Forex Technical and Fundamental Analysis for October 5, 2011

EUR/USD Technical Analysis for October 5, 2011

EUR/USDbounced on Tuesday as traders reacted to a story out of the Financial Times that suggested many EU countries were working behind the scenes to shore up the banks in case of a default by Greece, and that the compromise was coming out soon. The biggest problem is that this is simply a rumour, and cannot be trusted. It isn’t like this hasn’t happened before, and we see this as only a relief rally at this point. We like selling rallies, and will be looking for exhaustive candles to sell from at this point, especially the closer we get to the 1.35 mark.

EUR/USD Daily Fundamental Analysis for October 5, 2011

The EUR/USD volatility is ongoing and the jitters are clear in the market with the euro under pressure from rising risk of Greek default and investors again seeing bleak hope for the leaders to contain the crisis. The overall sentiment is still bearish on the euro and the recovery was merely needed relief on Bernanke’s remarks that the Federal Reserve is ready to take all measures needed to support the economy. The euro in general is still pressured by the debt debate especially after the Eurogroup delayed the decision on the next bailout payment for Greece at least till mid November which keeps the absence of concrete decisions a matter of speculation. On Wednesday we expect the jitters to remain with weak services data awaited from the euro area ahead of the ADP from the United States which will enforce the focus on the debt crisis and the slowing global growth and accordingly keep the mixed sentiment evident till the decision from the ECB and the final jobs figures from the U.S. on Friday. Germany starts the day at 07:55 GMT with the final PMI Services estimate which is expected unrevised contraction at 50.3. The euro area is set to release the final PMI Services estimate at 08:00 GMT which is expected with an unrevised contraction at 49.1 while the Composite PMI is expected steady as well at 49.2. The Retail Sales Index for August follow at 09:00 GMT and expected with 0.3% drop following a rise of 0.2% the previous month and on the year to fall 0.7% after a drop of 0.2%. The United States will start at 12:15 GMT with the ADP Employment Change for September which is expected with 75 thousand new jobs following 91 thousand the previous month. At 14:00 GMT the ISM Services for September is due and expected to slow to 53.0 from 53.3.

AUD/USD Technical Analysis for October 5, 2011

AUD/USDfell on Tuesday, retesting the 0.9350 level before bouncing in the later hours of the session. The pair is now sitting on a massive support area, and could very well bounce at this point in time. The Aussie is very sensitive to global risk and commodity pricing, so the longer-term direction of this pair seems to be down. Because of this, we like selling rallies at this point and will aggressively do so when we see weakness at higher levels. The 0.90 is likely to be supportive as well, so we would prefer to see a bounce from here to sell from while giving us more room to manoeuvre to the downside. We won’t buy this pair as the news flow has been so negative for the global economy lately, it could fall apart at any moment.

AUD/USD Daily Fundamental Analysis for October 5, 2011

The AUD/USD pair dropped further to reach its lowest level in more than a year after the Reserve Bank of Australia kept the interest rate steady at 4.75%, while the central bank’s statement was bearish on aussie. The RBA’s Governor Glenn Stevens indicated that the bank is ready to lower the interest rate during the upcoming period, as inflation pressure retreated which gives the policy makers the opportunity to support the economic recovery. The inflation outlook for the RBA drove Aussie down against greenback and other major currencies, where investors increased demand for the US dollar as a safe haven and abandoned the Australian dollar and other higher-yielding assets. On Wednesday at 22:30 GMT (Tuesday), the Australian economy will release the AiG Performance of Service Index for September, which had a previous reading of 52.1. At 00:30 GMT, Australia will release the seasonally adjusted Retail Sales for August, where the previous reading was 0.5%. The U.S. economy will release the ADP employment change for August at 12:15 GMT, where it’s expected to come at 75 thousands from the previous reading of 91 thousands. The U.S. ISM Non-Manufacturing Composite for September will be released at 14:00 GMT, where it’s expected to come at 52.7 from the prior reading of 53.3.

EUR/CHF Technical Analysis for October 5, 2011

EUR/CHF rose on Tuesday as traders reacted to the rumours of impending action by the EU to shore up banks, and create a buffer of sorts for them. The market even ignored a three-tier cut in the rating of Italian credit by Moody’s, which was surprising to many. We have been saying this pair cannot be sold as the Swiss National Bank is willing to intervene, and that it would be a great long-term buy if the EU got the situation under control in that area. The situation is still highly murky, but the reaction to the rumour shows what could happen. We are still waiting, but even more determined to buy when the final solution finally gets here.

EUR/CHF Daily Fundamental Analysis for October 5, 2011

The EUR/CHF moved violently to the upside on Tuesday which was surprising to investors compared to the tight trading range that the pair has been trading within in the past period. The overall sentiment for the euro remains weak and especially after the euro area finance ministers failed to offer any breakthrough in talks or provide concrete view to what is next and only delayed a decision on Greece till November. We saw the euro gain on a relief move as Bernanke assured readiness to act which eased the pressure and also on new reports saying that Belgium and France are ready to support Dexia which also eased the woes. Still the upside move was not supported by a strong fundamental reason and some say the SNB was pressuring the pair to the upside again which extended the gains for the pair and more talk on the matter might be seen on Wednesday as investors assess the outlook for the pair. The euro area is set to release the final PMI Services estimate at 08:00 GMT which is expected with an unrevised contraction at 49.1 while the Composite PMI is expected steady as well at 49.2. The Retail Sales Index for August follow at 09:00 GMT and expected with 0.3% drop following a rise of 0.2% the previous month and on the year to fall 0.7% after a drop of 0.2%.

NZD/USD Technical Analysis for October 5, 2011

NZD/USDbounced a bit during the Tuesday session as the market bounced from an oversold condition. The pair is still decidedly weak, and the global commodity markets should continue to add to the pressure as they fall over the long run. The pair is a “sell only” pair at this point, and we like selling the rallies as they come. Buying isn’t possible as the global risk environment is far too dangerous at the moment to buy riskier currencies like the Kiwi Dollar. We see this bounce as a “dead cat bounce” form the 0.75 and nothing more.

NZD/USD Daily Fundamental Analysis for October 5, 2011

The NZD/USD pair dropped to its lowest level in more than six months, as the greenback continues its upside wave against Kiwi and other higher-yielding currencies amid the risk aversion seen in the market. The current market sentiment supports further losses for the NZD/USD pair, where investors abandon all risky assets and shift their investments to safer assets such as the US dollar and the yen. The EU debt crisis and the slowdown in the U.S. economy are fueling fears regarding the global economic outlook, which reduced demand for the higher yielding currencies. The U.S. economy will release the ADP employment change for August at 12:15 GMT, where it’s expected to come at 75 thousands from the previous reading of 91 thousands. The U.S. ISM Non-Manufacturing Composite for September will be released at 14:00 GMT, where it’s expected to come at 52.7 from the prior reading of 53.3.

USD/JPY Technical Analysis for October 5, 2011

USD/JPYdidn’t move mush on Tuesday, but this is normal for this pair recently as the Bank of Japan is threatening to intervene if the pair falls too far, and the USD is still considered a second-class citizen in comparison to the Yen. The pair continues to be a scalping market, with the preferred route being buying from the 76 handle and aiming for about 50 pips. The selling of this pair isn’t recommended as the Japanese could intervene if threatened with Yen appreciation.

USD/JPY Daily Fundamental Analysis for October 5, 2011

The USD/JPY pair traded in a narrow range early Tuesday near its highest level in 2 days, as risk aversion drove investors to abandon higher-yielding currencies and shift to safer assets. On the other hand, the current appreciation in the Japanese currencies increased concerns of another intervention from the Bank of Japan, as the higher yen hurt the Japanese economic recovery. Expectations signal further losses for the USD/JPY pair during the coming period, as jitters spread all over the financial market are fueling demand for the Japanese yen as a safe haven which keeps the pair biased to the downside. The U.S. economy will release the ADP employment change for August at 12:15 GMT, where it’s expected to come at 75 thousands from the previous reading of 91 thousands. The U.S. ISM Non-Manufacturing Composite for September will be released at 14:00 GMT, where it’s expected to come at 52.7 from the prior reading of 53.3.

GBP/USD Technical Analysis for October 5, 2011

GBP/USDfell on Tuesday, but managed to bounce in the late hours of the US session to form a perfect shooting star for the daily candle. The pair is certainly oversold, and a bounce from this level isn’t hard to imagine at this point. The buy signal would be a break of the top of the daily shooting star. Of course, if we break the bottom of that candle – this would be very, very bearish at this point. Either way, we prefer selling the cable at this point, and will either sell rallies, or sell the breaking the bottom of the Tuesday shooting star.

GBP/USD Daily Fundamental Analysis for October 5, 2011

On Tuesday, the pair continued its drop for the third day after data showing that construction’s sector expansion eased to 50.1 in September from 52.6 a month earlier, according to PMI gauge, offsetting the improvement seen in manufacturing which showed an expansion of 51.1 from a revised of 49.4 a month earlier, therefore increasing speculations the BoE will expand the APF this week to boost the weak growth trajectory. In general, the jittery sentiment eroded demand on high-yielding currencies after European Finance Chief said the private sector will have a role in Greece’s second bailout which increased worries that European banks will face deepening crisis. Still, there are concerns that Greece may face a default on its debt obligations as the next instalment will probably be postponed till mid-November while the euro area finance minister’s coming meeting on October 13 was cancelled. On Wednesday, eyes will be PMI manufacturing, which will show that the services’ sector expansion cooled down in September to 50.5 from 51.1 a month before. At the same time, 2q GDP final reading is expected to remain unrevised at 0.2% on the quarter and 0.7% on the year. In the U.S., ADP employment change, release at 12:15 GMT, is expected to show a drop in private sector jobs to 75,000 in September from the 91,000 jobs added in August. Thereafter, specifically at 14:00 GMT, ISM non-manufacturing will probably show an ease in expansion to 53.0 in Sep. from 53.3 a month earlier.

USD/CAD Technical Analysis for October 5, 2011

After spending most of the day rising, the USD/CADpair fell hard toward the end of the Tuesday session. The pair formed a perfect shooting star, and it appears that it is ready to pullback. This shouldn’t be too surprising as the market is overbought at this point in time, and that the 1.05 area is acting as resistance isn’t overly surprising either. We see this pullback as just that – a pullback, and not a reason to get heavily short this pair. We think that waiting a couple of days to see a supportive candle is exactly the best way to reenter this pair from the long side.

USD/CAD Daily Fundamental Analysis for October 5, 2011

In line with our projections, the USD/CAD pair extended its gains on Tuesday, as mounting fears among traders that the European debt crisis is worsening continued to weigh down on demand for higher yielding assets, which put the Canadian dollar under huge negative pressure and pushed the USD/CAD pair to the upside, as investors continued to target lower yielding assets including the U.S. dollar. We maintain our bullish projection for the USD/CAD pair, as we expect the pair to extend its gains over the coming period on rising pessimism over the outlook for growth and mounting fears from the EU debt crisis, although we expect to witness high levels of volatility as well. Traders will be following the ADP employment report closely, since it will provide an important hint ahead of Friday’s jobs report. Wednesday October 05: The United States will start at 12:15 GMT with the ADP Employment Change for September which is expected with 75 thousand new jobs following 91 thousand the previous month. At 14:00 GMT the ISM Services for September is due and expected to slow to 53.0 from 53.3.

USD/CHF Technical Analysis for October 5, 2011

USD/CHFrose on Tuesday, but managed to fall later in the session. The resulting candle was a shooting star, and this shows that exhaustion may be setting into this market. With this in mind, the pair looks ready to fall as traders are getting interested in buying other currencies than the USD. The pair still looks very healthy overall, and we see this as a great opportunity to buy this pair at a cheaper price. With the Non-Farm Payroll announcement coming out on Friday – this could be the catalyst to see higher prices after a fall in this pair. We see 0.90 as a potentially supportive area.

USD/CHF Daily Fundamental Analysis for October 5, 2011

On Tuesday, the pair was little changed, showing slight upside tendency, as the negative sentiment in the market, gave some advance to the dollar which recently has become a favourite safe haven amid the latest interventions by the SNB to curb the franc’s runaway. European Finance Chief said the private sector will have a role in Greece’s second bailout which increased worries that European banks will face deepening crisis. Still, there are concerns that Greece may face a default on its debt obligations as the next instalment will probably be postponed till mid-November while the euro area finance minister’s coming meeting on October 13 was cancelled. On Wednesday, eyes will be directed towards U.S. data, amid the absence of news from Switzerland, specifically to ADP employment change, release at 12:15 GMT, which is expected to show a drop in private sector jobs to 75,000 in September from the 91,000 added in August. Thereafter, specifically at 14:00GMT, ISM non-manufacturing will probably show an ease in expansion to 53.0 in Sep. from 53.3 a month earlier.

 

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