed to announce more monetary easing measures. Also on Wednesday, traders will be eyeing the ADP employment change report for the month of October, since it could provide some hints over the health of the U.S. labour market ahead of Friday’s Non-farm payrolls. Wednesday November 02: The United States will join the session at 12:15 GMT with the ADP employment change for October, as employment is expected to increase by 100 thousand jobs from 91 thousand. At 16:30 GMT the United States will release the FOMC rate decision, with expectations for a steady rate of 0.25%. At 18:15 GMT, the Fed’s Chairman Ben Bernanke will speak at a Fed Conference to discuss the latest projections and outlook for the U.S. economy.

NZD/USD Fundamental Analysis for November 2, 2011

The NZD/USD pair dropped for the second day as the Kiwi followed risky assets and commodities steps and dropped to the downside amid a renewed wave of risk aversion in the market. Kiwi retreated against the US dollar as investors sentiment is turning negative again on fears over the outlook especially after the weak Chinese PMI and worsening outlook for Europe again after Greek prime minister unexpectedly called for a referendum on the new bailout. The fears supported haven demand on the dollar and risk aversion which further pressured the New Zealand dollar to the downside. On Wednesday, the U.S. economy will release the ADP employment change for August at 12:15 GMT, where it’s expected at 101 thousands from the previous reading of 91 thousands. At 16:30 GMT, the Federal Open Market Committee will announce its Rate Decision, which is expected to be steady between 0.0% and 0.25%; and at 18:15 GMT Fed’s Governor Bernanke will speak at the Fed Press Conference.

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