By GCI Forex Research
Fundamental Outlook at 0800 GMT (EDT + 0400)
USD
The dollar weakened during the US session after New York Fed President Dudley said that the Fed’s latest round of Treasury purchases is equivalent to a 75bp cut in the policy rate. EURUSD traded 1.3561-1.3656, and USDJPY 82.72-83.27. FOMC Vice Chairman Yellen earlier sounded extremely dovish and said she saw “inflation lingering near current levels for a long time”. Yellen said she could be in favour of extended purchases beyond June “if I were to continue to be concerned about the outlook and thought that further purchases could work.” Both speakers also said that the Fed’s latest policy initiative was not designed to weaken the dollar. The S&P 500 finished down -0.12%. US data were largely overshadowed by Eurozone comments on the developing sovereign risk story. The NY Fed’s Empire State manufacturing current activity index plunged to -11.1, weaker than expected. In contrast, total retail sales were better than expected at 1.2% (cons: +0.7%, UBSe: +0.6%) in October after an upwardly revised 0.7% gain in September (was 0.6%). Ex-autos sales rose in line with expectations: up 0.4% after an upwardly revised 0.5% (was 0.4%) in September. Ahead, US October PPI, September TIC data, October industrial production, and the November NAHB housing market index will be released.
EUR
Various policymakers across Europe commented on the Irish situation yesterday. An Irish junior minister said that Ireland has not approached the EU or IMF to arrange a sovereign bailout. However, despite the denials from the Irish government, media reports continue to run the story. Irish opposition spokesperson Noonan said he believed that European intervention for Ireland is underway and that matters could come to a head over the next 24 hours.
The FT reported that Portugal’s Finance Minister said the risk was high that Portugal would need external assistance. However, in subsequent comments, he said there is “no imminent” request for foreign aid and that Portugal will maintain its strategy of raising financing from the markets.
Greek debt figures provided grim reading as the level of government debt in 2009 was revised up to 126.8% of GDP from 115.1%. The revisions from eurostat also revised the budget deficit upwards to 15.4% of GDP.
GBP
Ahead of the BoE minutes on Wednesday, MPC member Martin Weale suggested that the committee will be split as he expressed his worries about the effectiveness of any monetary tightening or loosening.
CHF
The combined PPI and IPI index in Switzerland was slightly lower than market consensus at -0.4% (m/m) and +0.3% (y/y), providing further evidence that pricing pressures remain largely subdued.
AUD
The minutes from the RBA’s Nov 2 policy meeting revealed that the decision to hike the policy rate by +25bp was finely-balanced. Ultimately the policy board chose to be forward-looking on inflation, although a strong AUD, tame CPI, and subdued credit growth were noted as reasons that argued in favour of not hiking at that particular meeting.
TECHNICAL OUTLOOK
EURUSD support at 1.3235.
EURUSD BEARISH Breach of 1.3574 exposes 1.3235. Resistance at 1.3777 ahead of 1.4282.
USDJPY BULLISH Focus on 83.99, only a break above 85.93 would confirm a bull trend. Initial support at 81.66 reaction low.
GBPUSD BULLISH Upside potential holds below 1.6379 ahead of 1.6458. Support holds at 1.5952.
USDCHF BULLISH Push through 0.9972 would expose 1.0183. Support at 0.9671 ahead of 0.9463.
AUDUSD NEUTRAL Pullback from 1.0183 has support at 0.9652 ahead of 0.9542 reaction low.
USDCAD BEARISH Stalled in front of 0.9931, push through the level would expose 0.9820 with scope for 0.9712 next. Resistance at 1.0156.
EURCHF BEARISH Push through 1.3229 and 1.3072 would expose 1.2766. Sustained break of 1.3834 required for resumption of bull trend.
EURGBP BEARISH Move below 0.8390 would expose 0.8311. Resistance at 0.8638.
EURJPY BEARISH Remains heavy below 115.68; break of 111.05 reaction low would expose 107.73.
Forex Daily Market Commentary provided by GCI Financial Ltd.
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