Forex Technical and Fundamental Analysis for October 7, 2011

EUR/USD Technical Analysis for October 7, 2011

 

EUR/USD rose on Thursday, showing a continued “risk on” attitude over the last few days. The ECB didn’t do much for the session, even though there was the much anticipated last meeting of Jean-Claude Trichet. The market continues to react to possible coordinated recapitalization efforts by the various EU countries, but in reality the market is still in a bearish mode overall. It will only take a bit of bad news to send this pair back down. With Non-Farm Payroll coming out later today, it very well could. We still favour selling rallies at this point, but any new positions will have to wait until we see the reaction to the NFP numbers out of America.

EUR/USD Daily Fundamental Analysis for October 7, 2011

The EUR/USD fluctuated heavily on Thursday with all eyes on the ECB which indeed delivered new measures to ease the market strain. The pair attempted to recover on the action from the ECB to contain the crisis and the speculation that governments are preparing more measures to contain the crisis, including banks recapitalization to prevent a financial meltdown. The ECB held rates steady but introduced a 40 billion euro program to purchase covered bonds starting next month and also announced two long term liquidity operations of 12 and 13 months alongside prolonging the regular refinancing operations at least until July 2012. Still though, the downside pressures remain as the ECB did discuss cutting rates and also said that the downside pressures on growth have intensified with high uncertainty. Investors are still worried that the crisis in the euro area is deepening and the speculation of the next move will not be sufficient to shore confidence and more will be needed from leaders soon. On Friday the focus will certainly turn from debt to growth as investors await the US jobs report and hope to see any improvement after the sector stagnated in August. The better the jobs added the more support it will be to jittery markets that are focused on fears of recession. German Industrial Production for August is due at 10:00 GMT and expected with 1.5% drop following 4.0% gain and on the year to rise 5.6% following 10.1%. From the United States the eyes will be on the infamous jobs report for September at 12:30 GMT. The nonfarm payrolls are expected to show 50 thousand created jobs after remaining unchanged in August, while the unemployment rate is expected to hold steady at 9.1%. The whole sales inventories are due at 14:00 GMT for August and expected to rise by 0.6% after 0.8%. The week will end with the August Consumer Credit at 19:00 GMT and expected to slow to $8.0 billion from $11.965 billion the previous month. AUD/USD Technical Analysis for October 7, 2011

 

AUD/USD continued to rise on Thursday as the global markets continue the “risk on” move that they have been in over the last few days. The charts do suggest that we may still be a bit oversold, and this move up is more than likely a short covering rally rather than a serious attempt at bulls to rally this pair with any real conviction. We see the 0.98 to 1.0000 area as potential resistance, and with the Non-Farm Payroll report coming out today, we think that exhaustion could set in on this pair. If we get a bad number – this pair could fall dramatically. Either way, we prefer selling on signs of weakness at this point.

AUD/USD Daily Fundamental Analysis for October 7, 2011

The Australian dollar (Aussie) declined against the US currency after the International Monetary Fund (IMF) cut its forecast for the global economic recovery as the European leaders fail to contain the debt crisis. Furthermore, the debt crisis in Europe escalated after Moody’s Investor Service issued yet another downgrade for an indebted European nation, moving Italy’s rating three notches lower to A2 from Aa2. Aussie will remain under pressure as traders move into lower yielding ‘haven’ assets like the dollar after the news indicated that the German support for the European bailouts is dwindling. On Friday, all eyes will be focused on the jobs report from the United States as the development in the labour market can either ease the woes over the rapid downturn in the economy or increase them. The United States of America jobs report is due at 12:30 GMT, the non-farm payrolls are expected to show that the U.S. economy added 73 thousand jobs during the month of September after it stagnated in August. The unemployment rate during the month of September is expected to remain at 9.1%. EUR/CHF Technical Analysis for October 7, 2011

 

EUR/CHF rose on Thursday as the “risk on” trade continued to pick up a little steam. It should be noted however that the day candle formed a shooting star. The belief that all is well in the EU is probably a little far-fetched, so a pullback wouldn’t be surprising at all. The Swiss National Bank has set a floor in on this pair at 1.20, so a pullback to that level makes sense. We like selling on a break below the Thursday low, but only down to 1.20 or so if it happens. Overall, we would prefer to buy this pair, but only when the EU can get the debt issues under control.

EUR/CHF Daily Fundamental Analysis for October 7, 2011

The EUR/CHF fluctuated heavily on Thursday with the heavy data and the ECB rate decision where the bank stepped up the efforts to contain the confidence crisis in the euro area and ensure financial sectors stability. The ECB kept rates steady and introduced new 12 month and 13 month loans while extending the regular refinancing operations at least until July 2012. The bank also announced 40 billion euros for covered bond purchases that will start next month in another effort to provide banks with loans. Investors remain wary over the outlook for the euro area though the tension is starting to ease with the ECB taking action and governments arranging their cards to shelter the banking sector from a catastrophic meltdown. The market though remained downbeat after Trichet assured the downside risks to growth intensified and the outlook remains highly uncertain. The swiss franc instantly weakened in the European session on Thursday earlier after the SNB said on their website that the foreign currency reserves rallied to a record 282.4 billion francs at the end of September from 253.4 billion. The rise in reserves confirms the bank’s commitment to their pledge to defend the new set 1.20 floor for the EUR/CHF and also halt its rapid appreciation against majors to protect the export economy and stave off deflation pressures. The high reserves is not only an immediate pressure on the euro yet it assures that the bullish side for the pair is the only open way as the pair is likely to stay well held above the new set floor. On Friday the sentiment will remain jittery with eyes on the sentiment and the U.S. infamous jobs report and with the end of the week we surely will not exclude the volatility. The Swiss economy will end the week with labour figures for September due at 05:45 GMT where the unemployment rate is expected to hold steady in seasonally adjusted terms at 3.0%. NZD/USD Technical Analysis for October 7, 2011

 

NZD/USD rallied on Thursday as the markets are finally starting to calm down after the massive bearish move we have seen over the last couple of weeks. The pair is highly sensitive to global markets and the risk profile at the time, as well as commodities. The commodity markets are also starting to rally on a bounce, so this pair rising isn’t a surprise. However, the recent move down was simply too strong to believe that this pair will rally for any significant length of time. We are waiting to see an exhaustive candle in the next 200 pips or so to sell this pair. We won’t buy as there are too many potential headwinds out there at the moment.

NZD/USD Daily Fundamental Analysis for October 7, 2011

New Zealand dollar, nicknamed Kiwi, held at a two-day high as the sentiment slightly improved on expectations the EU will take steps to help banks and the jobs report from the U.S. might be better than expected. Kiwi has continues the overall downside downside trend versus the US dollar as the global economic growth falters at the time the European crisis worsens, damping the demand for higher-yielding investments. The IMF also cut its world growth forecast to 4 per cent in 2011 and 2012, compared with June forecasts of 4.3 per cent this year and 4.5 per cent next year, reducing investors’ confidence. On Friday, the New Zealand will end the week without releasing any fundamental data, as eyes will be focused on the jobs report from the United States as the development in the labour market can either ease the woes over the rapid downturn in the economy or increase them. The United States of America jobs report is due at 12:30 GMT, the non-farm payrolls are expected to show that the U.S. economy added 73 thousand jobs during the month of September after it stagnated in August. The unemployment rate during the month of September is expected to remain at 9.1%. USD/JPY Technical Analysis for October 7, 2011

 

USD/JPY continued its back and forth trading between the 76 and 77.50 areas on Thursday. The pair is stuck in this range, and has been very good to scalpers who have absolutely cleaned up in this tight market. Looking ahead, the Bank of Japan will undoubtedly buy this pair if it falls too fast, but the pressure to the downside is significant. Because of this, we continue to buy close to the 76 handle, and take our profit after 40 -50 pips.

USD/JPY Daily Fundamental Analysis for October 7, 2011

The USD/JPY pair dropped for the second straight day, as the Japanese yen soared against most of its major counterparts, amid expectations the ECB will take more measures to ease market strain. The higher-yielding currencies retreated due to the risk aversion and the uncertainty regarding the growth outlook, pushing the greenback to record more gains against them. On the other hand, the USD/JPY pair traded into its trading range, before the BOJ announce its rate decision and the bank statement, which could affect the yen’s movements. On Friday the Bank of Japan will announce its rate decision for the October, where it’s expected that the central bank will keep the rate unchanged at its lowest level between 0.0% and 0.10%. At 05:00 GMT, Japan will issue the preliminary reading for Coincident Index for August, where the previous reading was 107.1. The preliminary reading for Leading Index for August will be up at the same time, with a prior reading of 104.6. The United States of America will issue a number of economic data on Friday, starting with the jobs report at 12:30 GMT, the non-farm payrolls are expected to show that the U.S. economy added 73 thousand jobs during the month of September after it stagnated in August. The unemployment rate during the month of September is expected to remain at 9.1%. GBP/USD Technical Analysis for October 7, 2011

 

GBP/USD fell on Thursday as the Bank of England announced it was expanding its bond buying program, which of course is a form of quantitative easing. However, the pair found its footing late in the session and formed a hammer at the end of the day. This suggests a bounce is still in the offering, and with the Non-Farm Payroll report coming out later today, we think this pair could move strongly in reaction. The pair is a massive sell if we break the low of the Thursday session, and if it breaks the high – it becomes a short-term buy.

GBP/USD Daily Fundamental Analysis for October 7, 2011

On Thursday, the pair showed a drop after the announcement of the BoE monetary decision for October which included holding interest rate at 0.50% while unexpectedly adding 75 billion pounds to the APF to 275 billion pounds.

The increase of the newly printed pounds used to boost growth will result in the appreciation of the currency, thereby causing investors to sell it. Also, expanding the non-standard measures for the first time since November 2009 provided a vivid sign that the economy is in real risk and needs incentives otherwise may experience another recession.

On the other hand, concerns increased that inflation will probably increase in the coming period, reaching very risky level and therefore reducing Briton’s purchasing power and household consumption further.

Still, there are jitters in markets that he sluggish global growth pace, triggered by the escalating European debt woes, may continue, especially as central banks returned back to stimulus to avert relapsing into another recession. The tensions enhanced demand on the dollar as refuge.

The ECB said on Thursday will provide banks with additional longer-term liquidity while begins its covered bond purchases.

On Friday the week ends with the release of producer prices index for theU.K., due at 08:30 GMT. The output gauge for the year ending September is predicted to show a slight rise to 6.2% from the previous reading of 6.1%, while the input measure will record 17.2% increase in the year ended Sep. compared with the prior 16.2% advance.

In fact, the report may add to tensions if it showed further rise in inflation before the release of CPI for September, amid expectations from the bank that the rate would climb to 5% this year.

For theU.S., the main highlight of the week will be out at 12:30 GMT; the jobs report is predicted to show that theU.S.economy added 50,000 jobs in September compared with the zero jobs added in August, according to median forecasts.

The jobs report is expected to have a remarkable impact on the pair as it follows a series of data released this week showing an improvement in theU.S.economy with the end of the third quarter.

USD/CAD Technical Analysis for October 7, 2011

 

USD/CAD continued to fall on Thursday as traders are willing to take on a bit more risk over the last several sessions. The pair is highly correlated to the oil markets, and the announcement of a larger than expected drawdown on Wednesday sent this pair in the downward path. However, the recent impulsive move to the upside suggests that we will eventually see a larger move to the upside. Any bad economic news will more than likely send this pair higher, and if the Non-Farm Payroll number out of America disappoints, this pair will rise as Canada is so heavily dependent on the US as an export market.

USD/CAD Daily Fundamental Analysis for October 7, 2011

The USD/CAD pair rose on Thursday, as volatility continued to dominate markets after the rate decisions from Europe, where the Bank of England surprised markets by announcing an expansion to the asset purchases program, while the ECB announced more easing measures, however, both central banks left the benchmark interest rates unchanged. Meanwhile, data from Canada proved to be mixed, as building permits fell sharply opposite to expectations, while the Ivey PMI slowed in September but was better than median estimates. Moreover, the jobless claims index was released from the United States showing an increase in jobless claims but better than median estimates. Nonetheless, 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 eyeing the jobs reports from both Canada and the United States on Friday. Friday October 07: Canada will release the jobs report for September at 11:00 GMT, where the net change in employment is expected to rise by 15.0K, compared with the prior drop of 5.5 thousand, while unemployment is expected to remain unchanged at 7.3%. From the United States the eyes will be on the infamous jobs report for September at 12:30 GMT. The nonfarm payrolls are expected to show 58 thousand created jobs after remaining unchanged in August, while the unemployment rate is expected to hold steady at 9.1%. The whole sales inventories are due at 14:00 GMT for August and expected to rise by 0.6% after 0.8%. The week will end with the August Consumer Credit at 19:00 GMT and expected to slow to $8.0 billion from $11.965 billion the previous month. USD/CHF Technical Analysis for October 7, 2011

 

USD/CHF rose on Thursday, but formed a shooting star at the end of the session as the move faded a bit. The pair looks a little overbought at these levels, and a pullback isn’t necessarily a bad thing at this point. We still believe in the upward momentum of this pair, but no market moves in one direction forever, so we are welcoming a potential pullback as a chance to buy at a cheaper price, and expect the 0.90 level to be very supportive.

USD/CHF Daily Fundamental Analysis for October 7, 2011

On Thursday, the pair showed an upside tendency after a Swiss report showed that the SNB reserves climbed to 282.4 billion francs at the end of September compared with 253.4 billion francs the previous month, raising speculations the bank will resume its interventions to curb the franc’s advance after putting a ceiling of 1.20 against the euro last month. Increasing the supply of the franc by the SNB cause the Alpine currency to depreciate, thereby pushing the pair to the upside. Still, there are jitters in markets that he sluggish global growth pace, triggered by the escalating European debt woes, may continue, especially as central banks returned back to stimulus to avert relapsing into another recession. The tensions enhanced demand on the dollar as refuge. The BoE unexpectedly added 75 billion pounds to the APF while the ECB said will provide banks with additional longer-term liquidity while begins its covered bond purchases. On Friday the week ends with the release of unemployment data for the Swiss economy, at 05:45 GMT, where the reading is predicted to linger at 2.8% in September while the seasonally adjusted reading will also remain at 3.0%. For theU.S., the main highlight of the week will be out at 12:30 GMT; the jobs report is predicted to show that theU.S.economy added 50,000 jobs in September compared with the zero jobs added in August, according to median forecasts. The jobs report is expected to have a remarkable impact on the pair as it follows a series of data released this week showing an improvement in theU.S.economy with the end of the third quarter.  

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