- Dollar Finds Backing for an Advance in Faltering Risk, European Troubles, Margin Increase for Silver
- Euro Quickly Returning to the Top Headlines as Yields for Sovereign Debt Soar, Auctions Materialize Concern
- British Pound Tempers its Response to Data as Focus turns to Wednesday’s BoE Quarterly Inflation Report
- New Zealand Dollar Overvalued According to RBNZ Governor Bollard
- Australian Dollar Gains Weight as Investor Optimism Retreats, Consumer Confidence Tumbles
- Japanese Yen Slides against the Dollar Even as Risk Falls Back
Dollar Finds Backing for an Advance in Faltering Risk, European Troubles, Margin Increase for Silver
Despite the dollar’s recovery from 11-month lows after the significant advances made this past Friday and Monday, confidence that this was a lasting move was still shaky. Though the currency was showing obvious strength with aggressive and broad gains, it was highly likely at that point the gains were simply a natural correction from extremes. After a significant drive in any market, a rebalancing eventually becomes necessary. Just how aggressive and prevalent this curative move proves to be is where timing enters the picture. Generally, a correction is by its very definition limited. On the other hand, if the retracement can last long enough; it could eventually shift the underlying assessment of the currency’s bearings or keep the market in a holding pattern until a more permanent driver can take up the responsibility. We may be seeing the dollar following the path in the latter scenario. Adding to the dollar’s stand-alone strength these past few days, we have seen risk aversion start to catch. As a benchmark for speculative interest, the S&P 500 fell 0.8 percent through Tuesday’s close, crude had stalled in its most consistent advance since April and the manipulated 10-year Treasury note has suffered its biggest decline in two months. However, this is still a preliminary move. There is still a critical need for fundamental support of risk aversion and the US dollar.
Shaping risk appetite trends through Tuesday, concern was roused starting early in the trading day. In the Asian hours, rumors were circulating that China would raise its reserve rates; but concrete means for slowing speculative turnover in the investment hub were introduced via the State Administration of Foreign Exchange. The group said that it would increase auditing of overseas fund raising. This is a clear reaction to the Fed’s stimulus efforts and diminishes the easy flow of ‘hot’ capital to a ready-made carry. Heading into the London session, investor sentiment would further deteriorate through the wear in the European Union’s financial health. Reminiscent of the crisis fear that developed between March of June, we have seen yield differentials on ten-year sovereign debt between peripheral EU economies (Portugal, Ireland) and Germany’s bund balloon to record highs. Not only does this shake confidence in the stability of global financial markets; but it also reverses a prominent flow of capital between the dollar and euro over the past months. This has the potential to be a major catalyst for the dollar over the coming days and weeks depending on how much coverage the region’s trouble receive. Finally, heading into the US session, we would see risk aversion really take root with capital markets facing real losses. Interestingly enough, news that the Chicago Mercantile Exchange was raising its margin requirements on silver by 30 percent – presumably to curb very blatant speculative activity – would further carry over to other asset classes. Why? This is yet another clear effort by authorities to check speculative activity. How far will they go? Will the effort extend to exchange rates?
And, while risk appetite is taking the initiative in guiding the dollar’s movements for the time being; it is worthwhile to highlight the long-term implications of a few extreme headlines. Earlier, the World Bank President issued a statement in which he suggested the world adopt a modified exchange rate regime which would reference gold as a benchmark for value. It is unlikely that officials will take this proposal seriously; but it won’t be the last time we hear it in the coming years. The same initial skepticism surrounded Chinese credit rating agency Dagong’s downgrade of the US sovereign debt rating. However, capacity to repay debt and problems arising from stimulus efforts are not exactly outlandish concerns.
Related: Discuss the Dollar in the DailyFX Forum, John’s Analyst Picks: Waiting for a EURUSD Short while USDJPY and USDCAD are Active
Euro Quickly Returning to the Top Headlines as Yields for Sovereign Debt Soar, Auctions Materialize Concern
There was economic data for euro traders to work with Tuesday; but its influence was modest. Between the final readings of German CPI data and business sentiment statistics; there was little to truly garner a sense of regional growth and inflation. Far more interesting is the fiscal picture of the entire European Union. Irish bond prices dropped an 11th day as EU Commissioner Rehn said the country couldn’t remain a low tax economy – another blow to its ability to attract capital. In Greece, the Finance Minister voiced concerns that budget cuts could chock growth; but he did see a successful 52-week bond auction. We’ll see if Portugal is as lucky with a 1.25 billion euro debt sale Wednesday morning.
British Pound Tempers its Response to Data as Focus turns to Wednesday’s BoE Quarterly Inflation Report
Economic data was questionable for the British pound Tuesday. The deficit improved slightly from a record low; the NIESR GDP estimate was still positive but is falling quickly and factory activity is quickly standing in as the last bastion of support with a fifth consecutive improvement. The upcoming BoE quarterly inflation report will have more influence with updated inflation and growth forecasts to guide stimulus speculation.
New Zealand Dollar Overvalued According to RBNZ Governor Bollard
Lamenting the high level of his currency and the impact it is having on the New Zealand economy, RBNZ Governor Alan Bollard suggested the kiwi was overvalued. Furthermore, in his dovish commentary, the policy official said the currency is being driven by the Fed’s stimulus pump and domestic activity and credit demand remain weak. The market will decide whether it is willing to believe these comments.
Australian Dollar Gains Weight as Investor Optimism Retreats, Consumer Confidence Tumbles
Risk appetite trends are the primary source of strength/weakness for most asset classes out there; but it is especially influential for the Australian dollar as the FX market’s favored yield currency. Adding a further unfavorable slant to the general appetite for risk, the Aussie dollar’s standing as a faultless high-yielder was diminished by a 5.3 percent drop in the Westpac consumer confidence survey. High rates have their impact.
Japanese Yen Slides against the Dollar Even as Risk Falls Back
Fundamental roles and correlations change over time. For the dollar, the appeal of a safe haven is growing more and more dubious. The same can be said of the yen. However, where the dollar is already under significant pressure; the Japanese currency is near multi-year and record highs. Is reality catching up to the low yield, deflationary and stimulus-friendly currency? With USDJPY rising as risk slides, we could be.
Tell us what you think of this article!
For Real Time Forex News, visit:http://www.dailyfx.com/real_time_news/
**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar
ECONOMIC DATA
Next 24 Hours
|
Currency |
GMT |
Release |
Survey |
Previous |
Comments |
|
AUD |
23:30 |
Westpac Consumer Confidence (NOV) |
3.3% |
Confidence rebounded last month following a 5.0% decline in Sept. |
|
|
AUD |
23:30 |
Westpac Consumer Confidence Index (NOV) |
117.0 |
||
|
CNY |
Trade Balance (USD) (OCT) |
$25.00B |
$16.88B |
China will probably report its second-largest monthly trade surplus of the year in October. |
|
|
CNY |
Exports (YoY) (OCT) |
23.0% |
25.1% |
||
|
CNY |
Imports (YoY) (OCT) |
28.1% |
24.1% |
||
|
AUD |
0:30 |
Home Loans (SEP) |
1.0% |
1.0% |
Australian home price gains slowed for a third straight quarter from July to September. |
|
AUD |
0:30 |
Investment Lending (SEP) |
-3.9% |
||
|
AUD |
0:30 |
Value of Loans (MoM) (SEP) |
0.0% |
||
|
JPY |
5:00 |
Consumer Confidence (OCT) |
40.8 |
41.4 |
Japanese consumer confidence declined in the last three months. |
|
JPY |
5:00 |
Consumer Confidence Households (OCT) |
40.6 |
41.2 |
|
|
EUR |
6:30 |
French Consumer Price Index (MoM) (OCT) |
0.1% |
-0.1% |
French consumer prices accelerated in September, lifted by rising electricity costs, higher prices for fresh vegetables, and the end of summer retail promotions. |
|
EUR |
6:30 |
French Consumer Price Index (YoY) (OCT) |
1.6% |
1.6% |
|
|
EUR |
6:30 |
French CPI – EU Harmonised (MoM) (OCT) |
0.2% |
0.0% |
|
|
EUR |
6:30 |
French v – EU Harmonised (YoY) (OCT) |
1.8% |
1.8% |
|
|
EUR |
6:30 |
French CPI Ex Tobacco Index (OCT) |
120.04 |
119.88 |
|
|
EUR |
7:00 |
German Wholesale Price Index (MoM) (OCT) |
1.0% |
Wholesale prices likely rose annually for a tenth straight month. |
|
|
EUR |
7:00 |
German Wholesale Price Index (YoY) (OCT) |
7.6% |
||
|
EUR |
7:45 |
French Industrial Production (MoM) (SEP) |
0.5% |
0.0% |
French industrial and manufacturing production unexpectedly stalled in August, suggesting the economic recovery may be losing momentum. |
|
EUR |
7:45 |
French Industrial Production (YoY) (SEP) |
4.7% |
3.2% |
|
|
EUR |
7:45 |
French Manufacturing Production (MoM) (SEP) |
0.6% |
0.0% |
|
|
EUR |
7:45 |
French Manufacturing Production (YoY) (SEP) |
5.1% |
3.2% |
|
|
EUR |
9:00 |
Italian Industrial Production s.a. (MoM) (SEP) |
-0.3% |
1.6% |
Italian industrial production probably declined in September, halting an eight-month rise. |
|
EUR |
9:00 |
Italian Industrial Production w.d.a. (YoY) (SEP) |
7.1% |
9.5% |
|
|
EUR |
9:00 |
Italian Industrial Production n.s.a. (YoY) (SEP) |
12.8% |
||
|
USD |
12:00 |
MBA Mortgage Applications (NOV 5) |
-5.0% |
Declined in 7 of the past 9 months. |
|
|
13:30 |
International Merchandise Trade (C$) (SEP) |
-1.6B |
-1.3B |
Narrowed more than expected. |
|
|
USD |
13:30 |
Import Price Index (MoM) (OCT) |
1.2% |
-0.3% |
Import prices declined in September after a 0.6% rise the month prior. |
|
USD |
13:30 |
Import Price Index (YoY) (OCT) |
3.8% |
3.5% |
|
|
USD |
13:30 |
Trade Balance (SEP) |
-$45.0B |
-$46.3B |
Deficit likely narrowed in Sept. |
|
USD |
13:30 |
Initial Jobless Claims (NOV 6) |
450K |
457K |
U.S. initial jobless claims last week were highest since October 8. |
|
USD |
13:30 |
Continuing Claims (OCT 30) |
4303K |
4340K |
|
|
USD |
15:30 |
DOE U.S. Crude Oil Inventories (NOV 5) |
1300K |
1950K |
Crude refinery inputs averaged 13.9 million barrels per day during the week ending October 29. |
|
USD |
15:30 |
DOE U.S. Gasoline Inventories (NOV 5) |
-1000K |
-2689K |
|
|
USD |
15:30 |
DOE U.S. Distillate Inventory (NOV 5) |
-2000K |
-3568K |
|
|
USD |
19:00 |
Monthly Budget Statement (OCT) |
-$140.5B |
-$176.4B |
Deficit likely narrowed in October. |
|
NZD |
21:30 |
Business NZ PMI (OCT) |
49.2 |
Index declined in the last 3 months. |
|
|
NZD |
21:45 |
Food Prices (MoM) (OCT) |
0.7% |
Prices rose in 3 of past 4 months. |
|
Currency |
GMT |
Upcoming Events & Speeches |
|
GBP |
10:30 |
Bank of England Quarterly Inflation Report |
SUPPORT AND RESISTANCE LEVELS
CLASSIC SUPPORT AND RESISTANCE – 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist 2 |
1.4800 |
1.6715 |
89.00 |
1.0460 |
1.0922 |
1.0600 |
0.8230 |
127.60 |
146.05 |
|
Resist 1 |
1.4450 |
1.6420 |
86.00 |
0.9950 |
1.0750 |
1.0200 |
0.8000 |
120.00 |
140.00 |
|
Spot |
1.3776 |
1.5985 |
81.72 |
0.9679 |
1.0080 |
1.0031 |
0.7770 |
112.59 |
130.62 |
|
Support 1 |
1.3700 |
1.5650 |
80.00 |
0.9500 |
0.9950 |
0.9640 |
0.6850 |
103.80 |
125.00 |
|
Support 2 |
1.3500 |
1.5500 |
75.00 |
0.9000 |
0.9700 |
0.9375 |
0.6585 |
100.00 |
119.00 |
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT
|
Currency |
USD/MXN |
USD/TRY |
USD/ZAR |
USD/HKD |
USD/SGD |
Currency |
USD/SEK |
USD/DKK |
USD/NOK |
|
Resist 2 |
14.4500 |
1.6755 |
8.7915 |
7.8165 |
1.4945 |
Resist 2 |
7.7500 |
5.7800 |
6.2750 |
|
Resist 1 |
13.8500 |
1.4865 |
8.3675 |
7.8075 |
1.4655 |
Resist 1 |
7.5800 |
5.5400 |
6.1150 |
|
Spot |
12.3023 |
1.4160 |
6.8778 |
7.7512 |
1.2898 |
Spot |
6.7579 |
5.4105 |
5.8504 |
|
Support 1 |
12.0500 |
1.3665 |
6.6950 |
7.7490 |
1.2750 |
Support 1 |
6.4500 |
5.2625 |
5.7030 |
|
Support 2 |
11.7200 |
1.3475 |
6.4300 |
7.7450 |
1.2500 |
Support 2 |
6.1250 |
5.1000 |
5.5200 |
INTRA-DAY PIVOT POINTS 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist 2 |
1.4055 |
1.6272 |
82.84 |
0.9764 |
1.0166 |
1.0243 |
0.7967 |
113.84 |
131.78 |
|
Resist 1 |
1.3916 |
1.6129 |
82.28 |
0.9722 |
1.0123 |
1.0137 |
0.7869 |
113.22 |
131.20 |
|
Pivot |
1.3834 |
1.6040 |
81.41 |
0.9654 |
1.0052 |
1.0068 |
0.7814 |
112.47 |
130.52 |
|
Support 1 |
1.3695 |
1.5897 |
80.85 |
0.9612 |
1.0009 |
0.9962 |
0.7716 |
111.85 |
129.94 |
|
Support 2 |
1.3613 |
1.5808 |
79.98 |
0.9544 |
0.9938 |
0.9893 |
0.7661 |
111.10 |
129.26 |
INTRA-DAY PROBABILITY BANDS 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist. 3 |
1.3975 |
1.6177 |
82.66 |
0.9811 |
1.0200 |
1.0183 |
0.7890 |
114.20 |
132.55 |
|
Resist. 2 |
1.3925 |
1.6129 |
82.43 |
0.9778 |
1.0170 |
1.0145 |
0.7860 |
113.80 |
132.07 |
|
Resist. 1 |
1.3876 |
1.6081 |
82.19 |
0.9745 |
1.0140 |
1.0107 |
0.7830 |
113.40 |
131.59 |
|
Spot |
1.3776 |
1.5985 |
81.72 |
0.9679 |
1.0080 |
1.0031 |
0.7770 |
112.59 |
130.62 |
|
Support 1 |
1.3676 |
1.5889 |
81.25 |
0.9613 |
1.0020 |
0.9955 |
0.7710 |
111.78 |
129.65 |
|
Support 2 |
1.3627 |
1.5841 |
81.01 |
0.9580 |
0.9990 |
0.9917 |
0.7680 |
111.38 |
129.17 |
|
Support 3 |
1.3577 |
1.5793 |
80.78 |
0.9547 |
0.9960 |
0.9879 |
0.7650 |
110.98 |
128.69 |
v
Written by: John Kicklighter, Currency Strategist for DailyFX.com
To receive John’s reports via email or to submit Questions or Comments about an article; email jkicklighter@dailyfx.com
http://www.surveymonkey.com/s/WT6MCGL
