Forex Technical and Fundamental Analysis for October 19,2011

EUR/USD Technical Analysis for October 19, 2011

 

EUR/USD had an absolutely wild day during the Tuesday session as the market originally sold it off, and hard – only to turn it around in the late hours of the NY session. After that came another bit of a selloff, resulting in a long-legged doji for the daily candle.

The China GDP numbers missing slightly spooked the markets and the EUR/USD sold off as a result. The late hours in New York saw a story that stated the Germans and French had reached an agreement to increase the EFSF to over 2 Trillion Euros, and that the banks would be recapitalized. This turned out to be overblown, and the market fell again. The Tuesday session did show one thing though: There is serious concern about Europe still.

The set up is easy though: A breaking of either end of the doji trades in the same direction. If we break to the upside – it becomes a buy. Alternately, if it breaks to the downside – it is a sell. Either way, this pair will remain hostage to the headlines that will certainly continue to come out of the EU.

EUR/USD Daily Fundamental Analysis for October 19, 2011

The sentiment remained downbeat and the fear is still dominant after the German comments and Moody’s warning to France which further weakened the euro and sent the EUR/USD to the downside.

On Tuesday investors remained wary over the outlook with the weaker than expected Chinese growth triggering fears over the outlook alongside the slump in European confidence.

We can still expect more volatility for the pair and downside pressure on the euro ahead of the summit next Sunday, especially after Moody’s warned France that it is at risk from increasing its support to bailouts and debt laden nations and said it might change its stable outlook on the French “Aaa” rating to negative, a signal that France might be pressured in the coming period whether in making moves or in extending its support leaving more doubt over the ability of Europe to contain the crisis.

We still see the markets highly uncertain of what comes next for the debt crisis and the global economy and on Wednesday we expect the jitters to continue to be evident, yet the euro weakness might start to slow as investors still bet on some progress next weekend.

The euro area will release the August Current Account at 08:00 GMT where the deficit might have narrowed from -12.9 billion in seasonally adjusted terms after the trade deficit narrowed.

At 09:00 GMT the Construction Output for August is due after it rose 1.4% in July and was higher 1.2% on the year.

The United States continues with the inflation data at 12:30 GMT with the Consumer Price Index for September. The CPI is expected to rise 0.3% on the month after 0.4% gain and on the year to hold at 3.8%, while Core CPI is expected to hold the monthly gain at 0.2% and on the year to rise slightly to 2.1% from 2.0%.

The data continues with the Housing Starts for September also at 12:30 GMT and expected to rise to 594 thousand from 571 thousand. Building Permits on the other end are expected with 2.4% drop to 610 thousand from 620 thousand.

The final release for the United States on Wednesday will be the Fed’s Beige Book at 18:00 GMT.

AUD/USD Technical Analysis for October 19, 2011

 

 

The AUD/USD pair had a pretty wild session on Tuesday, as traders reacted to varying headlines around the world. The European issues continue to dominate headlines at the moment, and fears out of Europe rocked the markets. The fact that the Chinese GDP numbers came out at “only” 9.1% vs. 9.3% suggests that the Chinese economy is slowing down a bit. As the Aussies supply China with a lot of its resources, the two economies are inevitably interlinked.

The resulting price action saw an attempt at 1.03, but a failure at the end of the session. The 1.03 area still looks very important to us as resistance, and should be a continued source of frustration for the bulls. Shorting this pair on weakness is still our thought, but at the moment we have no candles to confirm this idea.

AUD/USD Daily Fundamental Analysis for October 19, 2011

All eyes focus on the Germany’s comments that indicated the European leaders will not be able to fully support the repair of the euro zone’s debt crises as expected at the next summit, which will be held on October 23.

Aussie improved against the greenback after the RBA’a minutes showed that Australia is highly depends on exporting iron and natural gas for surrounding countries including China, India and Iran, where the value of liquefied natural gas projects reached almost $70 billion in 2011.

Meanwhile, the RBA’s minutes noted that economic growth in Australia is not going to be strong as expected earlier which is a reflection to global and local factors, thereby that will cause lower inflation than expected, where the RBA intends to keep inflation between 2 to 3% and the CPI report which is due on October 26.

On Wednesday, Australia’s Westpac leading index for August will be released at 23:30 GMT (Tuesday) after the reported 0.50% rise in July.

The U.S. economy will issue the Consumer Price Index for September at 12:30 GMT, where it’s expected to come at 0.3% from the previous reading of 0.4%, as for the annual Consumer Price Index it’s expected to hold at 3.8%.

The U.S. Housing Starts for September will be released as well at 12:30 GMT with and expected to rise to 595 thousand by 3.9% from the previous 571 thousand. The Building Permits on the other hand are expected with a drop by 2.4% to 610 from 620 thousand.

EUR/CHF Technical Analysis for October 19, 2011

 

EUR/CHF continues to sit still as it barely budged during the Tuesday session. Even with the report coming out in the later hours of the session that the EFSF could possibly be expanded by 2 Trillion Euros, the pair did almost nothing. The Swiss National Bank is willing to buy this pair if it gets below 1.20, so there is a floor in this market presently. However, there is no real reason to own the Euro as there are simply far too many issues out there in the EU to buy this pair. With that in mind, we simply wait to see if the Europeans can give us a move upward.

EUR/CHF Daily Fundamental Analysis for October 19, 2011

The EUR/CHF continued to hover in a tight range and is not biased with the market sentiment or the euro’s movement and rather fluctuating within its range based on the SNB intervention that for now halted the volatility for the pair.

We can see that the euro softness on Tuesday did not affect the pair and it was trading within the same range and rather biased to the upside, while the euro rally in the past week was also not affected on the pair and it did not strengthen as the risk appetite is not affecting the pair, especially as the franc is the haven currency and it only weakened on the SNB intervention and not for fundamental franc weakness.

We can still expect more volatility for the pair ahead of the summit next Sunday, especially after Moody’s warned France that it is at risk from increasing its support to bailouts and debt laden nations and said it might change its stable outlook on the French “Aaa” rating to negative, a signal that France might be pressured in the coming period whether in making moves or in extending its support leaving more doubt over the ability of Europe to contain the crisis.

On Wednesday the euro area will release the August Current Account at 08:00 GMT where the deficit might have narrowed from -12.9 billion in seasonally adjusted terms after the trade deficit narrowed.

At 09:00 GMT the Construction Output for August is due after it rose 1.4% in July and was higher 1.2% on the year.

NZD/USD Technical Analysis for October 19, 2011

 

NZD/USD had a strange day on Tuesday as traders went from bearish to bullish and back to bearish later. The pair is a great barometer of global risk, and will continue to be influenced by events in places like Europe. The 0.8000 level is also in the neighbourhood, and should continue to be resistive at this point. It is because of this, we prefer finding selling opportunities, but are presently seeing none.

The daily long-legged doji that was formed on Tuesday does give us a set up though. The doji is traded on a break of the top or bottom, and in that coinciding direction. The breaking of the lows is more tenable to us as it is with the trend. However, a daily close above the 0.8000 mark, and a breaking of the top of the candle is a very bullish sign, but this pair will always be at risk because of the global issues.

NZD/USD Daily Fundamental Analysis for October 19, 2011

Still the New Zealand dollar moves in a tight range as the market has reversed its upside movement to the downside after Germany indicated that Europe will not bring a final cure in the coming summit as markets expect.

Furthermore, the New Zealand dollar strengthened as traders bet Bollard will consider unwinding a 50 basis-point emergency cut made in March to help cushion the economy from the quake’s fallout, yet the currency was still pressured for a third day as Asian stocks extended a global slump.

On Wednesday, the New Zealand economy won’t release any fundamental data but the U.S. economy will issue the Consumer Price Index for September at 12:30 GMT, where it’s expected to come at 0.3% from the previous reading of 0.4%, as for the annual Consumer Price Index it’s expected to hold at 3.8%.

The U.S. Housing Starts for September will be released as well at 12:30 GMT with and expected to rise to 595 thousand by 3.9% from the previous 571 thousand. The Building Permits on the other hand are expected with a drop by 2.4% to 610 from 620 thousand.

USD/JPY Technical Analysis for October 19, 2011

 

The USD/JPY pair had a fairly quiet day on Tuesday as the range continues to hold in this market. The market closed near the 77 mark, which has been the epicentre of this very tight range recently. The 77.50 area is the top, and the 76.00 level is the bottom.

With the Bank of Japan threatening possible intervention in the marketplace if the Yen appreciates too quickly, it is going to be hard to sell this pair for any serious length of time. The range has held, and has paid traders quite handsomely if they played it. The range continues to be a guideline for scalpers to clean up in this environment. The range should continue to be abided by, with smaller positions to the downside, and larger ones to the upside as the threat of intervention is still out there.

USD/JPY Daily Fundamental Analysis for October 19, 2011

The USD/JPY retreated for the second day after markets lost confidence once again, as Moody’s Investors Service reported that France’s sovereign debt rating is facing great pressure.

The Moody’s announcement fuelled fears between investors regarding the EU debt crisis, and it’ potential to spread among other European countries.

Investors abandoned higher-yielding currencies and shifted to yen and US dollar as a safe haven, where the greenback reached its highest level in five days against the euro, while it lost its previous gains against the Japanese yen.

On Wednesday at 04:30 GMT, the Japanese economy will release the All Industry Activity Index for August, where it had a previous reading of 0.4% and expected to fall to 0.5%.

The U.S. economy will issue the Consumer Price Index for September at 12:30 GMT, where it’s expected to come at 0.3% from the previous reading of 0.4%, as for the annual Consumer Price Index it’s expected to hold at 3.8%.

The U.S. Housing Starts for September will be released as well at 12:30 GMT with and expected to rise to 595 thousand by 3.9% from the previous 571 thousand. The Building Permits on the other hand are expected with a drop by 2.4% to 610 from 620 thousand.

GBP/USD Technical Analysis for October 19, 2011

 

GBP/USD had a wild day as the “risk on / risk off” environment continued to plague the markets. The cable is tainted as the British economy is suffering from both high unemployment, and extremely high inflation. Because of this, the Pound originally sold off during the Tuesday session.

The markets whipped back into the positive side when an announcement also came out suggesting there was a plan in Europe again. However, it was proven to be suspect at best, and the markets turned back around to the downside as a result. The end was a massive doji, albeit a negative one. The trade set up should be straightforward as the long-legged doji on the chart calls for a trade in the direction of which way the market breaks out of it. If we go higher – it is to be bought. If we break below the lows – it is to be sold.

GBP/USD Daily Fundamental Analysis for October 19, 2011

On Tuesday, the pair drafted lower after the release of higher-than-expected CPI figures which showed thatU.K.inflation accelerated to 5.2% in September, for the first time since September 2008, from 4.5% in August, above expectations of 4.9%, raising concerns the British economy is in the brink of a stagflation.

However, the general sentiment in the market is once again fuelled with concerns as the European anti-debt crisis plan, which will be introduced on October 23, will not provide a complete fix to the two-year crisis, according to the latest announcements by German officials.

Still, the main focus is on the euro area to see European leaders’ ability to come out with a comprehensive and decisive plan at their next meeting. Thus, after the dovish tone seen this week from German officials, investors resorted to the dollar once again as a favourite safe haven.

Moreover, the Chinese economy expanded 9.1% in the three months ended September compared with 9.5% growth in the second quarter and median estimates of 9.3%, adding to worries that the sluggish growth pace would continue in the fourth quarter.

On the other hand, the pound is weighed down by expectations the BoE will add further stimulus to boost growth.

On Wednesday, at 08:30 GMT, attention will be toward BoE minutes for October’s monetary decision which may show a split among policy makers as some may have supported Adam Posen in adding 75 billion pounds to the APF in October while others opposed it.

In the U.S., the day is going to witness the release of many important fundamentals; the start will be with MBA mortgage applications for October 14 which will be available at 11:00 GMT, followed by housing starts and building permits and CPI at 12:30 GMT.

Housing starts, which will provide evidence about the status of the housing market that triggered the 2008 crisis, are expected to increase to 594,000 in September from 571,000 in August, while building permits will probably show a fall to 610,000 from the prior 620,000.

On the other hand, CPI for the year ended September is predicted to rise to 2.1% from the preceding 2.0%. Thereafter, eyes will be on the Fed Beige book at 18:00 GMT.

USD/CAD Technical Analysis for October 19, 2011

 

The USD/CAD pair fell during the Tuesday session, and continues to react inversely to the oil markets. The parity level below still keeps this market afloat though, and until we get a close below it on the daily, we are not selling this pair. The 1.0650 level above is massive resistance, but it is far enough that we are interested in buying on a sign of supportive price action, perhaps in the form of a hammer or engulfing green candle.

USD/CAD Daily Fundamental Analysis for October 19, 2011

The USD/CAD pair rose on Tuesday, as pessimism continued to dominate markets on fears from slowing global growth and concerns from the EU debt crisis, where China reported growth that disappointed investors, as the Chinese economy expanded at the slowest pace in two years, while Moody’s Investors Services said it is reviewing France’s Triple-A rating, which pushed investors away from higher yielding assets, where traders targeted lower yielding assets including the U.S. dollar, which sent the USD/CAD pair higher.

Traders will continue to monitor the latest developments from Europe, where more pessimism could provide the USD/CAD pair with more bullish momentum on Wednesday. We should also note that traders will be eyeing CPI inflation from the United States, in addition to the Fed’s Beige Book, and Canada’s leading indicators on Wednesday.

Wednesday October 19:

The United States continues with the inflation data at 12:30 GMT with the Consumer Price Index for September. The CPI is expected to rise 0.3% on the month after 0.4% gain and on the year to hold at 3.8%, while Core CPI is expected to hold the monthly gain at 0.2% and on the year to rise slightly to 2.1% from 2.0%.

The data continues with the Housing Starts for September also at 12:30 GMT and expected to rise to 594 thousand from 571 thousand. Building Permits on the other end are expected with 2.4% drop to 610 thousand from 620 thousand.

Canada will release the leading indicators index for September, where the leading indicators index was flat back in August.

The final release for the United States on Wednesday will be the Fed’s Beige Book at 18:00 GMT.

USD/CHF Technical Analysis for October 19, 2011

 

USD/CHF finished the day fairly unchanged as the market continues to run around in circles. The result is a small doji, but the move proved the 0.9000 level should continue to give reactions in this marketplace. The Swiss National Bank is still working against the appreciation of the Franc, so we are not willing to sell this pair under any circumstances. The breaking of the top of the Tuesday session would get us buying though, and is in line with the idea of the USD being a “safe haven” while the Franc is no longer allowed to be. With all of the negative headlines out there – it makes sense to us that the pair should continue to rise over time.

USD/CHF Daily Fundamental Analysis for October 19, 2011

On Tuesday, the U.S. dollar’s advance took the pair higher on concerns in markets that the European anti-debt crisis plan, that will be introduced on October 23, will not provide a complete fix to the two-year crisis, according to the latest announcements by German officials, and on lower-than-estimated Chinese growth figures. Still, the main focus is on the euro area to see European leaders’ ability to come out with a comprehensive and decisive plan at their next meeting.

Thus, after the dovish tone seen this week from German officials, investors resorted to the dollar once again as a favourite safe haven amid the latest several interventions by the SNB to curb the franc’s runaway. Moreover, the Chinese economy expanded 9.1% in the three months ended September compared with the 9.5% growth recorded in the second quarter and median estimates of 9.3%, adding to worries that the sluggish growth pace would continue in the fourth quarter.

On the other hand, Switzerland’s main trades union organisation Tuesday urged the SNB and government to raise the ceiling of the euro against franc to 1.40 from the current 1.20 to avoid relapsing into recession, where it still believe that the franc is overvalued. On Wednesday, while the Swiss economy lacks fundamentals, the U.S. has a busy day; the start will be with MBA mortgage applications for October 14 which will be available at 11:00 GMT, followed by housing starts and building permits and CPI at 12:30 GMT.

Housing starts, which will provide evidence about the status of the housing market that triggered the 2008 crisis, are expected to increase to 594,000 in September from 571,000 in August, while building permits will probably show a fall to 610,000 from the prior 620,000. On the other hand, CPI for the year ended September is predicted to rise to 2.1% from the preceding 2.0%. Thereafter, eyes will be on the Fed Beige book at 18:00 GMT.

 

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