Forex Technical and Fundamental Analysis for November 18, 2011

EUR/USD Technical Analysis for November 18, 2011

EUR/USDrose back above the 1.35 level on Thursday, only to fall back below it. The resulting candle for the session is a shooting star at the bottom of a down move – always a bad sign as it shows a rally that failed. Because of this, we would sell even more Euros if the bottom of the Thursday range gives way to the downside. It has become obvious that rallies are to be sold as well in this market. The poor bond auctions in the EU continue, and as long as they do – there will be serious pressure on the Euro in general.

EUR/USD Fundamental Analysis for November 18, 2011

Global financial markets are still trading in a Eurocentric mode. The volatility extended on Thursday with the prevailing jitters over the outlook for the euro stability with the tension over Papademos and Monti’s ability to restore confidence especially as protests rise across the nations.

Contagion fears are materialising in pressure, where yields remained elevated and Spain and France had to access markets are rising rates, and especially for Spain that is not sustainable at those levels just shy of 7.0%.

The market continued to fluctuate and the EUR/USD saw slight relief on needed correction and on the hope that the parliaments will ratify the new bailouts and budgets giving a space for markets to test their waters after the confidence motion in the new Greek government passed and the scenario expected as well for Italy.

With the lack of major data on Friday the market movement will remain choppy and volatile, especially with the end of the week. The focus will be on the second vote of confidence on the Monti cabinet and plans in Italy after the Senate vote which is expected late Thursday and likely seen to pass.

Markets will watch any changes on the yields and any sign that Europe is moving. Greece said they started talks with private bondholders on the 50% haircut yet more is needed on the October 26 measures and now it is the EFSF which is needed to at least restore the thought of the ECB as the only solution!

As for the data, Germany will end the week with the Producer Price Index for October at 07:00 GMT which is expected with 0.1% rise after 0.3% and on the year to slow to 5.3% from 5.5%.

The United States will end the week at 15:00 GMT with the Leading Indicators for October which are expected to improve to 0.5% from 0.2%.

USD/JPY Technical Analysis for November 18, 2011

The USD/JPYfell again on Thursday as traders continue to express a real lack of confidence in the global markets. The Bank of Japan has been intervening in the markets, pushing prices higher form time to time. The pair is in “No Man’s Land” at the moment, and cannot be bought or sold at these levels. The lower area around the 76 mark could invite intervention again, and a buy position down there could be enticing. Until we get down there, we don’t have much in the way of desires to trade this pair though.

USD/JPY Fundamental Analysis for November 18, 2011

The USD/JPY pair dropped early Thursday as the greenback fell against most of its major counterparts in a correctional movement after its strong performance the day before.

The U.S. stock market dropped after the rating agency Fitch warned the banking sector in United States of a possible downgrade due to the EU debt crisis infection.

Investors increased demand for the US dollar as a safe haven which drove it to record its highest level in five weeks against the euro, before it retreated early Thursday.

The weakening dollar open the way for the Japanese yen to record more gains, and drove the USD/JPY pair to its lower end of its trading range.

The United States will end the week at 15:00 GMT with the Leading Indicators for October which are expected to improve to 0.5% from 0.2%.

GBP/USD Technical Analysis for November 18, 2011

The GBP/USD pairrose during the Thursday session, although it did manage to fall late in the day. The pair punched through the 1.57 level, only to fall back below it by the end of the day. The pair is presently under serious pressure, and a break of the Thursday lows should send this pair much lower over time. The 1.55 level is supportive in our minds, so we expect a stop at that point in the down move. However, with the risk profile in the global markets – this pair could fall much lower.

GBP/USD Fundamental Analysis for November 18, 2011

The pair managed to rebound on Thursday after three days of decline after the release of better-than-expectedU.K.retail sales report andU.S.reports which enhanced demand on high-yielding currencies.

Retail sales with auto fuel advanced 0.6%, the highest level since June, compared with the revised 0.5% in September.

In theU.S., housing starts increased to 628,000 in Oct., beating estimates of 610.000, while initial jobless claims dropped to 388,000 in the week ended Nov. 12, below both estimates and the revised readings of 395,000 and 393,000 respectively.

The better-than-predictedU.S.data revived hopes theU.S.economy may lead recovery in the fourth quarter after the recent data has been showing progress.

The optimistic reports from both economies managed to ease the tensions spreading in markets on the back of the rise in Spanish and French bond yields which renewed concerns the debt contagion is spreading among the euro region’s largest economies.

The Spanish 10-year yields jumped to 6.975%, the highest level since 1997, from 5.433% in the previous auction where the sell came at 3.56 billon euros, below the maximum target of 4 billion euros. By the same token, the rate of Italian 10-year notes remained above 7%

InFrance, the rate of the five-year bills climbed 9 basis points to 2.87%, while the spread between French and German bunds soared to a record high of 200 basis points.

On Friday, the week ends with the release of no data from theU.K.while theU.S.will release leading indicators which may show a rise to 0.5% in the month of Oct. from the prior reading of 0.2%.

The releases from theU.S.are not expected to have an impact on the pair’s movements where the main concentration will probably remain on the general sentiment which is meanwhile on the euro area.

Still, the main focus is on the latest developments from the euro area, especially fromItalyandGreecewhich have the highest debt in the region and witnessing political changes meanwhile.

USD/CHF Technical Analysis for November 18, 2011

The USD/CHF pairhad a fairly quiet day on Thursday, but did form a small hammer of sorts. The pair is approaching the recent highs, and if the 0.93 handle gives way – this pair should continue much higher. If that is the case, our first target is 0.95, and then parity. The Swiss Franc simply cannot be bought at this point because of the SNB and its threats of intervention. We like buying dips in this pair going forward.

USD/CHF Fundamental Analysis for November 18, 2011

The pair showed a slight decline on Thursday trading after the release of upbeatU.S.reports which prompted investors to damp the dollar as a safe haven.

Data from theU.S.showed improvement as housing starts increased to 628,000 in Oct., beating estimates of 610.000, while initial jobless claims dropped to 388,000 in the week ended Nov. 12, below both estimates and the revised readings of 395,000 and 393,000 respectively.

The better-than-predictedU.S.data revived hopes theU.S.economy may lead recovery in the fourth quarter after the recent data has been showing progress.

The data gave some confidence regarding the housing sector which triggered the 2008 crisis and the labour market which suffered tremendously from the undergoing slowdown.

In fact, the optimistic figures managed to ease the tensions spreading in markets on the back of the rise in Spanish and French bond yields which renewed concerns the debt contagion is spreading among the euro region’s largest economies.

The Spanish 10-year yields jumped to 6.975%, the highest level since 1997, from 5.433% in the previous auction where the sell came at 3.56 billon euros, below the maximum target of 4 billion euros. By the same token, the rate of Italian 10-year notes remained above 7%

InFrance, the rate of the five-year bills climbed 9 basis points to 2.87%, while the spread between French and German bunds soared to a record high of 200 basis points.

Still, the main focus is on the latest developments from the euro area, especially fromItalyandGreecewhich have the highest debt in the region and witnessing political changes meanwhile.

On Friday, the week ends with the release of no data from the Swiss economy while theU.S.will release leading indicators which may show a rise to 0.5% in the month of Oct. from the prior reading of 0.2%.

The releases from theU.S.are not expected to have an impact on the pair’s movements where the main concentration will probably remain on the general sentiment which is meanwhile on the euro area.

EUR/CHF Technical Analysis for November 18, 2011

EUR/CHFrose slightly during the Thursday session, but still remains under the 1.25 level. The 1.25 area looks like a buy area for us if we can close above it. The breaking on a daily close has us holding onto a long position for a long-term move. The biggest problem is that in order to buy the Euro, you would have to think the EU has got it all together…..which it clearly doesn’t. Someday this is a long-term buy and hold, but that day isn’t today. The SNB has put in a floor to this pair at 1.20, and any break below that would certainly invite intervention. Because of this, the downside is limited at best.

EUR/CHF Fundamental Analysis for November 18, 2011

Despite everything seen in the market and the high volatility and jitters, nothing has changed at all for the EUR/CHF! The move is still confined within a limited range and the outlook did not change for the pair with the lack of momentum and appeal for markets.

Investors are avoiding risk and surely fearful of the status of the euro amid the mixed and uncertain outlook for the debt crisis. Investors are mixed from as much as a euro break up all the way to the ability to solve the crisis and the far different odds are affecting the euro’s appeal.

With the debt crisis still the main market focus investors are surely not pro-euro enough to move the pair and surely are not bold enough to bet against the SNB which has proven, unlike European leaders, its willingness and ability to act in a firm and timely manner to stem the currency gains to shelter its economy.

This reaction is so far the missing link in Europe and the source of the agony. The October 26 resolutions are not turned into reality till now and the market shunned their slow reaction and forcing the ECB to act by keeping yields elevated and forcing more pressure on nations that might tip and fall if those rates persist starting with Italy and followed by Spain and not forgetting the spiral effect! Spain and France endured rising costs in the auction on Thursday and the market is still sceptic of the new government in Greece and Italy to succeed with protestors against further austerity still in the street.

The EUR/CHF will end the week Friday with the same choppy and tight range trading as the focus remains on the euro area and with the lack of data nothing will change with the end of the week position squaring.

Germany will end the week with the Producer Price Index for October at 07:00 GMT which is expected with 0.1% rise after 0.3% and on the year to slow to 5.3% from 5.5%.

AUD/USD Technical Analysis for November 18, 2011

The AUD/USD pairbroke below the parity level on Thursday, and continued its bearish tone overall. The 0.99 level below should be somewhat supportive, and if that area gives way – this pair should fall much, much lower. The upside is going to be difficult in this pair at this point in time as it is so risk sensitive. The world’s markets are getting nervous, and this is never a good thing for the Aussie. We like selling a break below 0.99, and any rallies that present themselves.

AUD/USD Fundamental Analysis for November 18, 2011

The AUD/USD pair gained slightly early Thursday as the US dollar fell against other majors, while the downside wave still dominate the pair’s movement since the RBA changed its monetary policy.

The dollar index (which measure the performance of the US dollar against a basket of six major currencies) dropped on Thursday after it reached its highest level since October 10.

The current sentiment in the financial market is still full of fears regarding the EU debt crisis and its negative effect on other banking systems around the globe, the sentiment which was confirmed after the credit agency Fitch warned the U.S. banking sector of possible downgrade for some banks.

On the other hand, the Aussie lost its momentum due to risk aversion which drove investors to abandon higher-yielding currencies in addition to the current dovish stance from the RBA.

On Friday, the United States will end the week at 15:00 GMT with the Leading Indicators for October which are expected to improve to 0.5% from 0.2%.

USD/CAD Technical Analysis for November 18, 2011

The USD/CADpushed higher on Thursday, testing the 1.03 handle again. The 1.03 level is the top of the recent consolidation area, and the sight of massive resistance. The breaking of this area on a daily close would have us buying again, and a break of the 1.07 level has us holding onto a longer-term position. The pair could pullback, but the last two days have shown the real pressure is to the upside at the moment as the highs have pressed the 1.03 level.

USD/CAD Fundamental Analysis for November 18, 2011

The USD/CAD pair rebounded to the downside on Thursday, where better than expected data from the U.S. housing and labour sectors overshadowed rising fears from Europe, where housing starts and building permits came out better than forecasts. Nonetheless, the USD/CAD pair losses were limited, as fears continued to dominate markets, as yields on governmental bonds continued to rise in Europe, which reflects mounting concerns among investors that the euro zone debt crisis is worsening.

Housing starts fell by 0.3% in October to 628K, better than median estimates for a drop of 7.3% to 610K, while building permits rose strongly by 10.9% to 653K, compared with median estimates of 603K. Moreover, the weekly jobless claims fell by 5 thousand to 388K, better than median estimates of 395K. Nonetheless, the Philadelphia Fed index continued to expand in November at a slower than expected pace, where the Philly Fed index eased to 3.6 from 8.7 in October.

Traders will continue to monitor the developments from Europe regarding the debt crisis, where rising yields in Europe suggest investors are concerned amid the uncertainty that is surrounding the outlook of the EU debt crisis. Moreover, traders will be eyeing data from Canada on inflation, where the consumer price index will be released and is expected to show that price pressures eased in October. The USD/CAD pair should still be able to rise if concerns from Europe continue to dominate global markets, but we still expect volatility to continue to dominate trading, and that should also lead to high levels of fluctuations for the USD/CAD pair.

Friday November 18:

TheUnited Stateswill end the week at 15:00 GMT with the Leading Indicators for October which are expected to improve to 0.5% from 0.2%.

The inflation week continues in theCanadawith the Consumer Price Index for October at 12:00 GMT. The index is expected to ease to 0.1% and on the year to ease to 2.8% from 3.2%. Core CPI is expected is expected to ease to 0.1% and on the year to ease to 1.9% from 2.2%.

Canadawill release the Leading Indicators for October which are expected to improve to 0.1% from -0.1%.

NZD/USD Technical Analysis for November 18, 2011

The NZD/USD pairfell on Thursday as traders continue to sell risk-related assets around the world. The Kiwi will be especially sensitive to the commodity markets as it is one of the well documented “Com Dolls”, and moves with the overall sentiment of commodity markets in general. As long as there are issues in the global debt markets, especially Europe, this pair falls. The 0.75 level below looks very supportive, and if it gives way – 0.70 is more than likely going to be seen. We can’t buy this pair right now as there is simply far too much headline risk out there.

NZD/USD Fundamental Analysis for November 18, 2011

The NZD/USD pair advanced from it lowest level in six weeks, as the greenback lost momentum against other majors in a correctional movement after its previous strong performance.

The New Zealand dollar retreated during the last period due to the uncertainty regarding the global economy outlook, in addition to the Chinese authorities’ attempts to cool inflation which started to show the negative effects on China and accordingly on demand outlook for New Zealand’s exports which affects the recovery.

Expectations remain for further losses for the NZD/USD pair as the current rise is just a correction move due to the US dollar weakness where risk aversion remains the dominant force in markets.

On Friday, the United States will end the week at 15:00 GMT with the Leading Indicators for October which are expected to improve to 0.5% from 0.2%.

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