Forex Technical and Fundamental Analysis for November 24, 2011

EUR/USD Technical Analysis for November 24, 2011

The EUR/USD pair fell hard on Wednesday as traders reacted to a poor German bond auction. The pressure being put on Germany is a much larger deal than some of the other countries, and this move into German marekts by the “Bond Vigilantes” could signal another massive leg down for the EU in general. With this in mind, we like selling rallies still, and think that the 1.31 level will be tested soon. We will not buy the Euro at all.

EUR/USD Fundamental Analysis for November 24, 2011

It was another really bad day for the EUR/USD as the pair returned strongly to its bearish run amid mounting debt woes and fears of contagion that seemingly now affected Germany!

The fear of surging yields and record borrowing costs continues to alarm the market and keep the focus on the debt-laden euro nations. French and Belgian borrowing costs surged after newspapers said they are in talks with Dexia again to go over its rescue signaling alarming messages to markets that France might end in shouldering more putting its already fragile state at risk.

The news continued with Fitch issuing a new warning for France after Moody’s that at this worsening rate and slowdown it might lose its top credit rating. The worries coupled with downbeat macroeconomic figures with the contraction in the manufacturing and services sector ongoing in the euro area that assures the weak outlook for the area.

Nevertheless, the biggest strain for the day was the unexpected abysmal outcome of the German 10-year bond auction as it missed 6.0 billion target and the Bundesbank had to step in and purchase almost the half of the sale as investors shunned the bond of fears over Germany’s outlook to shoulder more as recession looms and the debt crisis deepens with low yields that was not tempting risk-reward ratio to investors!

Surely the debt crisis is the main driver for the sentiment and the good news are not doing anything to help in ending the selloff! The IMF expanded the precautionary lines lending up to 6 months for nations that are under distress from the current crisis and that are healthy to prevent the contagion yet still it did little to nothing for the market. The EC also proposed changes to monitor the euro zone members budgets in line with the demands from Germany and France yet that is also another precautionary move that is not at all what the market needs now as they need a solution which no one is offering!

We still see the market will continue to battle its demons on Thursday and with our expectations for lower trading volumes due to the U.S. holiday more volatility might be evident especially with Europe queued to release more important macroeconomic data.

Germany will start the session at 06:00 GMT with the GDP figures for the third quarter in a final reading, where the seasonally adjusted quarterly GDP is expected unchanged at 0.5%, while the working-day adjusted GDP index is expected at 2.6%. In addition, the domestic demand index for the third quarter is expected unchanged at 0.4%, while exports are expected to expand by 1.7% from 2.3%.

At 09:00 GMTGermanywill release the IFO survey for November, where the business climate indicator could have retreated to 105.2 from 106.4, while the current assessment indicator could have declined to 115.2 from 116.7, in the time expectations indicator could ease to 96.0 from 97.0.

USD/JPY Technical Analysis for November 24, 2011

The USD/JPY pair rose during the Wednesday session as the run towards the US dollar continues. The pair is backed by the Bank of Japan and its intervention to weaken the Yen. The move was fairly impressive, but long-term this pair is massively bearish. The move will more than likely turn out to be another chance for sellers to come into the market. Because of this, we are not buying at this point, and will look for weakness to sell.

USD/JPY Fundamental Analysis for November 24, 2011

The USD/JPY pair traded in a narrow range early Wednesday but it leans to the upside, as the US dollar is gaining momentum against most of its major counterparts which makes it hard for the Japanese yen to compete.

The greenback soared against the euro and other majors after the Fed’ FMOC minutes that showed discussions between the bank’s members regarding more easing.

Market confidence retreated once again after the FOMC minutes, the dollar gained against the majors along with the Japanese yen which consider the safe haven currencies.

On the other hand, the USD/JPY pair is expected to move in sideways due to the current pressure from the dollar’s strength along with the downside trend dominating on the pair.

Both economies will not release any data on Thursday, where the pair’s movements will depend on the current market sentiment and the volume will be low with limited movement with the absence of U.S. markets for Thanksgiving holiday which will increase the volatility.

GBP/USD Technical Analysis for November 24, 2011

GBP/USD finally found the 1.55 mark on Wednesday that we have been calling for recently. The level marks the start of a massive support band down to the 1.53 level. Because of this, we aren’t keen on selling at these current levels. The candle was very bearish, and does indicate that the next large move is more than likely down. However, we will want to see a bounce to sell, or the 1.53 level cleared to get aggressively short in this pair. We aren’t buying at the moment.

GBP/USD Fundamental Analysis for November 24, 2011

On Wednesday, the pair continued its drop for the third day amid tensions spreading in markets which empowered demand on the greenback as a refuge.

Concerns aggravated the debt contagion is spreading among the euro region’s largest economies after the rise in German bond yields and decline in demand.

The euro area’s biggest economy did not manage to receive bids of 35% of the 10-year bonds, while the 30-year notes surged to two-week high where the sale came at 3.889 billion euros, below the maximum target of 6 billion euros.

Moreover, fears of facing another recession increased with the release of weak manufacturing reports which showed that the contraction in the euro zone deepened to 46.4 in Nov. from 47.1 in Oct, according to the PMI gauge.

Also, Chinese HSBC services PMI started the day with pessimism as manufacturing showed a contraction of 48.30 in Nov. from 51.1 a month before.

In theU.S., data added to worries as durable goods orders fell 0.7% from the previous 1.5% drop, personal spending recorded 0.1% advance in Oct. compared with 0.7% a month earlier and initial jobless claims showed increase to 393,000 in the week ended Nov. 19 while the prior reading was revised up to 391,000 from the initial 388,000.

Moreover, the pound showed decline after the release of BoE minutes which showed that a unanimous vote 9-0 for keeping both interest rate and stimulus steady at 0.50% and 275 billion pounds this month.

The latest forecasts by officials refer to a slowdown in growth and inflation which increases speculations policy makers will continue their expansion in the stimulus to boost recovery, thereby lowering demand on the sterling on expected oversupply in markets.

On Thursday, TheU.K.will release 3q GDP preliminary reading which is estimated to remain unrevised at 0.5%. At 11:00 GMT, CBI trends total orders for Oct. will be out, yet the news is not expected to have a significant impact on the pair’s movements.

However, trading on the pair may be calm due to thanks giving holiday, noting that the main focus will be probably on the latest developments from the euro area which has been grabbing investor’s attention over the past few weeks.

USD/CHF Technical Analysis for November 24, 2011

USD/CHF rose again during the Wednesday session as the world continues to buy Dollars. The pair looks ready to rise and break out above the recent highs and with the Swiss National Bank actively working against the value of the Franc – it makes sense. As long as there are headline risks out there – this pair will more than likely be a “buy on the dips” pair for us. A break above the 0.93 level sends this pair upwards and probably for a longer-term trend change.

USD/CHF Fundamental Analysis for November 24, 2011

On Wednesday trading, the pair showed advance as the tensions in markets enhanced demand on the dollar as a safe haven.

Concerns aggravated the debt contagion is spreading among the euro region’s largest economies after the rise in German bond yields and decline in demand.

The euro area’s biggest economy did not manage to receive bids of 35% of the 10-year bonds, while the 30-year notes surged to two-week high where the sale came at 3.889 billion euros, below the maximum target of 6 billion euros.

Moreover, fears of facing another recession increased with the release of weak manufacturing reports which showed that the contraction in the euro zone deepened to 46.4 in Nov. from 47.1 in Oct, according to the PMI gauge.

Also, Chinese HSBC services PMI started the day with pessimism as manufacturing showed a contraction of 48.30 in Nov. from 51.1 a month before.

In theU.S., data added to worries as durable goods orders fell 0.7% from the previous 1.5% drop, personal spending recorded 0.1% advance in Oct. compared with 0.7% a month earlier and initial jobless claims showed increase to 393,000 in the week ended Nov. 19 while the prior reading was revised up to 391,000 from the initial 388,000.

On Thursday, both economies lack economic fundamentals which propose that there would be calm trading on the pair, especially due to thanks giving holiday, which is predicted to follow the general trend in market as it will not able to get direction from data.

The main focus will be probably on the latest developments from the euro area which has been grabbing investor’s attention. over the past few weeks.

EUR/CHF Technical Analysis for November 24, 2011

EUR/CHF fell on Wednesday as traders continue to dump the Euro. The German 10-year bond sale in the European morning was weak, and this started a rout for the Euro in general during the session. The pair is being supported by the Swiss National Bank and its floor of 1.20, so we think the downside is somewhat limited. The Euro isn’t desired by anyone at the moment, so there is no real reason to buy. However, if we were to fall closer to the 1.20 level, we would be very interested in buying this pair. We won’t short it and tempt the SNB.

EUR/CHF Fundamental Analysis for November 24, 2011

As we expected the EUR/CHF maintained the downside bias with the favour seen for the Swiss Franc as the debt woes intensified and fears of contagion spread to other major economies in the euro area.

The biggest downside pressure on the euro on Wednesday was the abysmal bond sale from Germany, its worst in the euro history where the low yield on the 10-year German bund did not compromise with the risk seen that Germany might endure more main with the deepening recession risk and the deepening debt crisis where Germany sold only 3.6 billion of the 6.0 billion offer!

Fears are spreading to big nations and France remains the top pick, Fitch also warned that the worsening outlook could cost France its AAA rating which came inline with prevailing fears that talks with Dexia means the nation might endure more pressure and accordingly risk its rating.

We can see the crisis expanding with only the flow of bad news and no solutions proposed on the table to at least shore up confidence leaving the euro defenseless for now. We still expect more volatility and choppy trading on Thursday with more weak macroeconomic data from the euro zone while the absence of US markets will pressure the trading volumes that might even extend the volatility.

Germany will start the session at 06:00 GMT with the GDP figures for the third quarter in a final reading, where the seasonally adjusted quarterly GDP is expected unchanged at 0.5%, while the working-day adjusted GDP index is expected at 2.6%. In addition, the domestic demand index for the third quarter is expected unchanged at 0.4%, while exports are expected to expand by 1.7% from 2.3%.

At 09:00 GMT Germany will release the IFO survey for November, where the business climate indicator could have retreated to 105.2 from 106.4, while the current assessment indicator could have declined to 115.2 from 116.7, in the time expectations indicator could ease to 96.0 from 97.0.

AUD/USD Technical Analysis for November 24, 2011

The AUD/USD pair fell apart on Wednesday as traders are decidedly dumping the riskier assets in the markets. The Aussie is highly sensitive to global risk appetite, and as such should continue to fall. We believe at this point you simply cannot buy this pair, and every rally should be viewed as a potential selling opportunity. The lows at 0.9350 are calling, and we think this pair will visit that area before it sees a level greater than parity.

AUD/USD Fundamental Analysis for November 24, 2011

The AUD/USD pair dropped to its lowest level in seven weeks, as the US dollar increased sharply against most of its major counter parts after the FOMC minutes which fuelled risk aversion in financial market.

The Australian dollar also lost momentum after the Chinese PMI data, which showed that the manufacturing sector in China is responding to the authorities’ tightening policies which cooled growth alongside slowing global economic growth.

China is considered the biggest trade partner for Australia, the PMI data reflected negatively on the performance of Aussie which continued to decline versus the dollar.

Expectations remain for further losses for the AUD/USD pair, as the current market sentiment remains bearish amid heightened fears.

Both economies will not release any data on Thursday, where the pair’s movements will depend on the current market sentiment and the volume will be low with limited movement with the absence of U.S. markets for Thanksgiving holiday which will increase the volatility.

USD/CAD Technical Analysis for November 24, 2011

The USD/CAD pair rose rapidly on the Wednesday session as the “risk off” trade continues. The breaking of the 1.03 level that we mentioned a few days ago signaled the next leg up in this pair, and now we are waiting to see if this is a short-term trade, or long. If we break above the 1.07 level, this pair should see 1.10 before too long. The pair is a “buy on the dips” pair at the moment as the headline risks continue to come along, and oil markets are under tremendous pressure at the moment.

USD/CAD Fundamental Analysis for November 24, 2011

NZD/USD Technical Analysis for November 24, 2011

NZD/USD fell hard on Wednesday as traders are running from the riskier assets around the world. The Kiwi will continue to get pummelled in a “risk off” environment as it is highly correlated to commodities in general. The pair looks like the 0.75 is a thing of the past, and that the next move is probably going to be to the 0.70 level. We sell rallies as long as we are under 0.75, and continue to sell only – not buying at all.

NZD/USD Fundamental Analysis for November 24, 2011

The NZD/USD pair reached its lowest level in eight months, as the US dollar soared against all of its 16 major peers after the FOMC minutes caused a selloff in the financial market.

The Asian stocks dropped, added more pressure on the Kiwi which reached its lowest level in eight months also against the Japanese yen, where investors decided to abandon higher-yielding currencies.

On the other hand, the weak Chinese PMI increased pressures on the New Zealand dollar after it declined sharply, as a result of the current Chinese authorities’ tightening policies which cooled growth alongside slowing global economic growth.

On Thursday at 21:45 GMT (Wednesday), New Zealand economy will release the Trade Balance for October where the previous was a deficit of NZ$ 751 million.

The New Zealand exports for October had a previous reading of NZ$ 3.44 Billion, while the prior reading for the Imports was NZ$ 4.19 Billion.

The trading volume will be low with limited movement with the absence of U.S. markets for Thanksgiving holiday which will increase the volatility.

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