Forex Technical and Fundamental Analysis for October 12, 2011

EUR/USD Technical Analysis for October 12, 2011

 

The EUR/USD pair rose again on the Tuesday session as traders really didn’t have much to focus on during the session. The pair wants to rise, mainly as an oversold bounce at this point, but the consensus continues to be mixed at best.

The pair looks like it has found serious resistance at the 1.37 level, and until that area is broken to the upside, most trades will be difficult at this point. The EU has a lot of issues ahead of it, so owning the Euro will be a short-term prospect at best. The breaking of the level will undoubtedly have the pair looking for the 1.40 level, but any bad news could suddenly reverse the direction. Because of this, we are more interested in looking for rallies to sell, and weaker candle formations to short from at this point.

 

EUR/USD Daily Fundamental Analysis for October 12, 2011

The EUR/USD fluctuated on Tuesday as all eyes remained on the Slovak vote on the expansion of the EFSF powers, especially as the tension inclined after the prime minister threatened to quit if the vote does not pass.

The volatility was evident and with the end of the European session the effect of the final voter will continue to linger till Wednesday where all euro parliaments need to ratify the changes to the EFSF firepower to be activated.

This pending vote had its toll on the pair amid jitters that the deadlock between lawmakers might result in a catastrophe for the euro area and the progress in containing the debt crisis.

Already the overall jitters have eased, especially after the troika said that Greece is likely to receive the next tranche of last year’s bailout by the beginning of November easing the fear of default and the block of the aid loans. Still the debate is ongoing on the how to contain the crisis especially as the EU bought more time by delaying the summit from next Monday till October 23 to assess the report from the troika on the progress in Greece and finalise their view on the new bailout that still sees mixed views over the increasing the private sector’s participation.

We still see the debt debate predominant and will control the pair on Wednesday especially as investors await the final vote from Slovakia.

The euro area is set to release the Industrial Production for August at 09:00 GMT which is expected with 0.7% drop after 1.0% rise and to rise 2.2% on the year following 4.2% rise.

In the U.S. session the focus will be on the FOMC minutes for the last meeting when the Fed announced “operation twist” and with the lack of major fundamentals investors will keep their focus on the minutes for any hints for the coming move from the Federal Reserve.

AUD/USD Technical Analysis for October 12, 2011

 

 

The AUD/USD fell originally during the Tuesday session, but managed to pop back up during the later hours. The resulting candle is a hammer-shaped one, and this suggests some kind of support just below where the market sits. It should be noted that the parity level is just above, and it did in fact hold the Aussie down for the second time on Tuesday. The pair looks like it wants to bounce, but the parity level is also where the 50% Fibonacci retracement level sits from the last move down.

The candle shape also suggests that a break to the downside form here would be very, very bearish. In fact, the shape would then be known as a “hanging man”, which is decidedly bearish for the market. The breaking of the Tuesday lows would have us aggressively short of the Aussie yet again. However, we aren’t willing to bet on the parity level holding price down over the long haul until we see this happen.

On the buy side, we simply need to see a daily close above the 1.0000 area. The breaking and closing above that area would have the market looking for the 1.03 area or so, and would be a nice bounce waiting to happen.

As long as the economic scenario worldwide is one of fear though, it will be hard to buy and hold the Aussie for any real length of time though. The attitude of the markets is simply too pessimistic to get that bullish.

AUD/USD Daily Fundamental Analysis for October 12, 2011

Aussie fluctuated between losses and gains versus the American dollar amid the European debt concerns, while the market awaits more news to detail the next step by leaders to contain the crisis to help sustain the upside momentum.

Meanwhile, the Australian dollar continued its upside movement against the greenback and the yen before a report later this week projected to show Australian employers added jobs last month for the first time since June.

Aussie rose versus the US dollar for the first time since September 22 as a rally in stocks spurred demand for higher-yielding assets, while the Kiwi also inclined against the greenback as Germany and France pledged to deliver a plan to support banks.

On the other hand, Australia’s currency pared earlier losses after minutes of the central bank’s policy meeting this month said the Reserve Bank is “well placed” to respond to global and domestic economic risks or inflation.

On Wednesday, at 23:30 GMT (Tuesday) Australia will report the Westpac consumer confidence for October after it dropped by 3.5% in September.

Australian home loans index for August will be released at 00:30 GMT on Wednesday after rising 1.0% in July.

At 18:00 GMT, the Federal Reserve Bank will release the minutes of its September 20 FOMC meeting.

EUR/CHF Technical Analysis for October 12, 2011

 

The EUR/CHF pair rose during the session on Tuesday as traders continue to buy the Euro like they believe something has changed. Although no real announcements have been made yet, the market is acting like the situation in the EU is finally solved. The truth is that there are a lot of reasons why the Euro could sink over the next few weeks, and we would be very weary of owning it for any great length of time.

This pair could be the one exception though. The Swiss National Bank is currently putting in bids near the 1.20 level, and this will continue to keep this pair in an uptrend as it is no longer a true free market. Because of this, selling isn’t even an option at this point. The buying of this pair is the only way to go, but that also relies on the EU being a solid place to invest. At the moment, it isn’t – so there really isn’t much to do in this market presently.

EUR/CHF Daily Fundamental Analysis for October 12, 2011

The franc returned to its weak status on Tuesday after investors locked on profits with the beginning of the week and supported the weak franc which is still avoided due to the SNB vigilance and readiness to act against the currency’s appreciation.

We saw the gains spread for the euro most of the European session despite the overall jitters on the Slovak parliament vote on the EFSF expanded powers. The fear that Slovakia might reject the new EFSF powers pressured the euro yet did not halt its gains versus the franc.

Investors still see progress in the euro area especially after the troika said that Greece is likely to receive the next tranche of last year’s bailout by the beginning of November easing the fear of default and the block of the aid loans. Still the debate is ongoing on the how to contain the crisis especially as the EU bought more time by delaying the summit from next Monday till October 23 to assess the report from the troika on the progress in Greece and finalise their view on the new bailout that still sees mixed views over the increasing the private sector’s participation.

We still see the debt debate predominant and will control the pair on Wednesday especially as investors await the final vote from Slovakia.

The euro area is set to release the Industrial Production for August at 09:00 GMT which is expected with 0.7% drop after 1.0% rise and to rise 2.2% on the year following 4.2% rise.

NZD/USD Technical Analysis for October 12, 2011

 

NZD/USD rose in later hours of trading after first falling on Tuesday. The pair is highly correlated with commodities, and as such enjoyed a bounce from the lows over the last couple of days. However, the pair is also highly influenced by trader attitudes about global risk, and in this environment it is constantly waxing and waning.

The resulting candle for the day is hammer-like, and could either be a sign of support, or a sign of weakness – depending on how the market breaks from here. The breaking of this candle to the upside is very bullish, but we fear any time that the market gets bullish on risk – it seems to give up gains rather rapidly. The breaking of the bottom of the candle is very bearish, and would make the candle a “hanging man”, which is very bearish for the market.

As the markets have been so bearish lately, the market for the Kiwi dollar has fallen quite far. The bounce we have seen over the last few days is what we think it is: just a bounce at this point. In fact, we would rather see a daily close above the 0.8000 level as a sign to buy as the room from a bullish break isn’t quite large enough for our trade to run.

NZD/USD Daily Fundamental Analysis for October 12, 2011

New Zealand’s currency pared its losses as Asian stocks gained on speculation German lawmakers will approve a measure to expand a bailout fund for Europe’s debt-stricken nations.

Nevertheless, New Zealand dollar (Kiwi) rose against the US dollar as Reserve Bank Governor Alan Bollard said policy makers are better positioned than many peers to whether any fallout from the European and U.S. fiscal crises.

On Wednesday, at 23:00 GMT (Tuesday) New Zealand economy will issue its house price index for the year ended September after it inclined slightly by 0.1% in August.

Moreover, at 00:00 GMT NZD Consumer Confidence for October is due where the prior reading plunged by 0.6% in September.

At 18:00 GMT, the Federal Reserve Bank will release the minutes of its September 20 FOMC meeting.

USD/JPY Technical Analysis for October 12, 2011

 

USD/JPY sat still again on Tuesday as traders continue to scalp the market at best. The pressure on the pair is significant, but not so much as to press the patience of the Bank of Japan, who are more than willing to intervene on sharp falls in price. The pair is going to be especially difficult to trade for longer-term traders, but the scalping community has to love this environment.

The trade has been simple: Buy somewhere near 76.25, and sell somewhere near 77. It has been working for some time now, and there is nothing in the charts that shows it is going to break out anytime soon. We are neutral overall, but are also willing to accept the 25 pip trades that are so abundant in this pair presently.

USD/JPY Daily Fundamental Analysis for October 12, 2011

The USD/JPY pair traded in a narrow range early Tuesday, as the risk appetite improved in FX market which helped the higher-yielding currencies to cover some of their previous losses, adding more pressure on the Japanese currency .

Market sentiment shifted to risky assets after the EU leaders pledged to contain the debt crisis, which helped investors to reduce demand on the yen and the greenback.

On the other hand, the current appreciation in the Japanese currencies increased concerns of another intervention from the Bank of Japan, as the higher yen hurt the Japanese economic recovery.

On Wednesday at 23:50 GMT (Tuesday), Japan will release the Machine Orders Index for August, where the previous reading was down by 8.2% and it’s expected to rebound by 3.9%.

The annual Machine Orders is expected at –3.6% from the previous reading of 4.0%.

At 18:00 GMT, the Federal Reserve Bank will release the minutes of its September 20 FOMC meeting.

GBP/USD Technical Analysis for October 12, 2011

 

The GBP/USD pair had a fairly quiet day as the markets were largely in rest mode for the Tuesday session. The pair has bounced as high as 1.57, but the area proved to be overly resistive to the advance of bulls for the session. The pair is most certainly in a downtrend lately, but the market isn’t moving in a quick enough manner to cause alarm at this point.

The Bank of England is most certainly now embarking on a new round of quantitative easing, and as such, the Pound should continue to fall. Add to that the idea of a “risk off” environment overall, this pair will continue to have a negative bias. The global risk appetite weighs heavily on this pair, so the downward movement shouldn’t be much of a surprise, especially considering how exposed the UK is to the problems in the EU.

The pair looks to be supported at the 1.53 mark, and this area will have to be broken to the downside in order to continue the run to the downside. The pair looks bearish overall, and we are selling rallies, such as the one we saw yesterday. As long as the 1.57 level holds as resistance, we cannot buy this pair at all.

GBP/USD Daily Fundamental Analysis for October 12, 2011

On Tuesday, the GBP/USD halted its rise as investors remained cautious before the Slovak vote for expanding the European rescue fund later in the day. The Slovak Parliament will discuss the expansion of the EFSF amid frictions between policy makers regarding the broadening of the European lifeline.

Also, Trichet said on Tuesday “The crisis is systemic and must be tackled decisively,” while there is divide among European leaders regarding the how deep would be the Greek bond writedowns. Where, on the other hand, the joint statement by inspectors from the European Union, International Monetary Fund and European Central Bank, know as the troika, that Greece will probably get the next tranche of last year’s 110-aid package in early November did not have much impact on the pair as the main focus is on the Slovak vote.

Moreover, data from the UK came mixed as while manufacturing production slipped 0.3% in Aug., industrial production rose 0.2% in the same month.

On Wednesday, unemployment data from the British economy will be out at 08:30 GMT, where ILO unemployment for the three months ended August will rise to 8.0% from 7.9% while jobless claims will decline to 19.0 thousands in September from 20.3 thousands a month earlier.

Thereafter, U.S. MBA mortgage applications for October 7 will be available at 11:00 GMT.

USD/CAD Technical Analysis for October 12, 2011

 

USD/CAD rose, and then fell during the session on Tuesday, forming a shooting star-shaped candle at the end of the session. The pair has recently fallen, and the shape of the candle suggests that trouble could be in store for this pair as the rally failed for the session.

We still see the parity level as a massive inflection point in this pair, and would be weary of selling this pair until we can break below that level. The oil markets will continue to hamper the moves of this pair, and oil is highly correlated to the value of the Canadian dollar. Because of this, anyone trading this pair will have to keep one eye on this chart, and another on the oil markets.

Technically speaking, it looks weak, but there are far too many reasons this pair could shoot back up for us to get bearish at this point. In the mean time, we find sitting still the way to go in this market.

USD/CAD Daily Fundamental Analysis for October 12, 2011

The USD/CAD pair rose sharply on Tuesday , as investors remained cautious before the Slovak vote for expanding the European rescue fund later in the day, which enhanced demand on the dollar as a favourite safe haven. The Slovak Parliament will discuss the expansion of the EFSF amid frictions between policy makers regarding the broadening of the European lifeline, knowing thatCanadareleased the housing starts index for September on Tuesday, where the index jumped to reach 205.9 thousand, above expectations of 190.0 thousand.

Nonetheless, we maintain our bullish projection for the USD/CAD pair, as we expect the pair to extend its gains over the coming period on rising pessimism over the outlook for growth and mounting fears from the EU debt crisis, although we expect to witness high levels of volatility as well.

Wednesday October 12:

The focus on Wednesday will be on the FOMC minutes for the last meeting when the Fed announced “operation twist” and with the lack of major fundamentals investors will keep their focus on the minutes for any hints for the coming move from the Federal Reserve.

USD/CHF Technical Analysis for October 12, 2011

 

USD/CHF rose slightly during the Tuesday session as the Dollar found itself in trouble, but the safety of the Franc wasn’t needed. The pair is being held aloft by the Swiss National Bank as the central bank is willing to intervene if the Franc appreciates too rapidly. Because of this, we are not sellers of this pair, and are simply looking for opportunities to buy this pair.

The rising of this pair makes sense as long as there is fear out there. The Franc cannot be a safe haven currency anymore, as the Swiss will certainly not hesitate to intervene, so the buying of the US dollar will be the preferred route. The pair looks like it have a bit of support at 0.9000, but the candle for the day looks very weak. We are willing to wait on this pair, and buy the next supportive daily candle we see.

USD/CHF Daily Fundamental Analysis for October 12, 2011

On Tuesday, the USD/CHF rebounded as investors remained cautious before the Slovak vote for expanding the European rescue fund later in the day, which enhanced demand on the dollar as a favourite safe haven amid the several interventions by the SNB to curb the franc’s advance. The Slovak Parliament will discuss the expansion of the EFSF amid frictions between policy makers regarding the broadening of the European lifeline.

Also, Trichet said on Tuesday “The crisis is systemic and must be tackled decisively,” while there is a divide among European leaders regarding how deep would be the Greek bond writedowns. On the other hand the joint statement by inspectors from the European Union, International Monetary Fund and European Central Bank, know as the troika, that Greece will probably get the next tranche of last year’s 110-aid package in early November did not have much impact on the pair as the main focus is on the Slovak vote.

On Wednesday, the U.S. MBA mortgage applications for October 7 will be available at 11:00 GMT, while the Swiss economy has no releases. The main focus will probably remain on the latest developments from the euro area to see officials’ ability to shore up the 17-nation economy.

 

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