Forex Technical and Fundamental Analysis for October 20, 2011

EUR/USD Technical Analysis for October 20, 2011

 EUR/USD rose during the session as traders piled back into the Euro again on hopes of some kind of deal being worked out between Germany and France. (There was a Guardian report out of the UK that said as much.) However, that story was quickly denied, and the move got faded. The fall was pretty impressive, and the 50% Fibonacci retracement has held the price down. The daily candle is a long shooting star, and looks quite bearish. The failure of the bullish move has us thinking that the 1.38 – 1.40 levels should continue to be resistive in the short-term. We feel that selling rallies is the way to go at this point.

 

EUR/USD Daily Fundamental Analysis for October 20, 2011

The EUR/USD was supported on Wednesday with rumours that the EU is moving forward with plans to contain the crisis and the talk was about the EFSF expansion.

The market reacted positively to a report from Britain’s Guardian newspaper that Germany and France reached a deal to expand the firepower of the EFSF to 2.0 trillion euros. Although the report was not confirmed and German sources denied it, still they said that leveraging the facility to provide around 1.0 trillion euros in firepower was possible.

We can see the market still hopeful that Europe will present something in the coming weekend, and with the uncertainty ongoing and expectations that they might do something strong and others that say they will not be as hands-over as expected will continue to reflect on the market with volatility that will extend on Thursday.

At 06:00 GMT Germany will report the Producer Price Index for September which is expected with 0.3% rebound on the month following the drop of 0.3% and on the year to hold at 5.5%.

The advanced consumer confidence for October is due at 14:00 GMT and expected to drop further to -20.0 from -19.1 in September.

The United States will start with the weekly jobless claims for the week ending October 14 at 12:30 GMT after last week they rose by 404 thousand.

At 14:00 GMT the September Leading Indicators are expected with a slightly drop to 0.2% from 0.3%. The Philadelphia Fed Index for October is expected to improve to -0.9 from -17.5 and finally Existing Home Sales for September are expected with 2.5% drop to 4.91 million from 5.03 million.

AUD/USD Technical Analysis for October 20, 2011

 

AUD/USD had a wild range on Wednesday, as traders originally bought the Aussie in large amounts, only to pullback later in the session. The risk off trade came back into vogue when reports of disagreements came out of Europe, and this sent riskier currencies like the Aussie down in the US session. The shape of the bar is a shooting star, and although not at the top of the range like we normally look for, shows just how hard it is going to be to rally above the massive 1.03 – 1.05 resistance level. The pair remains a “sell the rally” pair in our eyes.

 

AUD/USD Daily Fundamental Analysis for October 20, 2011

The Australian dollar gained against the greenback as Britain’s Guardian reported that France and Germany reached a deal to bolster the EFSF to 2 trillion euro ($1.75 trillion) as a part of a comprehensive plane that works to solve the Euro-Zone debt crisis, yet the news were not confirmed yet revived hopes for a deal next weekend summit.

Moreover, Australia’s currency (Aussie) rose versus the major currencies on speculation the growth outlook will attract foreign investment, while Speculation European leaders are closer to reaching agreement on a plan to stem the region’s debt crisis also supported Asian currencies.

On the contrary, the fears still dominate the market after the Moody’s Investors Service agency reduced Spain’s rating by two levels to A1 from Aa2, where Spain’s credit rating was cut for the third time since June of last year as Europe’s debt crisis threatens to engulf the nation.

On Thursday, the NAB quarterly business confidence is due from Australia at 00:30 GMT after it declined the previous reading to 6.0.

On Thursday at 12:30 GMT, U.S. economy will issue its weekly initial claims numbers, where the number of people filing for first-time claims for the state unemployment insurance increased 404 thousand last week.

The Leading Indicators for September will released at 14:00 GMT and expected to slow to 0.2% from 0.3%. The Philadelphia Fed index is also due at 14:00 GMT and expected to improve to –9.5 from -17.5.

As for the Existing Home Sales for September it’s expected with a drop of 2.65% to 4.91 million from 5.03 million.

EUR/CHF Technical Analysis for October 20, 2011

 

The EUR/CHF is a heavily manipulated market currently. The Swiss National Bank has declared the 1.20 level a “floor “in this pair, and as such – it doesn’t dare test it. The Wednesday session saw the EUR/CHF rise for a while though, and this would be the only direction we could take since the other direction has a central bank in the way. However, this market rose, and then fell back forming a shooting star. This doesn’t look overly bearish, rather like a market that simply isn’t ready to move yet. We will be looking for a long-term buy on a bullish candle, but until Europe gets its collective act together, this market will struggle to rise.

 

EUR/CHF Daily Fundamental Analysis for October 20, 2011

The EUR/CHF is back on the move and again on speculation that the nation might do more to weaken the franc.

The pair moved higher after Switzerland’s main trades union organisation called on the central bank to further weaken the currency and raise the floor to 1.40 from the current 1.20 to stave recession fears and support the economy especially as the franc remains overvalued for now.

We can see that the pair is still caught in the speculation that the SNB might surrender to rising pressures, yet still the bank sees that the set floor is appropriate for now despite expectations from the market for otherwise on the mentioned remarks.

More volatility is expected in the coming days on the back of those comments until they lose steam, as they are moving the pair now until the plans from Europe are presented in the summit that can define if the euro will indeed maintain the strength to keep the pair biased higher and not artificially on SNB moves.

Switzerland will start the day at 06:00 GMT with the Trade figures for September where the nation suffered the weak global demand and franc’s rally that affected its exports heavily. The trade surplus was at 0.81 billion francs in August when exports slumped 7.0% and imports rose 0.9%.

The advanced consumer confidence for October is due at 14:00 GMT and expected to drop further to -20.0 from -19.1 in September.

NZD/USD Technical Analysis for October 20, 2011

 The NZD/USD pair rose to the all-important 0.8000 number and promptly fell. The 0.8000 level is in our opinion a massive resistance area, and will have to be overtaken in order to get long the Kiwi for any real length of time. The fall was quite rapid, and the snap back does go in line with the overall trend, which is also down. This gets us selling rallies, or a break of the Wednesday lows.

 

NZD/USD Daily Fundamental Analysis for October 20, 2011

New Zealand’s dollar extended the gains for the second day against the American dollar before European Union leaders hold a meeting on October 23 to discuss the comprehensive plan to contain the region’s debt crisis.

The New Zealand dollar also advanced as stock gains boosted demand for the currencies of commodity exporters, along with the cheerful data from the Chinese economy, where China’ industrial production continued to accelerate, adding that New Zealand products will increase this period because the Chinese market is the largest market for New Zealand goods.

Meanwhile, the New Zealand economy gives some signs of picking up as rising consumer spending and employment add to evidence the nation’s economy is expanding modestly, buoyed by record-low interest rates and a surge in commodity prices

On Thursday at 21:45 GMT (Wednesday) NZD net migration S.A. is expected to increase in September after it inclined to 200 in August.

On Thursday at 12:30 GMT, U.S. economy will issue its weekly initial claims numbers, where the number of people filing for first-time claims for the state unemployment insurance increased 404 thousand last week.

The Leading Indicators for September will released at 14:00 GMT and expected to slow to 0.2% from 0.3%. The Philadelphia Fed index is also due at 14:00 GMT and expected to improve to –9.5 from -17.5.

As for the Existing Home Sales for September it’s expected with a drop of 2.65% to 4.91 million from 5.03 million.

USD/JPY Technical Analysis for October 20, 2011

 

USD/JPY continues to sit in a tight range, and barely budged during the volatile Wednesday trading session. The market is currently being manipulated by the Bank of Japan as they want a lower valued Yen. The range has been between 76.25 and 77.50, and should continue to be in that area for the foreseeable future, as there is no real reason to sell the Yen, but no real reason to work against a central bank either.

We like selling close to the top of the range in the 77.50 area, and of course buying when the market dips down to the 76.25 level. The trading range has seemed to be oblivious to the wild swing in other markets, and as a result – we expect more quiet trading ahead.

USD/JPY Daily Fundamental Analysis for October 20, 2011

The USD/JPY pair still trading in a limited range after it failed to sustain the upside move. On the other hand, the Japanese yen retreated against other major currencies as some optimism returned to the market.

Expectations that the EU leaders are still on the right path to contain the crisis is supporting the sentiment despite the downbeat German comments, but fears still exist regarding whether this plan will be sufficient or not.

On the other hand, the Japanese yen has its own battle where BOJ is still looking for the appropriate measure to prevent it’s currency from recording more gains and hurt the economy, as all the previous measures have failed.

On Thursday at 05:00 GMT, Japan will release the final reading of Coincident Index for August, which had a prior reading of 107.4, while the Leading Index had a previous reading of 103.8.

On Thursday at 12:30 GMT, U.S. economy will issue its weekly initial claims numbers, where the number of people filing for first-time claims for the state unemployment insurance increased 404 thousand last week.

The Leading Indicators for September will released at 14:00 GMT and expected to slow to 0.2% from 0.3%. The Philadelphia Fed index is also due at 14:00 GMT and expected to improve to –9.5 from -17.5.

As for the Existing Home Sales for September it’s expected with a drop of 2.65% to 4.91 million from 5.03 million.

GBP/USD Technical Analysis for October 20, 2011

 The GBP/USD pair rose quite a bit during the first part of the Wednesday session, only to pull back in the later hours of the session. The 1.57 level held as support, and this is bullish for this pair, but with the global markets constantly working against worry, any longs in this pair will be overly dependent on the global risk appetite. The headline driven markets are sure to make this pair very volatile over the longer-term, and as such we are very careful about entries. The 1.57 simply must hold if you are to buy this pair on dips. If it gives way – this will become a very bearish market quickly.

 

GBP/USD Daily Fundamental Analysis for October 20, 2011

On Wednesday, the pair rose after the minutes of the BoE’s rate decision showed that the voting to keep interest rate at 0.50% and expanding the size of the Asset Purchase Facility by 75 billion pounds to 275 billion pounds.

In general, the sentiment was fuelled with optimism on Wednesday after a report released by the Guardian said thatGermanyandFrancehad reached an agreement regarding the expansion of the European Financial Stability Facility (EFSF) firepower to 2 trillions from the current 440 billion euros, enhancing demand on high-yielding currencies.

Still, the main focus is on the euro area ahead of the awaited European Council meeting on October 23 to details of the anti-crisis plan.

Moreover, data from theU.S.showed improvement as housing starts increased 15% in September from the prior 5.5% drop and median estimates of 3.3% surge, leading to more bullishness in the sentiment.

On Thursday, at 08:30 GMT, theUKwill release retail sales for September; analysts are predicting a 0.1% decline in the reading with auto fuel compared with the 0.2% drop in August.

For theU.S., initial jobless claims for the week ended Oct. 14 and continuing claims for the week ended Oct. 8 will be available at 12:30 GMT. Leading indicators and Philadelphia Fed will be out at 14:00 GMT. At the same time, existing home sales report is predicted to show 2.5% drop in Sep. from the prior 7.7% surge.

USD/CAD Technical Analysis for October 20, 2011

 The USD/CAD continued to respect the parity support area on Wednesday, as not only the demand for “riskier” currencies fell, but the demand for oil did as well. This was a double-whammy for the Canadian currency, and it showed in this market. The resulting candle is a hammer, and it looks like the market is ready to jump back up on any signs of bad news. If the oil markets move to the downside from here, we expect this up move to continue. Watch oil for the bias, and then trade the Canadian dollar accordingly.

 


USD/CHF Technical Analysis for October 20, 2011

 USD/CHF had a bullish day on Wednesday, and even popped above the 0.9000 mark. This was an area that we said we needed to see hold and get broken to the upside in order to buy this pair. Selling was never an option as the Swiss National Bank is threatening to sell Francs, so we are looking for buying opportunities. A breaking of the Tuesday doji would be a good sign that we are ready to continue the up move in this pair. It makes sense – as the Franc can’t be held for safety anymore, and basically makes the USD the only choice out there now for safety.

 

USD/CHF Daily Fundamental Analysis for October 20, 2011

On Wednesday, the U.S. dollar, yen and Swiss franc edged lower after a report released by the Guardian stating that Germany and France had reached an agreement regarding the expansion of the European Financial Stability Facility (EFSF) firepower to 2 trillions from the current 440 billion euros damped demand on refuges, yet the drop in the franc was higher causing the pair to rise.

However, German Finance Ministry spokesman said on Wednesday that there is no agreement betweenGermanyandFranceregarding boosting the EFSF.

Still, the main focus is on the euro area ahead of the awaited European Council meeting on October 23 to details of the anti-crisis plan.

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.

Moreover, data from theU.S.showed improvement as housing starts increased 15% in September from the prior 5.5% drop and median estimates of 3.3% surge.

On Thursday, at 06:00 GMT, the Swiss economy will release its most important data for the week which is trade data for Aug. with exports and imports during the month. The data will be under scrutiny as the recent earnings reports showed that Swiss companies were negatively affected by the franc’s appreciation which forced the SNB to embark on several interventions to curb the franc’s runaway. As of 09:00 GMT, credit Suisse Zew survey (expectations) for the month of October will be available.

For theU.S., initial jobless claims for the week ended Oct. 14 and continuing claims for the week ended Oct. 8 will be available at 12:30 GMT. Leading indicators and Philadelphia Fed will be out at 14:00 GMT. At the same time, existing home sales report is predicted to show 2.5% drop in Sep. from the prior 7.7% surge.

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