Forex Fundamental Analysis for October 25, 2011

EUR/USD Fundamental Analysis for October 25, 2011

The EUR/USD started the week with heavy volatility as eyes remain on the European continent and the progress being made to contain the debt crisis. The market is still holding up and awaiting the final details from the leaders on Wednesday at the latest. The market is still optimistic after they saw progress being made and the leaders at least managed to narrow their differences on how to contain the crisis and present a final plan. The EU already approved their part of the 8 billion euro tranche for Greece and also ruled out ECB involvement in the new expansion of the EFSF, yet the market remains highly volatile and uncertain and the volatility will prevail until the final details are provided. The EU accepted the recommendations from the finance ministers over banks that need around 100-110 billion euros of capital, which the market found another progress to help banks. We still see the uncertainty dominant as there are no sufficient details to judge if the plan will be strong enough or not, and accordingly investors remain sceptic and holding off from taking decisive decisions on the euro, which will be evident on Tuesday especially with the lack of major fundamentals. Investors see narrowing chances for a rally on the measures since it is mostly priced in, yet a strong breakthrough will also see the euro stronger, especially a break above the strong $1.40 levels which will be strong for the euro and will extend the rally, otherwise we will see the market take the course and move lower on the measures if they are indeed inadequate since they already ran their course on the market. Germany will report the Gfk Consumer Confidence for November at 06:00 GMT which is expected to weaken to 5.1 from 5.2. The U.S. economy is set to release the Consumer Confidence for October at 14:00 GMT which is expected to improve to 46.0 from 45.4.

USD/JPY Fundamental Analysis for October 25, 2011

The USD/JPY pair started the week with losses to trade near its post-war levels, where the weak dollar and the improvement in the majors’ levels opened the door for more gains for the Japanese currency. Jitters are still evident, yet eased fears over Europe suppressed haven demand on the yen as well. The EU leaders’ plans to contain the debt crisis started to appear on the scene, which increased confidence between investors to reflect on Asian stocks that recorded gains on the first trading day of the week as the market awaits the final details due maximum Wednesday. On Tuesday at 05:00 GMT, Japan will issue the Small Business Confidence for October where it had a prior reading of 47.2. On Tuesday, the U.S. economy will release the Consumer Confidence for October at 14:00 GMT, where it’s expected to come at 46.3 from the previous 45.4. The House Price Index for August is due at 14:00 GMT which had a previous reading of 0.8%.

GBP/USD Fundamental Analysis for October 25, 2011

On Monday, the pair fluctuated amid hopes that European leaders are coming closer to launching a comprehensive plan on Wednesday and worries after disappointing euro area reports. Meanwhile, the main focus is on the European summit results which are grabbing the main attention in the market. ┬áHopes increased that there will be final decision in the second summit on Wednesday; however, some expected more on Saturday meeting. European leaders during their meeting in the weekend tackled vital issues such as banks recapitalization and expanding the EFSF firepower, where the ECB’s participation in the EFSF was mainly ruled out. Greek banks were affected after German Chancellor set a size between 50% and 60% to Greek writeowns of Greek debt, as cited by the Greens party’s Juergen Trittin. Looking at fundamentals, the data came mixed as while Chinese manufacturing sectors showed expansion for the first time in three months in October, euro area manufacturing and services sector’s contraction widened in October. Thus, amid the absence of data from both U.S. and U.K., the mix between hopes and fears caused the pair to move near the day’s opening level.

USD/CHF Fundamental Analysis for October 25, 2011

On Monday, the pair fluctuated amid hopes that European leaders are coming closer to launching a comprehensive plan on Wednesday and worries after disappointing euro area reports. Still, the main focus is on the European summit results as hopes increased that there will be final decision in the second summit on Wednesday, yet, others expected more on Saturday meeting. The main issues discussed were banks recapitalization and expanding the EFSF firepower while the ECB’s participation in the EFSF was mainly ruled out. Worries persisted on Monday among Greek banks after German Chancellor set a size between 50% and 60% to Greek writeowns of Greek debt, as cited by the Greens party’s Juergen Trittin. Looking at fundamentals, while Chinese manufacturing sectors showed expansion for the first time in three months in October, euro area manufacturing and services sector’s contraction widened in October. Thus, amid the absence of data from both U.S. and Switzerland, the mix between hopes and fears cause the pair to move near the day’s opening level.

EUR/CHF Fundamental Analysis for October 25, 2011

The pair continued to hover within the same tight range with the start of a new week on Monday, where all the focus remains on the final plan to be presented by Europe on Wednesday’s summit, especially that the weekend meetings failed to produce concrete plans for the market to act on. Investors remain upbeat that the summit might present something, and accordingly still fear selling the euro now, and prefer to stay on hold to see the final recommendations. The odds are narrowing for a major breakthrough by leaders and investors remain more sceptic, yet fear a strong rally at the same time and accordingly caution is what we can see now with hopes that they might present something strong, especially support for banks. So far the market is realising that the measures are already being priced in the market and that Wednesday will not trigger new revelations and accordingly the buying pressure will extend on the euro, leaving the lighter chance for a breakthrough which can see the trigger of stops if the euro does gain versus the dollar and that might move the EUR/CHF higher. In the meantime fear of the SNB action also limits the scope for the pair’s movement yet with stability above 1.22 we see that any failure to meet high market expectations for the summit has the room to send the pair to test the 1.20 floor. Choppy trading will be evident on Tuesday ahead of the summit and with the lack of major fundamentals and accordingly we still see the EUR/CHF in a tight range with chances higher for the franc to gain grounds again amid the fear over the euro outlook. Germany will report the Gfk Consumer Confidence for November at 06:00 GMT which is expected to weaken to 5.1 from 5.2.

AUD/USD Fundamental Analysis for October 25, 2011

Still the fears dominate the market’s movements as the market awaits the final plan from the European leaders, where the decision was delayed till the new summit on Wednesday, yet we can see progress made and that is supporting some positive outlook amid high caution. Investors are waiting for the second part of the summit on Wednesday yet some agreement among Germany and France is made over ruling out the ECB role and they also approved their share of the Greek sixth tranche, which eased the jitters. On the other hand, the Australian currency, nicknamed Aussie, inclined against the greenback after the HSBC reported that China’s PMI is to show some improvements during October more than the previous reading; this reflects positively on Australian exports and accordingly the currency. Meanwhile, Australian producers rose in September less than economists forecasted as cheaper manufactured goods and construction partly offset gains in utility costs, singling that the inflation pressure cooled, supporting the Reserve Bank of Australia to keep interest rates unchanged in the upcoming months. On Tuesday, the U.S. economy will release the Consumer Confidence for October at 14:00 GMT, where it’s expected to come at 46.3 from the previous 45.4. The House Price Index for August is due at 14:00 GMT which had a previous reading of 0.8%.

USD/CAD Fundamental Analysis for October 25, 2011

The USD/CAD pair continued to drop on Monday, as optimism EU leaders will reach an agreement to ease the European debt crisis, in addition to the better than expected growth in Chinese manufacturing activities, which eased concerns over the extent of slowdown in China’s economic growth, boosted demand for higher yielding assets, which provided the Canadian dollar with some momentum and pushed the USD/CAD pair to the downside. The Canadian dollar’s gains though were limited by the worse than expected contraction in European services and manufacturing activities, which raised fears that the euro zone economy could be heading into recession. Traders will continue to monitor the latest developments from Europe, where more optimism could provide the USD/CAD pair with more bearish momentum on Monday. Nonetheless, the uncertainty remains very high in markets, and that could lead the USD/CAD pair to fluctuate over the coming days. Traders will be eyeing the interest rate decision from the Bank of Canada on Tuesday, where the BOC is expected to leave the benchmark interest rates unchanged. Tuesday October 25: Canada will release the retail sales for August at 12:30 GMT, where retail sales are expected to rise by 0.2%, following the prior decline of 0.6%, while retail sales excluding autos are expected to rise by 0.4%, compared with the prior flat estimate. The S&P/CaseShiller house price index will be released for the month of August at 13:00 GMT, where the S&P/CS 20 city house price index is expected to rise by 0.15%, compared with the prior rise of 0.05%, while compared with a year earlier, the S&P/CS Composite-20 index is expected to decline by 3.55%, compared with the prior drop of 4.11%. The U.S. Conference Board will release the consumer confidence index for October, where consumer confidence is expected to improve slightly to 46.0 from 45.4 back in September. The Bank of Canada will announce its decision on benchmark interest rates at 13:00 GMT, where the BOC is expected to leave the benchmark interest rates unchanged at 1.00%.

NZD/USD Fundamental Analysis for October 25, 2011

The euro area crisis continues to dominate markets with swings in sentiment producing corresponding moves in asset prices; nevertheless, with signs of progress after the weekend summit and broad lines of a plan eased the woes slightly. The commodities prices increased, which supported the New Zealand’s currency to gain versus the American dollar, also it increased after data showed consumer confidence rose. The New Zealand currency, nicknamed the Kiwi, increased against major currencies; while it continued its upside movement versus the US dollar after Asian stock markets rose, increasing demand for higher yielding currencies. On Tuesday, the U.S. economy will release the Consumer Confidence for October at 14:00 GMT, where it’s expected to come at 46.3 from the previous 45.4. The House Price Index for August is due at 14:00 GMT which had a previous reading of 0.8%.

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