Forex Technical and Fundamental Analysis for October 28, 2011

EUR/USD Technical Analysis for October 28, 2011

 The EUR/USD pair shot up during the Thursday session as the EU finally came out with a bailout plan, and so far it looks like the markets like it. The move was quick and strong, and it appears the trend has change, at least for the short-term. The pair looks to have a floor in it at this point in time – somewhere near the 1.39 level. The pair should continue to provide a good “buy on the dips” scenario for a while at least. The final details for the plan aren’t out yet, so there are going to be numerous headline risks in this pair. Tight stops are recommended, but a positive tone is certainly surrounding the pair at the moment. We cannot sell until we close below 1.40 on the daily chart again.

EUR/USD Daily Fundamental Analysis for October 28, 2011

The plan is finally announced and the market met the broad lines with positivity and optimism sending the EUR/USD strongly higher.

The market accepted the efforts and saw the new measures as strong and have the hope to ease the negativity in the market. The leaders said that 50% haircut will be seen for Greek bonds and banks will have to strengthen their capital by increasing the core capital requirements to 9.0% and the EBA said banks need 106.5 billion which was also less than market expectations.

Banks will also be supported by the expanded firepower of the EFSF which will be leveraged to 1.0 trillion euros to guarantee bonds and act as an investment vehicle to finance its operations and lend to nations and banks that need liquidity.

The second bailout for Greece will also be provided and finalised before the end of the year which is also further support to Greece and offsetting the market tension which will protect nations that are liquidity strapped such as Italy and Spain and prevent market pressures from affecting them.

Those measures supported optimism that markets might normalize and the efforts can now be focused to revive growth. Strong US GDP and 2.5% expansion in the third quarter was further support to the upside momentum as investors unwound their recession fears.

With the upbeat expectations the market remains now biased to the upside yet Friday might still see choppy trading and volatility after the rally and with the end of the week trading, especially that the optimism over the European measures might change any second since investors still do not know the means of implementing the measures or their timing which if delayed long enough might derail the progress made.

Also the U.S. economy will end the week with the income report for September at 12:30 GMT were personal spending is expected to rise by 0.6% after 0.2% and income to rise 0.3% after 0.1% drop. The Core PCE is expected with 0.2% on the month after 0.1% and on the year to rise 1.7% from 1.6%.

The week will end with the University of Michigan consumer confidence final October reading at 13:55 GMT and expected to be revised higher to 58.0 from 57.5.

AUD/USD Technical Analysis for October 28, 2011

 

 

The AUD/USD rose absolutely skyrocketed on Thursday as the EU presented a bailout package finally. The commodity trade was on in all markets as the US dollar got sold off. The pair has reached a gap that appeared in August, and found it resistive. However, the most important level has been broken – the 1.05 level. This is very bullish for the AUD, and we think that the trend upward should continue. As long as we stay above the 1.05 level, this pair should continue to be a “buy only” pair. We like buying dips on shorter time frames.

 

AUD/USD Daily Fundamental Analysis for October 28, 2011

The market rebounded after the meeting of European leaders held on Wednesday, where they decided write-down Greek bonds by 50% and boost the firepower of the rescue fund to 1 trillion euros ($1.4 trillion).

Asian currencies advanced sharply against the American dollar as Europe announced the headlines of the plan to save the Euro-Zone.

On the other hand, the Asian stock markets gained as the market sentiment improved, increasing investors to buy higher yielding currencies.

Furthermore, Aussie inclined after the Chinese manufacturing sector expanded for the first time in four months, adding that European financial crisis won’t affect China’s economic recovery, where the Chinese market is the largest for Australian products.

On Friday, the U.S. Personal Income for September will be released at 12:30 GMT and it’s expected to come at 0.3% from the previous –0.1%, the Personal Spending Index had a prior reading of 0.2% and expected to come at 0.6%.

The Core PCE for September had a previous reading of 1.6% and expected to rise to 1.8%.

The University of Michigan Confidence will be released at 13:55 GMT, where it’s expected to come at 57.8 from the previous reading of 57.5.

EUR/CHF Technical Analysis for October 28, 2011

 The EUR/CHF pair sat fairly still during the Thursday session, which was odd considering how the Euro absolutely took off against the Dollar. This in concert with the Italian debt yields still leaves some real doubts as to the length of this relief. The Swiss National Bank has put in a “floor” at the 1.20 level, and this could keep this pair higher. But knowing this, the market still didn’t buy this pair at all. Odd, and worrisome to be honest. The pair could be a harbinger of more Euro troubles to come. Maybe you cannot trade this pair right now, but the truth is that it can be an indicator for the overall strength of the Euro, no matter what it does against the USD.

 

EUR/CHF Daily Fundamental Analysis for October 28, 2011

Optimism controlled the market on Thursday after European leaders unveiled the measures to contain the crisis, yet still the EUR/CHF moved to the downside as the franc extended the rally against a weak dollar.

The market reacted positively to the new measures which include leveraging the EFSF to almost 1.0 trillion euros, new aid for Greece and including 50% writedown for debt and also capitalisation for banks by increasing capital requirements to 9.0% and providing assistance if the bank fails to raise the capital via its own capabilities.

Investors saw the measures strong yet we can see sceptics as the EUR/CHF still lacked the momentum to move higher despite the euro’s rally against its major rivals and especially the dollar. The gains for the franc versus other majors and especially the dollar offset the momentum for the pair and by that assuring that for now the pair will continue to hover in a tight range and is only affected by the SNB and not market forces.

Friday might still see choppy trading and volatility with the end of the week trading, especially that the optimism over the European measures might change any second since investors still do not know the means of implementing the measures or their timing which if delayed long enough might derail the progress made.

Switzerland will end the week with the KOF Leading Indicators for October at 09:30 GMT which is expected to slow to 1.00 from 1.20.

NZD/USD Technical Analysis for October 28, 2011

 The NZD/USD pair took off on Thursday as the commodity markets gained rapidly during the session. The US dollar has been bashed during the session as it appears that the EU has come up with a “doable” plan. The Kiwi is highly sensitive to commodity markets, and as such you should keep one eye on this chart and another on commodities in general. As long as the “risk on” trade continues, you should see this pair rise. We like buying on dips, but are aware that the pair is sensitive to headline risks.

 

NZD/USD Daily Fundamental Analysis for October 28, 2011

The New Zealand dollar soared against all major counterparts , while it gained sharply versus the US dollar after Reserve Bank Governor Alan Bollard held interest rates at a record low and signaled borrowing costs may need to rise as the domestic economy rebounds next year.

In the meantime, the investors increased demand for the New Zealand currency as the market sentiment improved after European leaders agreed to leverage the EFSF to one trillion euros and also agreed to a voluntary write-down of 50% on Greek debt.

On Friday, the U.S. Personal Income for September will be released at 12:30 GMT and it’s expected to come at 0.3% from the previous –0.1%, the Personal Spending Index had a prior reading of 0.2% and expected to come at 0.6%.

The Core PCE for September had a previous reading of 1.6% and expected to rise to 1.8%.

The University of Michigan Confidence will be released at 13:55 GMT, where it’s expected to come at 57.8 from the previous reading of 57.5.

USD/JPY Technical Analysis for October 28, 2011

 The USD/JPY had another down day on Thursday, but bounced yet again around the 75.50 area. The pair looks like it is trying to base at this area. The pair looks like it is trying as hard as possible to stay in the recent range, but the Bank of Japan has been quite vocal about its dislike of the falling value of this pair, and one has to wonder how long it will be before they intervene. The pair cannot be sold because of that, but the lows are starting to get lower. At best, this pair should be bought in small quantities, but avoiding this pair altogether isn’t necessarily a bad idea either.

 

USD/JPY Daily Fundamental Analysis for October 28, 2011

The USD/JPY had another down day on Thursday, but bounced yet again around the 75.50 area. The pair looks like it is trying to base at this area. The pair looks like it is trying as hard as possible to stay in the recent range, but the Bank of Japan has been quite vocal about its dislike of the falling value of this pair, and one has to wonder how long it will be before they intervene. The pair cannot be sold because of that, but the lows are starting to get lower. At best, this pair should be bought in small quantities, but avoiding this pair altogether isn’t necessarily a bad idea either.

GBP/USD Technical Analysis for October 28, 2011

 The GBP/USD rose again on Thursday as it reacted to the good news of a EU bailout agreement. The pair has now broken above the 61.8% Fibonacci retracement, and now look set to move much higher. Based upon the Wednesday candle, it looks as though the 1.60 level should end up being supportive at this point, and buying can only be done as long as we are above that area. Buying on dips is probably going to be the best way to go about this pair until we get lower than the 1.60, and as the world gets more and more comfortable with the results of that bailout, this pair should continue to rise.

 

GBP/USD Daily Fundamental Analysis for October 28, 2011

On Thursday, the GBP/USD pair continued its rise after showing a slight decline on Wednesday to hover around seven-week high as the improvement in risk sentiment, after the European debt-relief accord and upbeat U.S. data, enhanced demand on high-yielding and risky assets while the dollar, on the other hand, was damped as a favourite refuge.

The market reacted positively to the agreement between European leaders to make private sector bondholders to bare 50% of losses of Greek debt to cut the Greek debt by 100 billion euros, while leveraging the firepower of the EFSF to 1 trillion euros from the current 440 billion euros.

Other findings of the summit included measures on bank recapitalization which will reach 106 billion euros, bigger role for the International Monetary Fund in addition to a commitment from Italy to do more effort to slash its huge budget deficit while the European Central Bank will maintain bond purchases.

Moreover, the optimisticU.S.data added to the positive sentiment as the U.S. economy grew 2.5%, the fastest pace in a year, from the second quarter’s expansion of 1.3%. Also, initial jobless claims fell by 2,000 to 402,000 in the week ended October 22, showing improvement in the labour sector.

However, the outlook for the British economy remained clouded with uncertainty as policymaker Paul Fisher said on Thursday there is a high probability the U.K. could experience another recession and the BoE may add further to stimulus after the current round is completed.

The week ends with the release of no fundamentals from the U.K., while in the U.S. personal income and spending will be under scrutiny at 12:30 GMT, followed by University of Michigan confidence will show a rise to 58.0 in Oct. from the prior 57.5.

Data is expected to have an impact on the pair’s movements as investors will keep an eye lid on data from theU.S.to see whether the world’s largest economy will be able to lead global economies to a rebound amid the current sluggish global growth.

USD/CAD Technical Analysis for October 28, 2011

 The USD/CAD sliced right through the parity level on Thursday as the EU finally came out with a bailout plan. The commodities markets took off as the US dollar was sold off against everything. The oil markets really took off, and as a result – the CAD became much desired. The closing on a daily candle well below the parity level has us thinking sell now, but it should be noted that the next 200 pips or so are likely to be a grind as there are a lot of orders in this area. We like selling rallies, at least until we close above parity on the daily chart.

 

USD/CAD Daily Fundamental Analysis for October 28, 2011

The USD/CAD pair extended its sharp decline on Thursday amid the huge wave of optimism that spread through global markets after EU leaders announced plans to ease the euro zone debt crisis and support Greece, which boosted demand for higher yielding assets including the Canadian dollar, as traders’ risk appetite improved, which put the USD/CAD pair under strong negative pressure.

Moreover, the U.S. Commerce Department released the advanced GDP estimate for the third quarter of 2011, where the U.S. economy expanded by 2.5%, in line with median estimates and compared with the prior expansion of 1.3% back in the second quarter, which also supported confidence levels, and put the USD/CAD pair under more pressure.

Traders will be eyeing theU.S.income report on Friday, which is expected to show that personal income and spending continued to improve at a moderate pace, while core PCE, the Fed’s favourite indicator for inflation, is expected to show that inflation remained subdued in September.

Friday October 28:

The U.S. will release the income report for September at 12:30 GMT, where personal income is expected to rise by 0.3%, compared with the prior drop of 0.1%, while personal spending is expected to rise by 0.6% after rising by 0.2% in August. Core PCE is expected to rise by 0.2% in September, following the prior rise of 0.1% in August, while compared with a year earlier, Core PCE is expected to rise by 1.7%, up from 1.6% in the prior estimate.

The University of Michigan will release the final estimate for consumer confidence in October at 13:55 GMT, where consumer confidence is expected to rise slightly to 58.0 from 57.5.

USD/CHF Technical Analysis for October 28, 2011

 The USD/CHF pair fell hard on Thursday as the USD was sold off against almost all other currencies around the world. This was in response to the EU finally releasing the bailout plan that has been long awaited. The EUR/USD rose, and the USD fell against all else. The selling of the USD even spilled into this market, one that is artificially being propped up. The Swiss National Bank is actively working against the Franc, and to see it strengthen against the USD shows just how bad the Dollar is right now. We see 0.85 as massive support at this point, and are looking to see if supportive daily candles form here in the next couple of days. We don’t sell, as we don’t want to tempt the Swiss into action.

 

USD/CHF Daily Fundamental Analysis for October 28, 2011

On Thursday, the USD/CHF pair continued its drop after showing a slight rebound on Wednesday as the sentiment was bolstered by the European debt-relief accord and upbeatU.S.data which damped demand on the dollar as a favourite safe haven.

As the Swiss franc 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, the pair is continuing its downside direction.

The market reacted positively to the agreement between European leaders to make private sector bondholders to bare 50% of losses of Greek debt to cut the Greek debt by 100 billion euros, while leveraging the firepower of the EFSF to 1 trillion euros from the current 440 billion euros.

The debt deal restored confidence and was deemed as a good plan by investors whom took long positions on risky and high-yielding assets.

Other findings of the summit included measures on bank recapitalization which will reach 106 billion euros, bigger role for the International Monetary Fund in addition to a commitment fromItalyto do more effort to slash its huge budget deficit while the European Central Bank will maintain bond purchases.

Moreover, the optimisticU.S.data added to the positive sentiment as theU.S.economy grew 2.5%, the fastest pace in a year, from the second quarter’s expansion of 1.3%. Also, initial jobless claims fell by 2,000 to 402,000 in the week ended October 22, showing improvement in the labour sector.

On Friday, the week ends with the release KOF Swiss leading indicator at 09:30 GMT which is estimated to retreat to 1.00 in Oct. from 1.21 a month earlier, while in the U.S. personal income and spending will be under scrutiny at 12:30 GMT, followed by University of Michigan confidence will show a rise to 58.0 in Oct. from the prior 57.5.

Data is expected to have an impact on the pair’s movements as investors will keep an eye lid on data to see whether they will be able to rebound amid the current sluggish global growth.

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