Month: November 2010

By GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

For a long time markets had been eagerly awaiting the decision and now the Fed has taken position. Last night it announced that the Fed will purchase $600 billion of Treasuries until end of Q2/2011. Together with the reinvestment of swiftly maturing assets (mainly due to prepayments on mortgages) the total volume of bond purchases may reach $900 billion over that period. And the Fed even did not proclaim that this number is a hard ceiling. Instead, the US central bankers will adjust the volume of asset purchases according to newly available data.
EUR-USD started a roller-coaster ride after the announcement, but in the end the USD came under pressure. And not without reason, even though the Fed had initially announced a volume which was relatively close to the (in this instance difficult to measure) market expectations. The Fed’s announcement that the volume and speed of the purchasing programme will be adjusted if necessary to reach the two targets of price stability and maximum employment might soon turn out to be a bottomless pit. The Fed is likely to finally banish any fears about deflation. But it is far from certain whether further bond purchases will help a recovery of the US economy. So far Ben Bernanke has failed to provide an explanation of how further bond purchases are going to support the economy. Even if the Fed’s measures will hold yields down, yields have been at low levels for quite some time so that it is questionable if the purchases will lead to additional investments. Also the large supply on the housing market is unlikely to be reduced by these measures. Consumer sentiment is therefore expected to remain subdued.
But what is the Fed going to do once it becomes obvious that the economy (which is not in recession but is on a growth path slightly below potential) does not gain momentum and unemployment remains high? Following today’s announcement the Fed would then have to open the flood gates even further. The announcement gives the markets little reason to assume that the Fed would not implement this plan. As a result things are likely to become increasingly uncomfortable for USD and it only seems a matter of time until EUR-USD breaches its recent high at 1.42.

EUR

Nobody expects the ECB to change key rates today or to announce further details about an exit from its unconventional monetary policy. It can nonetheless not be excluded that the EUR will benefit from the subsequent press conference. Compared with the Fed the ECB will once again present itself as a central bank with an eye for the important issues long term. That is not reviving the economy short term but guaranteeing price level stability long term. Admittedly also the ECB decided to buy bonds, and what is worse those of struggling Eurozone members. But there is no doubt that the ECB will end this programme in the foreseeable future, while the Fed still has the foot on the accelerator. In view of this discrepancy EUR-USD might rise further this afternoon

GBP

Another UK data publication surprised on the upside yesterday. Contrary to expectations the PMI for the service sector rose slightly to 53.2 in October. Against the background of better economic data over the past few days it is unlikely that the Bank of England will announce an extension of the asset purchases at today’s meeting. It will however be interesting to see whether the trend towards QE among the members has increased. We will however have to wait for the inflation report next Wednesday as well as the central bank’s meeting minutes the following week for any indications on this issue.

TECHNICAL OUTLOOK

EURUSD BULLISH Rise through 1.4159 triggers another bullish run towards 1.4373. Support is at 1.392.

USDJPY BEARISH Little support below 79.75 till 77.91. Resistance at 81.99

GBPUSD BULLISH Break of 1.6107 has exposed 1.6276 and 1.6458 next. Support comes in at 1.5957.

USDCHF NEUTRAL Breach of 0.9703 exposes 0.9463. Upside capped at 0.9972

AUDUSD BULLISH Momentum is positive; next resistance at 1.0222, measured target. Support at 0.9891 ahead of 0.9542 reaction low.

USDCAD BEARISH Outlook is bearish; the pair targets 0.9981 with scope for 0.9820. Resistance at 1.0156.

EURCHF BULLISH Targets 1.3924 with scope for 1.4041 next. Near-term support at 1.3540

EURGBP NEUTRAL 0.8942 and 0.8652 mark the near-term directional triggers.

EURJPY BULLISH Clearance of 115.68 would expose 116.68 and 119.33 next. Support comes in at 110.66

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

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USD/JPY

Daily graph: http://www.real-forex.com/charts-daily/November2010/JPY_DAILY_041110.JPG

Four sessions ago, a vain breach of the resistance 80.42 occurred. However, the following 3 sessions, also uptrend oriented, were quite weak relative to the previous ones. This point describes a weakening of the bulls relatives to the bears.

Due to this distribution of the power, we anticipate a reversing that may occur before the pair is reaching the resistance of 81.82. This could open the opportunity to go “Short”. The confirmation of the previous assumption should appear on a One-Hour chart of the pair by the identification of a decreasing configuration.

Potential trade

One-Hour graph: http://www.real-forex.com/charts-daily/November2010/JPY_1H_041110.JPG

The required configuration should appear when the support of 80.9 will be crossed downward. Following is one way to catch the trade:

• “Limit” order on “Short” position 10 pips below the support mentioned earlier, meaning 80.80.
• “Stop loss” order on the last high occurred at 81.58.
• 1^st degree for “Take Profit” on the next support, meaning 80.59.

USD/CAD

Daily graph: http://www.real-forex.com/charts-daily/November2010/CAD_DAILY_041110.JPG

During the last session, the pair continued to decrease in a very interesting way. The downtrend started about 3 sessions ago, after a long navigation, and the pair has already broken the support 1.0180.In addition, during the last session, the pair broke the support of 1.006.

Actually, the pair is on its way to the next support which is 0.9979. Its behavior when this support will be reached will determine the future trend and, obviously, the most adapted entry orders:

–       A vain breach of the support may suggest a reversing trend, revealing a new uptrend. The opportunity to go “Long” should be open is that case.

–       If the pair is crossing and breaking the support, keeping the current downtrend, in this case, we suggest waiting for a small technical correction and only then go “Short” with the trend.

Have a nice day!

Real-Forex team

By CountingPips.com

Today’s Important News Releases – November 4, 2010

• Australia retail sales, September
• Switzerland foreign currency reserves, October
• Switzerland consumer price index, October
• Eurozone producer price index, September
• United Kingdom Bank of England interest rate decision
• Eurozone European central bank interest rate decision
• United States weekly initial jobless claims
• Canada Ivey purchasing managers index, October

See full Calendar here

The introduction to Forex is to understand the foreign exchange market or the Forex as it is commonly called is the place where currencies of the different countries are traded in. This kind of trading is important as the exchange in currency is important for any kind of trade that is, selling or buying of goods or services, is carried out. For example, if you are living in the USA but you want to buy some French wine, either you personally or the company that sells you the wine in the USA would have to pay the French wine company in Euros, and thus an exchange in currency would have to be made for the payment to take place. This means that the USA dollars would have to be exchanged into its equivalent value in Euros. Similarly, if you are an American tourist in Italy, you cannot pay dollars in a restaurant in Rome, as that is not the currency the locals deal with.  A pip calculator becomes essential in cases like these. Therefore even as a traveler, you would have to exchange your currency into the equivalent of the currency of the country you are visiting. This need for currency exchanges is the major reason why the Forex has now become one of the largest liquid financial markets in the world over mainly because the need to Calculate Forex Margin The great thing that sets the Forex apart from the other markets such as the stock exchange is that, the transactions do not take place in a particular area or spot, it happens over the counter. This takes place electronically, via computer networks around the world and is therefore much easier to access for all kinds of traders. The market is therefore open throughout the day and all through the week and exchanges is carried out in all the different currencies that exist and also across all the different time zones; this causes the market to remain active all round the clock and is very susceptible to change. For these there are forex brokers who are available.

There are three methods that a bank or any other financial organization can employ to carry out exchanges in the Forex. The Spot market, the Futures market and the Forwards market. You can also have a Live Trading Account which can be accessed online.

The Spot market, put simply is the place where the currencies are exchanged in absolutely current rates of exchange. This current price for exchange depends completely on the economic rates of supply and demand and other similar factors. But the quote given is the precise current price and is susceptible to change. Even though the market is supposed to be present, the settlements in reality take at least two days. The settlement is in cash.

The Forex is in fact now growing larger as a market with each passing year and the need for a derivative for a future OTC has become essential.

http://www.fxcentral.net/

USDJPY moved sideways in a range between 80.30 and 81.98. The price action in the trading range is more likely consolidation of downtrend from 85.92, another fall towards 79.75 (1995 low) is expected. Support is at 80.30, a breakdown below this level could signal resumption of downtrend. Key resistance is at 81.98, only break above this level could indicate that the fall from 85.92 is complete.

Daily Forex Reports

By FxNewsChina – The World Bank today released its latest quarterly update on the Chinese economy and said that China’s GDP will likely exceed the previous bank estimates. China’s GDP registered a 10.6% growth rate in the first half of the 2010 and was followed by a 9.6% growth rate in the third quarter, despite diminishing effects and the phasing out of the government stimulus program.

Looking forward for the Chinese economy, Louis Kuijs, Senior Economist and main author of the quarterly report says, “We have edged up our GDP growth projection for 2010 to 10 percent after the third quarter data. We see growth at 8.7 percent in 2011 and easing somewhat further in the medium term.”

The previous quarterly update published in June had projected a GDP rise of 9.5% for all of 2010 and an 8.5% advance for 2011.

Exports continued to be a main driver of the Chinese growth as merchandise export volumes are higher by 9.6% in the third quarter from the 2008 third quarter level, according to the report.

Other Highlights:

• The bank’s inflation outlook sees the inflation rate above 3% for the time being as food prices push higher.

• The trade surplus with the US is trending higher again after falling in 2009 as government stimulus fades and imports decline

• The yuan has gained by 2.3% against the US dollar from June to November

• Net inflow of foreign exchange to China in the third quarter of 2010 amounted to US $114 billion, helped out by the trade surplus

Read the entire report from the World Bank here (PDF)

Although the markets have performed well during the Obama administration, the president cannot claim all the credit, so says Per Hansen, Equities Analyst at Jyske markets, who adds that yesterday’s midterm elections shouldn’t have a signigifcant long term impact on the stock markets.

Just ahead of the market opening the day after the election, Hansen talks about what to expect and which other news stories will be relevant for equities markets in the coming days.

By http://en.jyskebank.tv/

The Australian dollar is finally at par with the greenback! Just today, the AUDUSD pair touched and even moved above the magical 1.0000 number after breaking out from a symmetrical triangle. Back in October 4, I asked whether the AUDUSD had the legs to reach for the parity level (kindly see it here). At that time, the pair had just broken out from a rare broadening right triangle formation. The pair then continued to move north before moving sideways for almost two weeks. The inevitable occurred and luckily for the Aussie bulls, the pair broke out to the upside. At present, the Aussie is now trading at just above 1.0000, it’s first time in history to be at that level. And based on my technical estimate (gauged by projecting the height of the smaller triangle upward), it could at least reach 1.0150. A more promising target would be as high as 1.0700 which is measured based on the height of the larger broadening pattern.

Earlier today, the Reserve Bank of Australia (RBA) surprisingly hiked its interest rate to 4.75% from 4.50% which effectively pushed the Aussie towards uncharted territory against the US dollar. The central bank sees inflation to rise at a faster pace over the medium term. One tool to prevent a rapid rise in prices is of course to increase the market’s interest rates. The increase makes the Aussie more appealing to investors because of its higher yields compared to the meager 0.25% of the greenback. More robust Australian economy, higher RBA interest rates, talks of additional QE measures by the Fed, plus the overall negative sentiment on the dollar have been working well for the AUDUSD, making it the best candidate for carry trade as of the moment. If these factors remain then the demand for the pair would more likely increase as well.

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