Month: December 2010

The US dollar has been on the decline against the Indian rupee for the second straight day to start the week in the forex markets on Tuesday, according to currency data in afternoon of the US session.

The USD/INR currency pair opened the day near the 45.66 exchange rate level and advanced to an intraday high of 45.81 before turning lower. The pair has decreased from the high to currently trading near the 45.54 level which is just above the low for the day.

The dollar gained ground against the rupee last week to end the week at the 45.73 level. The American currency had declined to a 26-month low at 44.03 on November 5th before rebounding as high as 46.29 on November 26th and has stayed trading in an upward price channel since the November low.

USD/INR Daily Chart – The pair is currently trading right near the 45.50 exchange rate level and below at the 21-day moving average (green line), according to data from Oanda. Previous support level is below at the 45.35 exchange rate.

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FxNewsIndia.com – Indian Rupee Forex News

According to media reports late yesterday, Yahoo (YHOO) is about to layoff as many as 600 to 700 employees. The cuts may be made as soon as today.

In recent days the Chairman of the Fed Ben Bernanke has commented that unless US economic performance improves he may introduce a third round of quantitative easing. This has caused trepidation on the markets that he may unintentionally devalue the dollar in the long term.

However the release of US Retail Sales data this afternoon indicates that Bernanke may not have to pursue this course. For the seventh straight month retail sales have improved – this time rising 0.8% ahead of economic forecasts. In particular strong department sales figures leading up to the Christmas period have buoyed hopes that the US is in course for recovery.

Commentators have noted that spending has increased due to historically low interest rates and low taxes. President Obama’s decision to extend the Bush-era tax cuts might thereby boost spending further into 2011, and could inform Mr. Bernanke’s decision to further the program of QE when he announces the Fed interest rate decision later today.

by Peter Lavelle with foreign currency exchange specialists Pure FX.

Today the currency exchange markets will be watching the US Fed as it announces the latest interest rate and decides whether to intensify its program of quantitative easing. Fed Chairman Ben Bernanke has commented that unless the US shows resilient growth and unemployment goes down he may kick-start the process with QEIII.

In related news President Obama’s bill of tax cuts pass the US Senate yesterday in spite of opposition from some Democrats (who thought the bill too lenient on the rich) and some Republicans (who thought the bill didn’t tackle the US deficit.) The bill is expected to foster job creation in the US and could improve sentiment toward the dollar.

In the UK and Europe meanwhile attention has turned to a new EU bill intended to curb banker bonuses. The new regulations limit bonuses to a multiple of each banker’s basic salary. The concern (or threat depending on who you ask) is that these regulations will encourage an exodus of bankers outside London and Europe when they are implemented next year.

In Ireland for instance this is already causing tension. This morning the Irish government told Allied Irish Bank that it could not pay its bankers an expected €40m in bonuses. This is in part because Allied Irish Bank is due to receive large contributions from the Irish government and lost €1.6bn this quarter. Yet the news can hardly please the Irish banking community.

In economic releases meanwhile this morning the UK Consumer Price Index figures have been released. These measure consumer purchasing power, and have been quite positive. This month CPI increased 0.4% beating market expectations that the Index would increase 0.3%. This is positive for sterling and could add further to optimism about the UK economy.

Furthermore this morning the German ZEW Survey for December has been released measuring investor sentiment in EU finances. These figures have also been positive arriving at 4.3 against market expectations of 3.9. However it is worth noting that investors were more cautious about the current situation in EU and German finances.

By Peter Lavelle with foreign currency exchange specialist Pure FX.

Tension in the EMU at the moment means that every large transaction or sale by a member state is closely watched. This afternoon for instance investor eyes were turned to Spain as the Government there completed a regularly scheduled sale of government bonds to raise capital.

The Spanish Government issued €2.5 billion in bonds in an auction that pretty much went smoothly. This might assure investors that the EMU debt crisis is under control for the moment: in the last day for instance the EURGBP exchange rate has gained to 0.85 cents while the EURUSD rate has almost tipped 1.35. This indicates the common currency is gaining strength.

On the other hand the Spanish Government was forced to pay hugely inflated interest rates on its bonds: 3.45% compared to 2.36% the same time last year. This indicates that investors are still aware that officials inside the EU have not devised a permanent solution to the debt crisis yet. The market expects they will do shortly.

In fact this afternoon the President of the ECB Jean-Claude Trichet has pushed for an expansion of the EFSF rescue fund ahead of a meeting of the European Commission on Friday. The Commission is expected to make the EFSF a permanent mechanism of the monetary union – but the ECB doubts this will receive sufficient funding to be effective.

Doubtless the market will be watching Friday to see what happens.

by Peter Lavelle with foreign currency exchange specialists Pure FX.

By Dan Eduard

Over the last several weeks, the Australian dollar has been able to capitalize on the poor economic situation in the United States and make substantial gains against the USD. Since the beginning of the month, the AUD/USD pair has moved up some 400 pips.

Forexyard traders will be interested to know that the pair may be due for a downward correction. Technical data indicates the cross is currently in overbought territory, meaning bearish movement is likely.

We will be looking at the 8-hour chart for AUD/USD, provided by Forexyard. The technical indicators being used are the Williams Percent Range, Stochastic Slow, and Relative Strength Index.

1. Typically when the Williams Percent Range is over -20, it is a clear indication that the instrument is overbought. Here, we can see the indicator is right around the -5 level, meaning a downward correction may take place.

2. Traders will want to keep a close eye on the Stochastic Slow, as it is currently showing the pair approaching the overbought region. Should the two lines intersect above the 80 level, it can be taken as a clear signal of impending bearish pressure.

3. Finally, the Relative Strength Index is currently right around the 75 level. Anything above 70 is usually taken as a sign that the pair could experience downward movement. Now may be a great time for traders to enter into sell positions at a great entry price, in order to capitalize on the coming trend.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

The dollar continues to trade on a soft note as a variety of investors have found adverse December trading conditions to be no barrier to enter fresh longs, though there is still enough event risk to induce plenty of intra-day volatility. The main focus is on the FOMC later in the day but the Eurozone also has much to clear, including a Spanish bill auction and a confidence vote in Italy, whose result continues to hang in the balance. EURUSD traded overnight in a range of 1.3374-1.3417 and USDJPY 83.38-83.55, largely due to a lack of drivers during the Asia session. In the US, while the recent pick-up in yields may have raised some concerns for the upcoming FOMC meeting, we do not think the Fed will adjust QE2 at the current juncture. Our economists also note that the expectation of a likely larger than expected fiscal package would argue for an unchanged Fed, as the September FOMC minutes cited fiscal policy uncertainty as one reason for lowering FOMC Members’ forecasts. Elsewhere, Moody’s said the recent US tax proposal increases the likelihood of a negative outlook on the US AAA rating over the next two years as the negative effects are likely to outweigh the positive effects of higher growth. Retail sales data is due ahead of the FOMC decision.
EUR

The euro drifted higher during a quiet session with few surprises on the Eurozone front. German officials continued to remain outspoken on the notion of a common Euro Area bond while the ECB announced it completed EUR 2.67bn of bond purchases settled in the previous week to December 10, versus EUR 1.97bn. The increase in the figures was expected given the reported buying the same day as the December 2ECB policy rate decision. Meanwhile, Spain announced it would sell EUR 6bn on Tuesday and Thursday of this week. The press reported that about 2-3bn would consist of the 2020 and 2025 bonds set for Thursday’s auction.
The one item to note was the report that Eurozone central bank sources are considering requesting a rise in capital. Further details were limited but this likely refers to ECB capital subscriptions, which are updated very 5 years and is done according to share of total EU population and EU GDP. This could have been viewed as euro negative but the euro shrugged off the headlines.
The ZEW and IFO releases are due in Germany and investors will be keen to assess whether the country’s economic momentum can be maintained. Also, the Italian Premier Berlusconi faces a no-confidence vote in both chambers of parliament
JPY

BoJ Governor Shirakawa again raised the possibility of further JGB purchases if the economy slows down faster than expected.
Industrial production figures in Japan confirmed a 2% monthly decline (4.3%y/y), while capacity utilization registered a 2.3% decline in October. The data underscore the need for the BoJ to maintain current policy and relative policy differentials.
The BoJ will be closely on watch for any sign of further dovish comments on the part of the Fed as they would need to respond in kind with their own rhetoric or policy to ensure policy gaps stay remain conducive to JPY weakness. The Q4 Tankan survey is the major release this week.
GBP

The Rightmove house price index showed a 3% monthly decline, another soft reading after the prior -3.2%m/m print. Annualised prices were up only 0.4%y/y.
CPI figures are due in the UK and the BoE will be closely watching whether headline prices will remain stubbornly high amid a still-challenging growth outlook. Deputy Governor Charles Bean, who has been fairly reserved in voicing his concerns of late sounded slightly more hawkish than usual, repeating the comments of other members that inflation is likely to persist in the near term.
CAD

BoC Governor Carney again said he is watching the Canadian dollar closely and the risk of a stronger currency on growth is now being partly realized. Carney reiterated the limits of divergence between the US and Canadian economies and also said Canadian household debt levels are unprecedented. He said Canadian banks should not be complacent on lending and this dovetailed with Finance Minister Flaherty’s comment that he would tighten mortgage rules again if needed.

TECHNICAL OUTLOOK
EURCHF 1.2766 support
EURUSD NEUTRAL Following the recovery yesterday, model has turned neutral. Initial resistance at 1.3471, support at 1.3337
USDJPY BULLISH Break of 83.45 exposes 82.34, but broader focus is on the upside with resistance defined at 84.41
GBPUSD NEUTRAL Push through 1.5892 exposes 1.5965. Support at 1.5720
USDCHF BEARISH Decline through 0.9726 opened up the way towards 0.9548. Resistance at 0.9727
AUDUSD BULLISH Break of 0.9965 exposes 1.0031. Support holds at 0.9833, yesterday’s low
USDCAD BEARISH Look for a break below 0.9978/31 support zone for confirmation of bear trend. Resistance at 1.0141
EURCHF BEARISH Break of 1.2933 exposes 1.2766. Resistance at 1.3100
EURGBP BEARISH Sudden recovery cleared 0.8429 exposing 0.8528, but overall focus is on the downside at 0.8335/31 support zone.
EURJPY NEUTRAL Choppy action holding support at 109.57 ahead of 108.35. Resistance at 112.07.

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.

This morning the latest UK Consumer Price Index has revealed an unexpected rise in inflation caused by rising prices for food and clothing.

Inflation rose to 3.3% in October beating market expectations that it would remain stable at 3.2%.

This is good news for sterling on the one hand. The new inflation data all but eliminates the chance that the Bank of England will introduce another round of quantitative easing.

This (QE) is perceived to devalue the pound, meaning that the inflation numbers could foster a stronger pound.

On the back of the inflation figures sterling rose 0.2 cents against the dollar reaching 1.5875.

On the other hand the new CPI numbers point to a rising cost of living for UK consumers.

This could ultimately result in reduced consumer spending as increases in VAT and gas prices are expected shortly too.

By Peter Lavelle with foreign currency exchange specialist Pure FX.

By Anton Eljwizat

With an unusually large number of news events coming from the euro-zone and United States today, forex traders have been in a frenzy to place their bets before the trading day gets underway. Trading during these news events, which typically carry a lot of market volatility, is a fast way to double your forex trading balance. Special attention should be paid to the German Economic Sentiment report at 10:00 GMT, the U.S Retail Sales at 13:30 GMT, and Federal Funds Rate at 19:15 GMT. Will you take advantage of the impending volatility, or sit on the sidelines and miss out?

10:00 GMT- German Economic Sentiment

• It reflects the level of diffusion index based on surveyed German institutional investors and analysts.
• This indicator always leads to extreme market volatility in the major currency pairs.
• If the result turns out to be lower than forecasted, the EUR may record a fairly bearish session in today’s trading.

13:30GMT- US Retail Sales

• It reflects the change in the total value of sales at the retail level.
• The release of the survey typically creates a volatile trading environment, affecting not only the USD pairs but also the value of Crude Oil and Gold.
• A disappointing result could send the EUR/USD above the 1.3500 resistance level

19:15 GMT- U.S Federal Funds Rate
• Forecast shows that the number is expected to stay at 0.25%.
• Heavy volatility is likely to take place at that time
• The impact of the Interest Rate decision may in fact strengthen the USD in the long run.
• Traders should focus their attention on this release, as it is expected to be the highlight of the week for US markets.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

The Federal Reserve is expected to keep its benchmark Interest Rate unchanged near zero today, as traders get ready for a busy news cycle. The Fed Statement is expected to provide an assessment of the current economic condition in the world’s largest economy and more importantly provide an economic outlook. The statement is likely to set the short term direction for the greenback.

Economic News

USD – Dollar Falls Ahead of Heavy News Day

The dollar fell broadly against the other major currencies on Monday; partly on concern that a U.S. tax cut deal could swell the large budget deficit at a time when the Federal Reserve is committed to accommodative monetary policy. By yesterday’s close, the USD fell sharply against the EUR, pushing the oft-traded currency pair to 1.3390. The dollar experienced similar behavior against the GBP and closed at 1.5860.

U.S. trade and budget deficit concerns have traditionally worried investors but they have been overshadowed in recent years by the collapse of the housing market, bad mortgages and their weight on the banking and financial system. Now, as the economy appears to be recovering, investor focus has shifted back to the budget deficit.

Looking ahead to today, all eyes are focused on the U.S. Federal Funds Rate statement scheduled for 19:15 GMT. The overwhelming consensus is that the Fed will hold the federal funds rate steady at near-zero, where the target has been since December 2008. The Fed Statement is expected to provide an assessment of current economic conditions in the world’s largest economy, and more importantly provide an economic outlook. Short term dollar values will likely be decided as a result of the statement.

EUR – EUR Strengthening on all Fronts

The EUR strengthened against most of its major counterparts on Monday as traders cited a more tolerant attitude toward risk after China refrained from raising interest rates. As a result, the 16-nation currency extended its gains against the U.S dollar to rise above $1.34. It is currently trading around 1.3390. The EUR experienced similar behavior against the JPY as the pair rose from 110.65 to 112.75 by days end.

China’s decision not to hike interest rates yet as part of an inflation-fighting program helped risk appetite overall, lifting oil prices and stock futures. Some traders also said hopes the European Union would work toward a permanent fund for supporting troubled countries when it meets this week, was helping the euro recover.

Investors should look for the unusual price volatility to continue in the EUR/USD as the pair attempts to stabilize and find new support and resistance lines. Large price jumps such as these are not common place and present terrific opportunities to take advantage of the price swings for large and profitable gains.

JPY – Yen Experiences Mixed Results against Major Currencies

The JPY finished yesterday’s trading session with mixed results versus the major currencies. The Japanese yen extended gains versus the U.S. dollar on Monday, to finish around 83.45 amid a broad sell off in the greenback. The yen experienced similar behavior against the GBP as the pair fell from 133.04 to 132.30 by days end. The JPY did see bearishness as well, as it lost over 100 pips against The EUR and closed at 111.70.

Today, the movement of the JPY will likely be affected by the release of the Tankan Manufacturing Index. This index is a leading indicator of the country’s economic health, since businesses are more likely to react quickly to changes in the market. A change in their sentiment can be an early signal of future economic activity such as spending, hiring, and investment.

Crude Oil – Crude Oil Prices Continue to Rise

Crude oil rose to the $89 level after China left interest rates unchanged and a report showed the country’s refineries ran at record levels last month, signaling global demand will continue to climb.

Moreover, oil and other commodities denominated in dollars for global trading tend to rise when the U.S. currency falls as they become cheaper for holders of other currencies. A move away from dollar-based pricing of the world’s leading commodity could further weaken the greenback.

Looking ahead, traders are advised to watch carefully the global stock markets and the major economic indicators which will be published from the U.S. and euro-zone in order to predict the next movements in oil prices.

Technical News

EUR/USD

The EUR/USD went increasingly bullish yesterday, and currently stands at the 1.3395 level. The daily chart’s Slow Stochastic predicts this currency cross to rise further today. However, the 4-hour chart’s Stochastic Slow signals that a bearish reversal will take place. Entering the pair when the signs are clearer seems to be the wise choice today.

GBP/USD

The pair currently sits near the upper border of the daily chart’s RSI, suggesting a downward correction may be imminent. The downward direction on the hourly chart’s Momentum Oscillator also supports this notion. When the downwards breach occurs, going short with tight stops appears to be the preferable strategy.

USD/JPY

The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic is providing us with mixed signals. Furthermore, the 4 hour charts are also not providing us with any clear signals. Waiting for a clearer sign on the hourly charts might be a good strategy today.

USD/CHF

The pair recorded heavy bearish behavior yesterday. However, the technical data indicates that this trend may reverse soon. For example, the 4-hour chart’s RSI signals that a bullish reversal is imminent. An upward trend today is also supported by the hourly chart’s RSI. Going long with tight stops may turn out to pay off today.

The Wild Card

CHF/JPY

This pair’s sustained upward movement has finally pushed its price into the over-bought territory on the 8-hour chart’s RSI. Not only that, but there actually appears to be a bearish cross on the Slow Stochastic pointing to an imminent downward correction. Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.