Forex Technical and Fundamental Analysis for October 21, 2011

EUR/USD Technical Analysis for October 21, 2011

EUR/USD had a wild day on Thursday as one would expect, given the nature of the financial crisis in European. The markets aren’t really sure what to do at the moment, and with the EU meeting over the weekend – one has to think the markets will simply wait until the outcome of those meeting in order to make a decision. For the Friday session, it is very likely that we see a range again, and probably a fairly small one as traders will not want to be in the wrong position on Monday when they wake up. The outcome of the meetings will more than likely set the tone for the Euro’s next move. We advise staying flat on Friday, unless the meetings are cancelled, or some other massive shock hits the news wires.

 

EUR/USD Daily Fundamental Analysis for October 21, 2011

The EUR/USD volatility extended on Thursday and the fluctuations were heavy and evident with conflicting news and signals from the euro area, confirming that the leaders are still at odds and further downplaying chances of a comprehensive plan in the weekend summit.

We can see the mixed sentiment evident with investors reacting to leaked documents by Reuters, which said the Troika urged the release of the sixth tranche for Greece, while another suggested that the finance ministers are in talks to finalise buying bonds from the market and recapitalizing banks.

The loose ends are keeping markets on the edge and the volatility is exceptionally high. The focus on Friday will be on the Finance Ministers that are set to meet to discuss the debt crisis and reach common grounds ahead of the leaders’ summit, which investors hope can yield something, especially as EC President Barroso expressed his confidence that they can reach a positive agreement on how to expand the firepower of the EFSF.

More volatility is expected with the week coming to an end and no clear picture seen to what the summit might yield and unless the finance ministers can give investors something ahead of closing their positions ahead of the weekend which might prove to be a surprise, and therefore risk aversion and cautious trading might be more dominant this Friday.

Germany will end the week with more confidence figures with the IFO Survey for October at 08:00 GMT; the Business Climate Indicator is expected to drop to 106.5 from 107.5 the Current Assessment index to fall to 116.9 from 117.9 and the Expectations index to drop to 97.0 from 98.0.

AUD/USD Technical Analysis for October 21, 2011

 The AUD USD pair had a wide range during the Thursday session as the global markets continue to go back and forth on headline news and general fears of European debt issues. The candle is another doji, suggesting that the pair isn’t ready to move much for the Friday session. This isn’t a surprise as so much of the world is focusing on the upcoming summits out of the EU during the weekend, and the markets will more than likely be somewhat tame, barring any headlines. (Hardly something that can be promised.) Because of this, we are neutral on this pair, and suspect it will fluctuate between 1.01 and 1.03 at the most.

 

AUD/USD Daily Fundamental Analysis for October 21, 2011

The Australian dollar was pressured further to the downside against the dollar amid renewed European debt woes, where the EU leaders are still at odds over how to expand the firepower of the EFSF and contain the crisis with the October 23 deadline approaching.

In the meantime, Aussie fell versus the greenback as Asian stocks dropped on concern about a Franco-German split over European bailout fund, sapping demand for higher-yielding assets.

On the other hand, Australia isn’t immune from concerns about funding-market stresses, and the recent rise in Australian bank premiums likely reflects the concerns about the global banking system.

On Friday, both economies will not release any fundamentals which will leave the pair affected by the prevailing sentiment and focus on progress between European leaders ahead of the weekend summit, where volatility and tension might be exceptionally high with no resolution seen yet.

EUR/CHF Technical Analysis for October 21, 2011

 EUR/CHF fell on Thursday in a rare show of movement. The pair is still hovering above the 1.23 area, and is likely to only have limited downside potential as the Swiss National Bank is willing to intervene if we get too close or below the 1.20 level. The market is one-way because of this, and quite frankly – we would love to see it fall down towards that area. The reality is that we can only buy this pair because of the SNB, and will have to wait to see what Europe does about its financial mess. The plan that could come out over the weekend is possibly the catalyst for a move up finally. Because of this, we hesitate to put a position on until Monday.

 

EUR/CHF Daily Fundamental Analysis for October 21, 2011

The EUR/CHF unwound the gains recorded the previous session on Thursday as data helped investors halt bets on soon moves from the SNB, while the uncertainty over the euro outlook and the weekend summit added further volatility and risk aversion which kept the euro weaker.

The data on Thursday was positive from Switzerland, where the trade surplus widened despite the franc gains and confidence improved and both helped suppress bets on a move by the Swiss National Bank.

The market was expecting the SNB to yield to rising calls for more action and trades union calling for the floor to be increased to 1.40, yet with the data in hand investors saw the SNB not responding to calls and pressures.

In general, the focus remains on the euro area and the prevailing uncertainty over what the weekend summit will provide markets, especially as hopes were set high for a final and comprehensive roadmap.

On Friday investors will focus on the finance ministers meeting ahead of the weekend and the end of the week trades will be influenced by any comments, especially that till now the view is uncertain and not clear to what the leaders will agree on, especially as the disagreement between France and Germany over how to expand the firepower of the EFSF is clear and evident strain on the market.

The volatility will continue on Friday and the pair will consolidate with choppy and thin trading, though more downside movement could be seen with the pair well above 1.20 set floor and the euro weakness is likely to persist unless the finance ministers provide any clues ahead of the end of the session.

NZD/USD Technical Analysis for October 21, 2011

 The NZD/USD pair produced a doji on Thursday, which is the third in a row. Obviously, the market isn’t quite sure what to do with it. The recent range is just below the 0.8000 mark, and could make a massive move in one direction or another after the weekend as the EU meeting gets underway. The market will make its intentions well-known after the weekend as these talks are the main focus of the entire forex world currently. If the outcome isn’t’ good – this pair will meltdown. The fact that it cannot rise over 0.8000 might be showing us that it is already leaning to the downside. We would wait until Monday to put on a new position, unless of course some concrete action of headline comes out on Friday that sends this pair in a velocity that breaks out of the recent consolidation.

 

NZD/USD Daily Fundamental Analysis for October 21, 2011

New Zealand dollar fell against the U.S. dollar on concern the global economic recovery is slowing dampening demand for higher-yielding currencies which also intensified amid growing debt woes.

Moreover, Kiwi extended its losses against the American dollar as China’s stock market fell to the lowest in 31 months as signs of a slowing economy sent metal prices plunging while Germany and France’s disagreement over Europe’s rescue strategy further strained the market and affects the global outlook.

The market is moving into the hurdle phase as the fears dominate the investors’ sentiment, pushing them to increase investment into the safe havens such as greenback and the Yen.

On Friday, the New Zealand economy continues releasing fundamental data, where the economy will issue its credit card spending S.A. for September at 02:00 GMT after it dropped by 1.0% and inclined by 4.7% on the yearly.

USD/JPY Technical Analysis for October 21, 2011

 

The USD/JPY pair continues to hover around the 77 handle during the Thursday session, and looks very likely to on Friday as well. The range it has been stuck in between 76 and 77.50 looks likely to hold as the Bank of Japan will not let the pair fall, and the risk of shorting the Yen isn’t appealing to readers either. With this in mind, we like scalping this pair for 50 pip runs from the bottom of the range, near the 76.25 mark.

 

USD/JPY Daily Fundamental Analysis for October 21, 2011

The USD/JPY pair traded in a range early Thursday after risk aversion returned to the FX market, as the EU leaders failed to reach a specific agreement regarding the strategy to be taken to contain the current debt crisis.

The dollar and the Japanese yen recorded gains against other major currencies, as investors focused on lower-yielding currencies which pushed the European currencies down.

On the other hand, the Japanese yen is still facing pressure as the 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 Friday, both economies will not release any fundamentals which will leave the pair affected by the prevailing sentiment and focus on progress between European leaders ahead of the weekend summit, where volatility and tension might be exceptionally high with no resolution seen yet.

GBP/USD Technical Analysis for October 21, 2011

 The GBP/USD pair fell on Thursday for the early hours of the session, only to bounce back upwards form the 1.57 level yet again. This shows just how resilient this area is as support, and that it should be respected. However, it is difficult to be aware of any major reason to buy this pair for a long-term trade at the moment. After all, it is a “risk on” trade, and the headline risks are far too great to put much faith in the markets at the moment. We think it is probably more likely that the 1.5850 area holds as resistance, and the 1.57 level holds as support. With this in mind, we are range trading it for quick scalps at this point.

 

GBP/USD Daily Fundamental Analysis for October 21, 2011

On Thursday, the pair fell amid cautions in markets that the European summit on October 23 may be delayed which damped demand on high-yielding currencies.

The jittery situation remained in markets amid rising speculations there will be a delay in the awaited European council meeting on Saturday and talks about a split among European leaders.

The pound recovered some of its losses after the release of upbeat retail sales figures which showed 0.6% advance in the reading with auto fuel, the highest level in five months, compared with the revised 0.4% drop in August, yet the rebound was not strong enough to recover all the losses as the main concern remained with news from the euro area.

On the other hand, data from theU.S.showed that initial claims fell to 403,000 in the week ended October 15 from the revised 409,000 a week before, higher than forecasts of 400,000, while existing home sales slipped 3.0% in September from the revised 8.4% rise, adding more negativity to the sentiment.

The week ends with the release of public finance excluding interventions at 08:30 GMT, while theU.S.has no releases. Thus, the pair is expected to follow the general sentiment in market, where the main focus remains on the latest developments from the euro area.

USD/CAD Technical Analysis for October 21, 2011

 The USD/CAD pair had a back and forth session on Thursday as traders first sold off risk, only to buy it back in the later hours of the session. This has been a bit of a trend lately: Americans trying to reverse the bearishness out of Europe. The pair will be greatly influenced by oil, and the massive support expected at the parity level. Because of this, we are hesitant to sell it until we close below that parity level. We are looking to see if it holds as support, and would be willing to buy a bullish candle form that area, as the headline risks out there are great, and the Dollar is always king in uncertainty.

 

USD/CAD Daily Fundamental Analysis for October 21, 2011

The USD/CAD pair fell on Thursday, where rising wholesale sales inCanadaboosted the Canadian dollar against the U.S. dollar. Moreover, data from theUnited Stateswas encouraging, where the leading indicators index rose in line with projections, while the Philadelphia Fed index expanded in October, opposite to expectations of contraction, which provided the Canadian dollar with bullish momentum to push the USD/CAD pair to the downside.

Traders will continue to monitor the latest developments fromEurope, where more optimism could provide the USD/CAD pair with more bearish momentum on Friday. Nonetheless, the uncertainty remains very high in markets, and that could lead the USD/CAD pair to fluctuate over the coming days until the EU summit begins next week. We should note that the CPI data fromCanadacould play a role in the pair’s movement on Friday.

Friday October 21:

Canadawill release the consumer price index for September at 11:00 GMT, where CPI is expected to rise by 0.1%, compared with 0.3% in August, while compared with a year earlier, CPI is expected to rise by 3.0%, following the prior rise of 3.1%. Core CPI is expected to rise by 0.2%, compared with 0.4% in August, and compared with a year earlier, Core CPI is expected to remain unchanged at 1.9%.

USD/CHF Technical Analysis for October 21, 2011

 The USD/CAD pair had a back and forth session on Thursday as traders first sold off risk, only to buy it back in the later hours of the session. This has been a bit of a trend lately: Americans trying to reverse the bearishness out of Europe. The pair will be greatly influenced by oil, and the massive support expected at the parity level. Because of this, we are hesitant to sell it until we close below that parity level. We are looking to see if it holds as support, and would be willing to buy a bullish candle form that area, as the headline risks out there are great, and the Dollar is always king in uncertainty.

 

USD/CHF Daily Fundamental Analysis for October 21, 2011

On Thursday, the Swiss franc advanced against the dollar, taking the pair lower, after the improvement in Swiss trade data amid cautions in markets that the European summit on October 23 may be delayed.

Swiss trade surplus widened to 1.85 billion francs in September compared with the revised 0.76 billion francs surplus. Exports rose 3.4% from the revised 6.9% drop while imports advanced 1.3% from the revised -0.3%.

Also, Swiss economic confidence index surged to -54.4 in October from -75.7 a month before.

The jittery situation remained in markets amid rising speculations there will be a delay in the awaited European council meeting on Saturday and talks about a split among European leaders.

With diminishing hopes the SNB would raise the ceiling of the euro against the franc to 1.40 from the current 1.20, investors started to resort to the franc once again as a safe harbor on expectation there will be no further interventions from the SNB to weaken the Alpine currency.

On the other hand, data from theU.S.showed that initial claims fell to 403,000 in the week ended October 15 from the revised 409,000 a week before, higher than forecasts of 400,000, while existing home sales slipped 3.0% in September from the revised 8.4% rise, adding more negativity to the sentiment.

On Friday, the week ends with the release of money supply M3 for the year ending Sep. at 07:00 GMT, while theU.S.has no releases. Thus, the pair is expected to follow the general sentiment in market, where the main focus remains on the latest developments from the euro area.

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