Forex Technical and Fundamental Analysis for October 27, 2011

EUR/USD Technical Analysis for October 27, 2011

The EUR/USDpair had a wild day with the EU summit coming to a close, there was back and forth trading, and at the New York close, there were only rumours to trade off of. The hints that China might participate turned the Euro’s fortunes around, and the EUR/USD bounced as a result. The ending candle is a massive doji, which shows exactly how confused this market is. The lack of information is making it almost impossible to trade, so we will simply have to wait to see if the 1.40 level gets broken to the upside in order to buy. We need to see a daily close above that level in order to buy this pair. To sell, we will need to see a break of the lows of the Wednesday session. Until we get clarity, the market continues to trade off of rumours, and little else.

EUR/USD Fundamental Analysis for October 27, 2011

The jitters and fears are controlling the market with all the eyes still focused on the meetings in Brussels with investors still mixed and uncertain which directly reflected on the EUR/USD. All eyes remain on the summit and what the leaders will finally present. The leaders are not expected to disclose any information until late Wednesday which now as Europe exits the market leaves the reaction a key mover on Thursday as well, and likely for the coming period! Choppy trading is evident with the parliament in Germany approving the space for Merkel to work on plans to expand the EFSF which excludes any more support from tax payers money. The options are available for the fund to be leveraged as a form of insurer and also an investment fund to purchase debt from the market and from governments. The market is expecting the fund to not be short of a trillion and for banks support to at least come at 100 billion which is still below the earlier estimates of 200-300 billion. The final decision on Greece is also not finalised and investors want to see if there will be a haircut on the bonds which now is expected around 50%. To the end of the European session on Wednesday investors turned more fearful and pessimistic and started to see little hope that the summit will present anything and that the measures will fall short of expectations which is pressuring the euro lower and for sure will send it further and violently lower if that fear materialised by the end of the summit. Thursday will be a critical day with the focus still on the outcome of the summit alongside key GDP figures from the US which are likely to go unnoticed if indeed the EU leaders wasted the magic chance they have to quell the fears. The euro zone confidence figures for October are due at 09:00 GMT. The Business Climate Indicators is expected to weaken further to -0.15 from -0.06, the Economic Confidence is expected to drop to 94.1 from 95.0 while Industrial Confidence is expected to fall to -6.5 from -5.9 and the Services Confidence will decline to -1.3 from 0.0. Consumer Confidence is expected unrevised from the advanced estimate at -19.9. Germany’s Consumer Price Index advanced reading for October is due and likely maintained the same gain from the previous month with 0.1% rise on the month and 2.6% on the year. In EU Harmonized terms expected to ease on the month with 0.1% gain following 0.2% rise and on the year to fall to 2.8% from 2.9%. Critical growth data is lined for release from the United States at 12:30 GMT. The economy is expected to expand by 2.3% in the third quarter after 1.3% and personal consumption is expected to strengthen to 1.9% after 0.7% the second quarter. The Core PCE on the quarter is expected to ease to 2.2% from 2.3% the previous quarter. The weekly jobless claims are also due as always the same time for the week ending October 22 after they dropped last week to 403 thousand. The pending home sales for September are due at 14:00 GMT and expected with 0.1% rise after 1.2% drop.

USD/JPY Technical Analysis for October 27, 2011

USD/JPY fell on Wednesday, and then bounced in the US afternoon. As a result, we have a hammer for the day – the second one in a row. There is talk of possible intervention in the pair by the Bank of Japan, and as long as that continues – it will find a floor in the 76 range. Because of this, we would like to buy this pair on dips, but only for short-term trades. The range should continue to grind between 75.50 and 78 for the foreseeable future – barring that intervention.

USD/JPY Fundamental Analysis for October 27, 2011

The USD/JPY pair dropped sharply early Wednesday to trade near its post-war level, where the Japanese yen used the dollar weakness to record more gains, while it couldn’t rise against other major due to the risk appetite. Market participants are still nervous about the possibility of further intervention from the BOJ in FX market to sell the yen, since the Japanese currency soared to its highest level against the dollar. Talks about the third round of quantitative easing drove the dollar to the downside against other majors, at the same time yen traders are waiting for the BOJ’s meeting this week which provides more uncertainty in the FX market and increased demand for the yen before any intervention from the BOJ. On Thursday the market will react to the final announcement from the EU leaders and what the euro area will do to contain the crisis. This will be the main impact and focus for trading and actually for the coming period, to assess if the measures are strong enough or not. At 23:50 GMT (Wednesday), Japan will release the annual Retail Trade for September, which had a previous reading of –2.6% and expected to rise to 0.1%. The seasonally adjusted Retail Trade for September is expected to drop to 0.3% from the previous –1.7%. At 04:00 GMT the Bank of Japan will announce its rate decision for October, where it’s expected to keep the rate steady at 0.10%, while market participants will focus on the bank’s statement. Also at 12:30 GMT the U.S. economy will release the annualized Gross Domestic Product for the third quarter, where the advanced reading is expected to show a growth of 2.3% from the previous 1.3%. U.S. Personal Consumption is expected to show a rise of 1.9% from the prior 0.7%, while Core PCE is expected to come at 2.3% in line with the previous quarter. On Thursday at 12:30 GMT, the U.S. economy will issue its weekly initial claims numbers, where the number of people filing for first-time claims for state unemployment insurance increased 403 thousand last week. The U.S. Pending Home Sales for September is expected to come at 0.1% from -1.2%, while the annual reading had a prior reading of 13.1%.

GBP/USD Technical Analysis for October 27, 2011

The GBP/USDpair has fallen during the Wednesday session, but had a bounce in the later hours of the US session. The pair looks set to retest the 1.60 level again, and the hammer formed on the daily looks bullish. However, it simply must make a fresh high in order to be a buy, and if the bottom of this hammer gets broken – it is massively bearish. The pair will be influenced by the drama (and rumours) out of Europe still, and can be expected to be very choppy.

GBP/USD Fundamental Analysis for October 27, 2011

On Wednesday, the pound fluctuated near seven-week high versus the greenback amid hopes and worries in markets that European leaders will be able to introduce a comprehensive and decisive plan in their meeting later in the day in Brussels, which damped demand on the dollar as a favourite safe haven.

Still, the pair is getting its direction from the market’s main focus which is the vital European meeting which may continue to determine the main direction in the market in the coming period.

German Chancellor won the Bundestag lower house of parliament approval for expanding the EFSF on Wednesday, giving Merkel the power to negotiate the expansion process during the summit.

Some analysts said today’s meeting may not come out with details which may be announced on November 7-8 when European finance ministers meet. Nonetheless, further delay in the plan will probably cause disappointment in the market, thereby giving more downside pushes to the pair.

Moreover, the upbeat earnings by many European companies, better-than-estimated U.S. data also gave more bullishness to the sentiment.

U.S.durable goods excluding transportation equipment roared 1.7%, higher than both revised and forecasted readings of -0.4% and 0.4%.

On Thursday, The main highlight of the week which is GDP annualized for the third quarter, which is predicted to record 2.3% from 1.3% growth in the second quarter, will be available at 12:30 GMT. At the same time, initial jobless claims for the week ended Oct. 22 and continuing claims for the week ending Oct. 15. Thereafter, specifically at 14:00 GMT, pending home sales will show 0.1% rise in Sep. from the previous 1.2% fall.

The data is predicted to have a remarkable impact in the pair’s movements yet the effect may be temporarily as the main attention will be on the results of the European summit.

On the other hand, as of 23:01 GMT, U.K. GfK consumer confidence survey will remain unchanged at minus 30.

This week, BoE policymaker Martin Weale said there is a possibility that the economy could witness contraction in the fourth quarter, while King said the bank was very close to restarting APF program in September yet they preferred to delay the decision to October to see if the volatility in financial markets would calm down.

USD/CHF Technical Analysis for October 27, 2011

The USD/CHF pair had a range bound session on Wednesday as traders waited for the all-important EU summit to end. The deal didn’t come, but there are rumours floating around, and rumours are exactly what the market has been trading on for some time now. The set up is easy now: Trading a break in either direction is the way to go for a doji. However, the Swiss National Bank is trying to sell off the Franc in order to keep its value down. The pair is only able to be bought, so we want to buy on a break to the upside, and a break to the downside has us waiting for supportive action in this “buy only” market.

USD/CHF Fundamental Analysis for October 27, 2011

On Wednesday, the USD/CHF pair continued its drop amid some hopes in markets European leaders will introduce a comprehensive and decisive plan in their meeting later in the day inBrussels, which damped demand on the dollar as a favourite safe haven. Still, the main focus is on the vital European meeting which will probably determine the main direction in the market in the coming period. German Chancellor won the Bundestag lower house of parliament approval for expanding the EFSF on Wednesday, giving Merkel the power to negotiate the expansion process during the summit. Some analysts said today’s meeting may not come out with details which may be announced on November 7-8 when European finance ministers meet. Nonetheless, further delay in the plan will probably cause disappointment in the market, thereby giving more downside pushes to the pair. Moreover, the upbeat earnings by many European companies, better-than-estimatedU.S.data also gave more bullishness to the sentiment. U.S. durable goods excluding transportation equipment soared 1.7%, higher than both revised and forecasted readings of -0.4% and 0.4%. The Swiss franc, on the other hand, had lost its appeal as a refuge after the several interventions that took place since September and amidst speculations the bank will raise the euro cap against the franc to 1.40 from the current 1.20, especially as some earnings reports showed that many Swiss companies were affected by the franc’s appreciation. On Thursday, the main highlight of the week which is U.S. GDP annualized for the third quarter, which is predicted to record 2.3% from 1.3% growth in the second quarter, will be available at 12:30 GMT. At the same time, initial jobless claims for the week ended Oct. 22 and continuing claims for the week ending Oct. 15. Thereafter, specifically at 14:00 GMT, pending home sales will show 0.1% rise in Sep. from the previous 1.2% fall. The data is predicted to have a remarkable impact in the pair’s movements yet the effect may be temporarily as the main attention will be on the results of the European summit.

EUR/CHF Technical Analysis for October 27, 2011

The EUR/CHF fell, and then formed a hammer for the day as the pair bounced in the later hours of the US session. The coincided with rumour coming out of Europe that China was getting involved in the bailout fund, but the news so far at the US close is simply rumours. The EUR/CHF pair is being held up by the Swiss National Bank, so selling isn’t possible anyway. Simply put: If the Europeans can get it together, this pair rises. If not – it’s not a tradable pair at all.

EUR/CHF Fundamental Analysis for October 27, 2011

The volatility controlled the EUR/CHF which was still biased to the downside despite the tight trading range as investors fear a great disappointment from the EU leaders. All eyes remain on the summit and what the leaders will finally present. The leaders are not expected to disclose any information until late Wednesday which now as Europe exits the market leaves the reaction a key mover on Thursday as well, and likely for the coming period! Choppy trading is evident with the parliament in Germany approving the space for Merkel to work on plans to expand the EFSF which excludes any more support from tax payers money. The options are available for the fund to be leveraged as a form of insurer and also an investment fund to purchase debt from the market and from governments. The market is expecting the fund to not be short of a trillion and for banks support to at least come at 100 billion which is still below the earlier estimates of 200-300 billion. The final decision on Greece is also not finalised and investors want to see if there will be a haircut on the bonds which now is expected around 50%. To the end of the European session on Wednesday investors turned more fearful and pessimistic and started to see little hope that the summit will present anything and that the measures will fall short of expectations which is pressuring the euro lower and for sure will send it further and violently lower if that fear materialised by the end of the summit. On Thursday the market will react to what the final results are and accordingly will affect the pair, especially if a great disappointment is seen that might send the euro strongly lower and might even dare to test 1.20 floor, yet a strong plan will surely drive the pair higher. The euro zone confidence figures for October are due at 09:00 GMT. The Business Climate Indicators is expected to weaken further to -0.15 from -0.06, the Economic Confidence is expected to drop to 94.1 from 95.0 while Industrial Confidence is expected to fall to -6.5 from -5.9 and the Services Confidence will decline to -1.3 from 0.0. Consumer Confidence is expected unrevised from the advanced estimate at -19.9.

AUD/USD Technical Analysis for October 27, 2011

AUD/USDfell and then rose on the session for Wednesday. The resulting candle was a hammer, and it looks like the Aussie will be supported after all. The 1.05 level above should be resistive again, so we feel that the initial bounce from this candle might be somewhat limited. The daily close over that level is what we want to see in order to buy this pair. Until then, we will be watching. A breaking of the lows of the Wednesday hammer would be a massively bearish signal, and would have us aggressively short of this pair.

AUD/USD Fundamental Analysis for October 27, 2011

The Australian dollar has extended its downside movement versus its major counterpart after the Australian economy reported that its consumer price index eased in October, supporting the RBA is to keep the rates unchanged in the upcoming period as inflation pressures slow. Aussie lost some gains against the US dollar on concern European leaders may not be able to construct a plan to resolve the region’s debt crisis when they meet in Brussels on Wednesday. On the other hand, the Aussie is finding support against the its US counterpart as the nation showed that its cheerful phase has started after the services industry index rebounded for the first time in more than four months led by growth in finance and communications, supporting demand for Australian dollar. On Thursday the market will open to the final announcement from the EU leaders and what the euro area will do to contain the crisis. This will be the main impact and focus for trading and actually for the coming period, to assess if the measures are strong enough or not. Also at 12:30 GMT the U.S. economy will release the annualized Gross Domestic Product for the third quarter, where the advanced reading is expected to show a growth of 2.3% from the previous 1.3%. U.S. Personal Consumption is expected to show a rise of 1.9% from the prior 0.7%, while Core PCE is expected to come at 2.3% in line with the previous quarter. On Thursday at 12:30 GMT, the U.S. economy will issue its weekly initial claims numbers, where the number of people filing for first-time claims for state unemployment insurance increased 403 thousand last week. The U.S. Pending Home Sales for September is expected to come at 0.1% from -1.2%, while the annual reading had a prior reading of 13.1%.

USD/CAD Technical Analysis for October 27, 2011

USD/CADfell hard during the Wednesday session as the rumours flew out of Europe that some kind of deal has been reached. At the close of the US session however, there are just that – rumours. The parity level is considered to be massive support, and until it gets broken below, the pair cannot be sold as there should be a lot of buying at that level. We have been looking for a daily close below that area before we can sell, and until then – we won’t. Buying cannot be done until we see some kind of supportive candle in the parity area, perhaps a hammer or bullish engulfing one.

USD/CAD Fundamental Analysis for October 27, 2011

The USD/CAD pair rebounded sharply to the downside on Wednesday, as the investors are targeting lower-yielding assets, where uncertainty continues to surround the outlook of Europe’s debt crisis, as EU Leaders gather in Brussels for the second summit in four days to discuss the debt crisis, how to aid Greece with a second bailout, the recapitalization of banks and leveraging the region’s rescue fund. Markets’ bids conflicted whether EU leaders will be able to reach a final and fulfilling cure for the debt crisis, but at the mean time, traders will continue to monitor the latest developments from Europe, as EU leaders will announce their plans to ease the European debt crisis on Wednesday, and that will be the major market mover for the USD/CAD pair on Wednesday. Thursday October 27: The United States will start with the weekly jobless claims for the week ending October 22 at 12:30 GMT following a gain of 403 thousand two weeks earlier. At 12:30 GMT, The U.S Department of Commerce will post the first reading of the GDP for the third-quarter of 2011, where projections suggest the economy expanded by 2.5 per cent in the past three month, compared to the prior 1.4 per cent growth in the second quarter this year.

NZD/USD Technical Analysis for October 27, 2011

The NZD/USD pair was fairly range bound during the session, but did in fact form a candle similar to a hammer just under the 0.8000 level. The pair is highly susceptible to risk appetite, and because of the rumour-related drama we have seen in the market, the pair doesn’t know which way to go. Further compounding the issue is the fact that at the US close, we still don’t have much more than rumours at this point. Because of this, we suspect this pair will be somewhat range bound in the short-term. We are very neutral in the pair because of the attitude of the market at the moment.

NZD/USD Fundamental Analysis for October 27, 2011

New Zealand’s currency fell against the greenback on speculation that Asian stock markets will slump amid the current global crisis, while the expectations indicated that the Reserve Bank of New Zealand will leave the rates unchanged at their current levels as the inflation pressures cooled in the third quarter. The New Zealand’s currency (the Kiwi) fell for a third day as Asian stocks extended a global slump, while demand for the New Zealand currency was also curbed as speculation China may begin monetary policy easing tempered uncertainty about the outcome of European debt-crisis. On Thursday at 20:00 GMT (Wednesday), the Reserve Bank of New Zealand will announce its rate decision for October, where it’s expected to keep rates steady at 2.50%. At 21:45 GMT New Zealand will release the Trade Balance for September, where the previous reading showed a deficit of 641 million and it’s expected to shrink to 440 million. The New Zealand Imports for September will be released at 21:45 GMT, where the expectations refer to 3.90 billion from the previous 4.08 billion. The Exports had a previous reading of 3.44 billion and expected to advance to 3.90 million. On Thursday the market will react to the final announcement from the EU leaders and what the euro area will do to contain the crisis. This will be the main impact and focus for trading and actually for the coming period, to assess if the measures are strong enough or not. Also at 12:30 GMT the U.S. economy will release the annualized Gross Domestic Product for the third quarter, where the advanced reading is expected to show a growth of 2.3% from the previous 1.3%. U.S. Personal Consumption is expected to show a rise of 1.9% from the prior 0.7%, while Core PCE is expected to come at 2.3% in line with the previous quarter. On Thursday at 12:30 GMT, the U.S. economy will issue its weekly initial claims numbers, where the number of people filing for first-time claims for state unemployment insurance increased 403 thousand last week. The U.S. Pending Home Sales for September is expected to come at 0.1% from -1.2%, while the annual reading had a prior reading of 13.1%.

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