By GCI Forex Research
Fundamental Outlook at 0800 GMT (EDT + 0400)
USD
The dollar weakened broadly during the Asia session, as the market looked back on yesterday’s weak US CPI report, and ahead to the arrival of a delegation of EU, IMF and ECB officials in Dublin today. The market is coming around to the view that an Irish bailout could eventually be on the cards, but the Irish government still insists that this is not inevitable. EURUSD traded 1.3511-1.3608 and USDJPY 83.11-83.40. Asian equities were also stronger after the S&P 500 finished flat. US core CPI in October was flat m/m for the third consecutive month (cons: +0.1%), but the annualized figure was more striking, showing a feeble rise of just +0.6% y/y. This was the slowest pace of growth in the history of the survey, which dates from 1957, and goes some way to justifying the latest FOMC decision to launch a new round of quantitative easing. In addition, October housing starts were also much weaker than expected, falling to an annual rate of only 519k (cons: 598k).
EUR
While Ireland has not asked for a bailout, consultations with the IMF, the ECB, and the European Commission are due to begin in Dublin today. EU Commissioner Rehn has said that these talks can be regarded as preparation for a potential aid program for Ireland, should it be necessary.
A major London-based clearing house increased the margin it requires for holding Irish government bonds to 30%, adding further pressures to Ireland.
GBP
As expected, the BoE minutes from the Nov. 4 policy meeting showed an 8-1 vote split on both QE and interest rates. MPC member Posen voted again for £50 bn in fresh QE, while MPC member Sentance wanted a +25bp rate hike.
AUD
RBA Deputy Governor Battellino said that, although the strong AUD is helpful for the economy overall, it is hurting the tourism industry. He noted the strength of the AUD is a natural result of the boom in commodity resources, implying that he felt it is justified by economic fundamentals.
Average weekly wages in Australia grew at a slower than expected pace in August, rising only +4.5% y/y (cons. 5.4%, prev. 5.3%).
TECHNICAL OUTLOOK
EURGBP 0.8449 support.
EURUSD BEARISH Move below 1.3363 would expose 1.3265. 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 82.40 ahead of 81.66 reaction low.
GBPUSD NEUTRAL 1.6379 and 1.5651 mark the near-term directional triggers.
USDCHF BULLISH Rise above 0.9972 has exposed 1.0183. Near-term support at 0.9829.
AUDUSD BEARISH Look for a break below 0.9652 for confirmation of bear trend. Initial resistance at 1.0183.
USDCAD NEUTRAL While resistance at 1.0380 holds, support comes in at 1.0070 ahead of 0.9931.
EURCHF BEARISH Focus is on 1.3229; a break here would expose 1.3072 and 1.2766 next. Only a push above 1.3834 would put odds against the ongoing trend.
EURGBP BEARISH Sell-off from 0.8942 found support at 0.8449. Next support at 0.8390.
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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