Month: December 2010

Source: ForexYard

A decline in US oil stockpiles by 5.3M barrels led to a steady rise in Crude Oil prices yesterday. As of this morning, the price for a barrel of crude was trading at $90.65. Analysts have forecast a rising price of oil ahead of the holiday season, but recent statements from OPEC seem to make it clear that the oil cartel will do what it can to keep prices below $100 throughout 2011.

Economic News

USD – USD Carrying Bullish Sentiment Ahead of Holiday Weekend

The US dollar has experienced a mixed performance against its primary currency rivals lately. Against the euro and UK pound, the greenback has gained a significant edge, pushing hard against its Atlantic rivals in the face of European debt concerns. However, the buck seems to be losing ground against most of its other counterparts.

The USD/JPY saw sharp losses yesterday as a resurgent yen pushed the pair towards 83.35 from as high as 83.70. The USD/CAD also witnessed a downturn yesterday, sliding towards 1.0125 from 1.0175.

On the positive side for the dollar, anticipation for a positive reading from today’s reports on durable goods orders and home sales may help drive USD values higher ahead of the holiday season. The boost in retail sales volume prior to the Christmas holiday tends to aid the greenback in holding value against its currency rivals until after the year comes to an end.

EUR – EUR Falls Broadly on Persistent Debt Woes

The EUR declined to its lowest level against the Swiss franc for a sixth consecutive day yesterday, with losses expected to continue through 2011 as the euro zone debt crisis weighs. Analysts have shown concern that a failure to produce immediate results on an expanded bailout mechanism during the coming year may cause uncertainty and debt woes to drag the region down further.

At the moment, the EUR/USD has fallen back towards the 1.31 price level. The EUR/AUD also reached the same price, marking a record low for the pair. It appears as if no end is in sight for the bearish Euro-Aussie. Yesterday marked the seventh consecutive day of declines, and the AUD shows no signs of letting up.

With only one mild report on consumer spending expected out of France today, the euro zone should see a relatively mild trading day. France may reveal an increase in spending ahead of the Christmas holiday weekend, but the effect on the 16-nation single currency will most likely be kept to a minimum as the market continues to focus on the safe-haven US dollar and Swiss franc.

JPY – Japan Cuts Export Growth Forecast on Rising Yen

The Japanese yen was on the rise yesterday as Japan slashed export forecasts in anticipation of a sluggish Asian market heading into the New Year. The USD/JPY was trading lower at 83.35 by the middle of the Tokyo trading session. The pair had fallen from as high as 83.70 from the day before.

The sudden breakout of the JPY against its currency rivals put a damper on many Japanese investment firms’ outlook on Japanese growth due to the effect such a currency value would carry on exports.

With a bank holiday taking place in celebration of the Emperor’s birthday, Japanese markets will be fairly quiet today. Traders will want to focus their attention on the American markets today as most market news will emerge from the Western Hemisphere. The greenback will be driving today’s market and traders will want to bear this in mind before taking positions on the yen.

Crude Oil – Oil Prices Climbing Towards $91 a Barrel

A decline in US oil stockpiles by 5.3M barrels led to a steady rise in Crude Oil prices yesterday. As of this morning, the price for a barrel of crude was trading at $90.65. Analysts have forecast a rising price of oil ahead of the holiday season, but recent statements from OPEC seem to make it clear that the oil cartel will do what it can to keep prices below $100 throughout 2011.

The cold winter months in Europe and the United States, coupled with the long flight delays and cancellations due to bad weather, have caused a run-up in heating oil costs and gasoline demand. With a heavy news day expected from the US, traders could see a large amount of USD volatility today affecting oil prices in an unpredictable manner. It’s possible that a resurgent USD could push oil prices back towards $89 a barrel in the short run.

Technical News

EUR/USD

A recent bullish cross on the daily Stochastic (slow) reveals a possible bullish correction heading into today’s trading sessions. The price also appears to be floating deep within the over-sold region on the daily chart’s Williams Percent Range, supporting the bullish notion. Going long with tight stops could be a smart tactic today.

GBP/USD

Most indicators appear to be floating in the neutral territory for this pair, indicative of this pair’s testing the 1.5400 support level. The daily Stochastic (slow) shows what appears to be a bullish cross right on the over-sold line which could indicate an imminent bullish movement. Traders will want to wait for clearer signals today. As of this morning, however, long positions appear favorable.

USD/JPY

The sudden sharp downward movement in the daily Stochastic (slow), RSI, and Williams Percent Range suggests an unnatural movement in the pair, but signals appear to support a continuation of this bearish move. The weekly Stochastic (slow) even shows a fresh bearish cross, suggesting that this pair’s bearishness may have room to run. Going short may be a wise strategy today.

USD/CHF

The price of this pair appears to have recently entered the over-sold region on the daily RSI, suggesting a build-up in bullish pressure. The daily Williams Percent Range indicates the same, supporting the bullish notion. Going long with tight stops might not be a bad idea.

The Wild Card

EUR/AUD

This pair’s bearish run, which began as far back as October 2008, looks to be continuing strongly today, but technical indicators appear to be suggesting a high intensity of bullish pressure building on this pair. The daily and weekly RSI and Williams Percent Range are floating deep within the over-sold region, while the Stochastic (slow) oscillators also show fresh or imminent bullish crosses. Forex traders may have a unique opportunity to catch this pair at a significant pivot point as it possibly turns upward just before the end of 2010.

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The bad news for sterling continues! The number of mortgages approved in November hit a 20 month low according to figures released this morning by the British Bankers Association (BBA.)

Only 29,991 mortgages were approved last month compared to 30,689 in October, and against expectations of 30,250.

The new figures suggest the high street banks remain less than willing to lend to consumers. Following the announcement the GBPEUR exchange rate fell to 1.1732.

by Peter Lavelle with foreign currency exchange specialist Pure FX.

By Forex Signs, Inc.

NZDJPY has formed a bearish trend after yesterday’s price went up to 62.599 but closed at 62.107. Price is consolidating between support level 62.011 and resistance level 62.308, with price testing the resistance level. Sell bias is possible in the nearest term. If price pushes up breaking the resistance level a bullish reversal may happen. If price makes a break below resistance the bearish trend may continue and validate the bias for this pair. RSI (14) shows price is within the neutral zone, suggesting the bearish trend may sustain its momentum.

Alligator Feeding on USDCHF’s Bearish Trend

Since the double top reversal pattern of USDCHF pair noted last week, the pair has been continuously striding down. At the opening of today’s session, the price level opened at 0.9580. The initial price is not the pair’s resistance level. Seven candle sticks after at H1 chart, the pair had a bearish breakout. The fall went further down as the following candle stick tries to create new support level at 0.9542. In the previous trade, an Elliot wave was perceived at H1 chart. Before the trade ended yesterday, the price level had a reversal which only reached 50 percent of wave iii using the Fibonacci retracement. Today, if Elliot wave will be followed, at the time of writing, the pair is at wave i. Chances are, the trend is still pursuing a bearish market. For three days now, the %R (14) is lingering at an oversold level. It tried to go away but only reached values between -60 and -50. The fluctuating increases are most likely to be corrections only. However, once the signal touches a little above -50, there is a slight chance of a bullish reversal. To further test the downward trend, the Alligator indicator strongly indicates a sell activity as the lips of the gator is placed under its teeth. The distances of each part are significant and there are no clues that the gator will sleep at any time today.

Recent Quake Weakens Kiwi

The Kiwi is possibly looking at a downward trend against US dollar as reports show that New Zealand is experiencing a slow economic growth. The stall in their economy is due to the lagging of their housing and manufacturing sector. The lagging began when the nation’s worst earthquake in eight decades occurred last September 4. The quake measured a magnitude 7 and it shook Christchurch city. It is only now that the aftermath is felt since as indicators for the third quarter were released.

Further, the sluggish growth adds to the case for central bank Governor Alan Bollard to keep interest rates unchanged to revitalize consumer confidence from a 17-month low and shore up housing demand. As a result, the Kiwi is being pushed further down. Economists say that New Zealand’s currency might show more weakness next year.

However, the NZD can possibly experience an increase if ever something market-moving happens to Australia and Japan. If something negative happens, traders will most likely consider NZD as Asia’s currency safe haven; similar with what happened to the Swissie.

In conclusion, the news scattered today indicates that the Kiwi is likely to depreciate. The recommendation is quite strong as economists are also stating likewise.

About the Author

Forex Signs, Inc., Founded in 2006 in Wall Street, New York City, FSI relentlessly strives to be the premier Forex brokerage company in the industry by providing exclusive and unmatched trading and investment related services while constantly developing innovative solutions that cater to the vast requirements of both individual and institutional market participants.

USDJPY’s fall from 84.49 extended further to as low as 83.37. Deeper decline is still possible later today and next target would be at 83.00 area. However, the next cycle bottom nearing, a break above 83.90 key resistance will indicate that the downward move has completed, then the following uptrend could bring price back to 85.00 area.

Daily Forex Forecast

American Airlines will no longer sell its flights on travel website Orbitz (OWW). The move came after a judge in Illinois lifted a restraining order that prevented American from pulling its flights from the site.

Crude oil has risen consistently since December 15, reaching as high as $90.70 a barrel today. Crude has gone up almost 400 pips in the last week alone.

Crude oil prices are rising as demand for gasoline in the U.S. increased by 1.8% over the past 4 weeks compared to a year earlier, averaging 9.2 million barrels a day. In addition, crude prices are rising on speculation that the U.S. economy is strengthening. The rising Standard & Poor’s 500 Index is trading in levels not seen since 2008, also boosting crude prices up. The current sentiment in the market is that the U.S. economy, unlike the European economies, has seen the worst of the economic crisis, and that a quick recovery is taking place. This is supporting the data the demand for gasoline in the U.S., the world’s largest energy consumer, will increase further in 2011.

U.S. Crude Oil Inventories

The weekly inventory report showed a higher-than-expected drop in crude oil stockpiles, said the Energy Information Administration. The number of barrels of crude oil held in inventory by commercial firms during the past week fell by 5.3M barrels as opposed to the previous week, failing to reach expectations for a 1.1M decline.

To sum up, the impact of rising demand on the one hand, and dropping supplies on the other, will likely boost crude oil prices further in the next week. I won’t be surprised if crude oil will test $100 a barrel before the end of 2010.

Microsoft (MSFT) is poised to unveil a version of its Windows computer operating system that runs on ARM Holdings (ARMH) technology, according to Bloomberg News. The companies will debut the new product at the Consumer Electronics Show in Las Vegas in January, on battery-powered devices like tablet computers and other handheld devices, Bloomberg reported.

Prechter and Kendall’s “All the Same Market” Analysis Shows how Diversification Can’t Protect You from Correlated Risk

By Elliott Wave International

A dear friend of mine wants to celebrate an important health milestone by going skydiving with friends. She feels happy and healthy and excited. She wants to do something very thrilling to celebrate.

I’m going to help my friend celebrate, by way of something very mundane: I intend to photograph the event from the ground. Of course I’m excited to be there, and I understand my friend’s motivation — it’s just that I am not a thrill seeker (especially when it comes to heights)!

Similarly, I don’t take big risks with my investments. I’m sure it’s a thrill to make a million, but the risk of losing all my capital is too terrifying for me to stomach.

When I started to research my investment choices, the idea of “portfolio diversification” made a lot of sense to me. All of the “experts” said it’s the key to reducing risk. It seemed safe in the same way that ropes and pulleys could really help a novice enjoy rock climbing or the trapeze.

But then I came across this gem of investing wisdom, written in terms that I understood on a visceral level:

Recommending diversification so that novices can reduce risk is like recommending that novice skydivers strap a pillow to their backsides to “reduce risk.” Wouldn’t it be more helpful to advise them to avoid skydiving until they have learned all about it? Novices should not be investing; they should be saving, which means acting to protect their principal, not to generate a return when they don’t know how.

The Elliott Wave Theorist (April 29, 1994)

I can appreciate the metaphor.

What fascinates me even more is how this contrary view of diversification is magnified when you consider how markets can correlate.

In Conquer the Crash, Robert Prechter and Pete Kendall first put forth their “All the Same Market” hypothesis, stating that in the Great Asset Mania and its bear market aftermath, all markets “move up and down more or less together…as liquidity expands and contracts.”

Consider, for instance, the tried and increasingly debilitating strategy of diversification. With the market smash extending across every investment front but cash, one might think that this concept would at least be challenged by now. But it remains a virtually uncontested truism among market advisors and their followers.

The Elliott Wave Financial Forecast (Oct 31, 2008)

The first edition of Conquer the Crash published in 2002; since then, our analysts have produced a multitude of chart-based evidence to demonstrate the coordinated trends across diverse financial markets.

Ready to turn in your pillow?

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By CountingPips.com

The U.S. economy expanded in the third quarter of 2010 at a slightly quicker pace than previously reported, according to a release by the U.S. Commerce Department. The third government estimate showed that the U.S. Gross Domestic Product grew on an annualized basis by 2.6 percent in the July to September quarter following a real 1.7 percent growth rate in the second quarter and a 3.7 percent gain in the first quarter.

The previous estimate for the third quarter had shown GDP growth by 2.5 percent. This marks the fifth consecutive quarter of U.S. economic growth after the GDP had fallen for four straight quarters over the second half of 2008 and the first half of 2009.

The latest data failed to surpass market forecasts that were expecting GDP growth to be revised to 2.8 percent for the quarter.

By GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

The dollar lost some ground to the euro during the Asia session, but was largely range-bound against the rest of its G10 peers. EURUSD traded 1.3074-1.3143, USDJPY 83.71-83.91. There were no data releases in the US, and economic data published elsewhere were second-tier. The S&P 500 closed up +0.6%, but Asian stocks are marginally weaker at the time of writing. Upcoming data for the US includes the third estimate of Q3 GDP and existing home sales. Our US economists expect Q3 GDP to be revised slightly higher to +2.8% q/q annualized from +2.5% previously. US data has generally improved since the summer, and an upward revision to GDP would reflect this. Eurozone headlines should remain the most significant FX driver into year-end, which should keep downward pressure on EURUSD. Conscious of the developing situation inside the Eurozone, the Fed authorized the extension of temporary dollar liquidity swaps to the Bank of Canada, Bank of England, ECB, Bank of Japan and SNB through to August 1, 2011. The existing facilities had been due to expire in January.

EUR

The euro remains vulnerable following the latest batch of ratings-related headlines. Moody’s placed Portugal’s sovereign rating on negative watch, citing economic growth prospects as the main justification. The ratings agency also said that approaching the EFSF for assistance would not necessarily be viewed as a negative, as it could help resolve some of the short-term uncertainties. Fitch put Greece on negative rating watch, and expects its review to be completed during January 2011.

JPY

The trade surplus contracted significantly in November, which is likely due at least in part to a stronger yen. Export growth fell short of expectations coming in at +9.1% y/y (cons. 10.3%), while imports grew by +14.2% y/y (cons. 9.0%). The government said it would take decisive steps to tackle the yen’s rise, including intervention if necessary.

GBP

Minutes from the BoE’s Dec. 9 policy meeting are due. We expect MPC member Sentance dissented in favour of a rate hike, and MPC member Posen looked to expand the size of the QE program. Sentance reaffirmed his stance overnight saying that “it is right to begin to gradually move UK interest rates up”. Posen, as recently as Thursday, warned about the risks of hiking too soon, noting it was important to resist the temptation “to demonstrate to the public or to markets how upset we are about being above target” on inflation.

TECHNICAL OUTLOOK

EURUSD BEARISH Move below 1.3061/48 support zone would expose 1.2969. Resistance at 1.3360
USDJPY BULLISH While support at 82.84 holds, expect gains to target 84.51
GBPUSD BEARISH Break below 1.5454 leaves little support till 1.5297/65. Initial resistance at 1.5568
USDCHF BEARISH Outlook is bearish; support at 0.9548 and then 0.9463 key low.
AUDUSD BULLISH Upside potential expected to target 1.0029; support lies at 0.9841/31
USDCAD BULLISH Push above 1.0287 required to confirm the bull trend; initial support at 1.0103
EURCHF BEARISH Pressure on 1.2533/00; resistance at 1.2714
EURGBP NEUTRAL Resistance at 0.8553, support at 0.8426
EURJPY BEARISH Stalled at 109.57; a break here would expose 108.35. Resistance at 110.82

Forex Daily Market Commentary provided by GCI Financial Ltd.

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