By GCI Forex Research
Fundamental Outlook at 0800 GMT (EDT + 0400)
USD
News of an exchange of fire on the Korean peninsula led to a sudden increase in risk aversion towards the end of the Asia session. The dollar strengthened sharply, in particular against the yen given Japan’s geographical proximity. EURUSD traded 1.3542-1.3634, USDJPY 83.23-83.74. We expect further dollar strength into year-end as dollar bears look to unwind positions. The US data calendar was quiet at the start of the holiday-shortened week, which only heightened market participant scrutiny of Eurozone developments. Minnesota Fed President Kocherlakota, a 2011 FOMC voter, said that he expected QE to have only a “modest” impact. But he nevertheless supported it as growth is “alarmingly” slow and uncertainty in the economy is too high. Upcoming releases include the second estimate of Q3 GDP and the latest FOMC minutes. The minutes will include updated central tendency forecasts. We expect these will show a lower real GDP growth projection than the 3.5%-4.2% central tendency reported at the June meeting.
EUR
Increased political uncertainty in Ireland, coupled with a ratings agency warning of a potential “multi-notch” downgrade continues to weigh on the euro. Irish Prime Minister Cowen said he would not dissolve parliament immediately or step down. But he said it is important for the government to work on passing the budget and finish aid talks. Cowen said should the budget pass on Dec 7, he would dissolve parliament and call for elections in early 2011.
ECB Governing Council Member Liikanan said the euro will survive this crisis and that it is ‘impossible’ for the Eurozone to split. ECB President Trichet said the euro has delivered exactly what was expected and the euro was not at stake. He shares the view that a dollar that is credible among the major currencies of the advanced economies is in the interests of the US. Trichet also said non-standard ECB measures are temporary in nature and that Europe is in a better fiscal position than Japan or the US.
UK Chancellor Osborne reiterated the UK will not be part of a permanent mechanism but would offer bilateral loans to Ireland.
TECHNICAL OUTLOOK
EURUSD focus on 1.3363
EURUSD BEARISH Focus is on 1.3363; break through the level would expose 1.3265. Resistance at 1.3786 ahead of 1.4282.
USDJPY BULLISH Push through 83.99 would expose 85.93. Initial support at 82.40 ahead of 81.66 reaction low.
GBPUSD NEUTRAL Model is neutral; 1.6379 and 1.5840 mark the key near-term directional triggers.
USDCHF BULLISH Following the break of 0.9977, the pair has room for a run towards 1.0183. Near-term support at 0.9829.
AUDUSD BEARISH The pair has support at 0.9652 ahead of 0.9542. Resistance at 0.9954 ahead of 1.0183.
USDCAD BULLISH Sustained break of 1.0380 required to confirm the bull trend. Initial support at 1.0070.
EURCHF NEUTRAL 1.3834 and 1.3229 mark the near term directional triggers.
EURGBP BEARISH Sell-off from 0.8942 found support at 0.8449 ahead of 0.8390. Initial resistance at 0.8638.
EURJPY BULLISH While support at 111.05 holds, require a break through 115.68 to confirm a bull trend.
Forex Daily Market Commentary provided by GCI Financial Ltd.
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