- Dollar Index Scores a Meaningful Bullish Breakout but European Issues, Risk Trends Still Blurred
- Euro Traders Look for Clarity on Ireland’s Future and the Future of the European Monetary Union
- British Pound Stifled by Disappointing Housing Data, Look for Clear Direction with CPI Data
- Japanese Yen: Why Did a Strong 3Q GDP Reading not Promote a Yen Rally?
- Australian Dollar Steady on Minutes that Show Concern over Inflation, OECD that Warns the Same
- New Zealand Dollar Sees Limited reaction to Strong Retail Sales Data thanks to Trading Conditions
Dollar Index Scores a Meaningful Bullish Breakout but European Issues, Risk Trends Still Blurred
Once again, the dollar put in for a significant and progressive price development. And yet, fundamental traders should be more suspicious of the greenback’s progress now than they were last week. Looking to the trade-weighted Dollar Index, we see that the benchmark currency was able to surpass a troublesome range high at 78.35. The monthly high this move presents certainly seems the next logical progression of a reversal that was jumpstarted after a quick dip to a low for the year. However, we can see the stain of doubt underlying this move despite the meaningful progress the day’s advance would imply. The first sign of uncertainty is found from the Dollar Index itself. After such a meaningful breakout, we would expect a significant increase in momentum to accelerate gains as traders are drawn into the development; but follow through was notably restrained. Another hitch to the greenback’s boundless recovery is the variation in progress across different pairs. While EURUSD has slipped below notable support (once again, lacking momentum) and USDJPY seems to be taking meaningful steps towards a larger advance; GBPUSD, USDCHF and AUDUSD are much further away from establishing conclusive reversals. Typically, when there is a mixed performance for a currency across its most liquid pairings, the confusion prevents definitive progress. And, venturing into the fundamental side of things, the greenback’s lack of momentum is consistent with the S&P 500 having yet to break from its two-and-a-half month rising trend channel.
All these factors taken into account, it should not be immediately concluded that the dollar’s bullish run is doomed for failure. Instead, it suggests that traders are simply more concerned with tangible fundamental catalysts rather than letting rampant speculation dictate activity levels. What is needed is a definitive shift in one (or more) of the more pervasive and influential trading themes. Effectively taking up the gauntlet of top fundamental driver from stimulus speculation, risk appetite trends now hold the greatest potential for the dollar’s advancement or retracement. This is why we make the regular reference to the health of the US equity market benchmark. Should there big an underlying shift in the balance of risk/reward, the stocks and other relatively-risky assets will be unloaded and safe havens will be scooped up. And, though the greenback’s shelter appeal has diminished significantly; when capital flows turn into torrents, the market will likely defer to historical norms. What can push equities into that tempting bear trend and subsequently leverage the dollar’s appeal? European financial uncertainties are at the top of the list. A crisis situation in this economy has very clear implications for investment trends; but even a move to bailout Ireland would further the dollar’s case. Such a move would be clear step towards government-backed support. The US isn’t the only government providing support…
Speaking of stimulus, we note a growing wave of dissension against the Fed’s decision to implement the second round of quantitative easing. While much of the grumbling comes from the speculative market and emerging markets, Fed member Lacker stated that he opposed the move as being potentially ineffective and even dangerous. Don’t expect the central bank to fold to pressure anytime soon though. In other news, data seemed to offer a bullish balance. Advanced retail sales were better than expected with a 1.2 percent improvement – cut to 0.4 percent excluding gas and auto sales. For some contrast, the Empire manufacturing index dropped to a July 2009 low.
Related: Discuss the Dollar in the DailyFX Forum, John’s Analyst Picks: Euro, Pound and Dollar Crosses Offer Numerous Opportunities
Euro Traders Look for Clarity on Ireland’s Future and the Future of the European Monetary Union
Irish officials responded to growing fear of a national financial crisis and subsequent speculation of an impending bailout by stating simply that they had not filed for aid and the government was fully funded through mid-2011. Clearly, this reiteration does not provide investors with a sense of confidence. In fact, it is adding to regional troubles according to the ECB’s Ordonez. Leaving the market in a state of uncertainty balances Ireland between the tarnished reputation of having to look for additional funds and potentially leaving its banking system open to collapse. With that in mind, Prime Minister Cowen is expected to bring the topic up at Tuesday’s meeting of European leaders. In the meantime, Portugal’s Finance Minister lamented that his country is at high risk similar troubles and the EU revised Greece’s deficit to GDP ratio up significantly.
British Pound Stifled by Disappointing Housing Data, Look for Clear Direction with CPI Data
Not to be ignored, the Rightmove released an indicator that showed a 3.2 percent drop in house prices in October – the biggest since December 2007 – and the longest turnover time on record. However, the market easily ignored the weak figure. That said, traders won’t as readily disregard Tuesday’s CPI data. Speculation of stimulus and rate hikes top’s the pound’s personal list of fundamental concerns.
Japanese Yen: Why Did a Strong 3Q GDP Reading not Promote a Yen Rally?
Expectations for Japan’s 3Q GDP numbers were tame heading into the release of the data. Yet, when the economy reportedly grew 0.9 percent in the three-month period and 3.9 percent on an annualized basis – both much better than expected – the yen showed little response. This can be partly attributed to timing; but with the Japanese Economic Minister suggesting 4Q will show the mirror performance, optimism will be muted.
Australian Dollar Steady on Minutes that Show Concern over Inflation, OECD that Warns the Same
All signs point to further gains for the Australian dollar – except for risk appetite trends. Early Monday, the OECD issued a statement warning the RBA to remain vigilant on inflation pressures and the bank’s own minutes on Tuesday supported a sustained hawkish lean. However, rate hikes later down the line will be overlooked if investors abandon carry trades to fund maintenance margin on losses in other trades.
New Zealand Dollar Sees Limited reaction to Strong Retail Sales Data thanks to Trading Conditions
The economic docket was stocked for the New Zealand dollar very early Friday morning; and yet the data has ultimately very little reaction on the currency. Data released during early in Auckland’s trading session hit at a time when few other markets are online; and doing so prior to Monday’s open exacerbates the issue. Therefore, a 1.6 percent jump in retail sales was able to rouse little activity before risk trends set in.
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ECONOMIC DATA
Next 24 Hours
|
Currency |
GMT |
Release |
Survey |
Previous |
Comments |
|
JPY |
23:50 |
Housing Loans (YoY) (3Q) |
3.6% |
Rose annually in last 12 quarters. |
|
|
JPY |
23:50 |
Tertiary Industry Index (MoM) (SEP) |
-0.5% |
-0.2% |
Likely fell for second month in Sept. |
|
JPY |
6:00 |
Machine Tool Orders (YoY) (OCT F) |
70.9% |
Rose annually in last 11 months. |
|
|
EUR |
7:00 |
EU 25 New Car Registrations (OCT) |
-9.6% |
Registrations fell in last six months. |
|
|
EUR |
7:45 |
French Non-Farm Payrolls (QoQ) (3Q P) |
0.2% |
0.2% |
Increased 0.2% in last 2 months. |
|
EUR |
9:00 |
Italian CPI (NIC incl. tobacco) (MoM) (OCT F) |
0.2% |
0.2% |
Italy’s inflation rate rose to the highest in nearly two years in October as food and cigarette prices increased. |
|
EUR |
9:00 |
Italian CPI (NIC incl. tobacco) (YoY) (OCT F) |
1.7% |
1.7% |
|
|
EUR |
9:00 |
Italian CPI – EU Harmonized (MoM) (OCT F) |
0.7% |
0.7% |
|
|
EUR |
9:00 |
Italian CPI – EU Harmonized (YoY) (OCT F) |
2.0% |
2.0% |
|
|
GBP |
9:30 |
DCLG UK House Prices (YoY) (SEP) |
8.3% |
Rose annually in last ten months. |
|
|
GBP |
9:30 |
Consumer Price Index (MoM) (OCT) |
0.2% |
0.0% |
U.K. inflation probably exceeded the BOE’s 3% limit for an eighth month in October. |
|
GBP |
9:30 |
Consumer Price Index (YoY) (OCT) |
3.1% |
3.1% |
|
|
GBP |
9:30 |
Core Consumer Price Index (YoY) (OCT) |
2.6% |
2.7% |
|
|
GBP |
9:30 |
Retail Price Index (OCT) |
226.0 |
225.3 |
U.K. retail prices rose over 4% in September from 12 months prior, as energy prices surged 8.5% and food prices increased 4.8%. |
|
GBP |
9:30 |
Retail Price Index (MoM) (OCT) |
0.3% |
0.4% |
|
|
GBP |
9:30 |
Retail Price Index (YoY) (OCT) |
4.6% |
4.6% |
|
|
GBP |
9:30 |
RPI Ex Mort Int.Payments (YoY) (OCT) |
4.6% |
4.6% |
|
|
EUR |
10:00 |
Euro-Zone Consumer Price Index (MoM) (OCT) |
0.3% |
0.2% |
European inflation unexpectedly accelerated to the fastest in almost two years in October. |
|
EUR |
10:00 |
Euro-Zone Consumer Price Index (YoY) (OCT F) |
1.9% |
1.9% |
|
|
EUR |
10:00 |
Euro-Zone CPI – Core (YoY) (OCT) |
1.0% |
1.0% |
|
|
EUR |
10:00 |
German ZEW Survey (Economic Sentiment) (NOV) |
-6.0 |
-7.2 |
German sentiment likely rose in November to highest since 2007. |
|
EUR |
10:00 |
German ZEW Survey (Current Situation) (NOV) |
75.0 |
72.6 |
|
|
EUR |
10:00 |
EZ ZEW Survey (Economic Sentiment) (NOV) |
2.0 |
1.8 |
At lowest reading since March ’09. |
|
13:30 |
Manufacturing Shipments (MoM) (SEP) |
-0.9% |
2.0% |
Rose more than forecast in August. |
|
|
USD |
13:30 |
Producer Price Index (MoM) (OCT) |
0.8% |
0.4% |
U.S. producer prices rose in September for a second month at a pace that suggests weak demand is restraining inflationary pressures. |
|
USD |
13:30 |
Producer Price Index (YoY) (OCT) |
4.6% |
4.0% |
|
|
USD |
13:30 |
PPI Ex Food & Energy (MoM) (OCT) |
0.1% |
0.1% |
|
|
USD |
13:30 |
PPI Ex Food & Energy (YoY) (OCT) |
2.1% |
1.6% |
|
|
USD |
14:00 |
Net Long-term TIC Flows (SEP) |
$62.5B |
$128.7B |
Global demand for U.S. assets rose in August on QE expectations. |
|
USD |
14:00 |
Total Net TIC Flows (SEP) |
$38.9B |
||
|
USD |
14:15 |
Industrial Production (OCT) |
0.3% |
-0.2% |
Industrial production declined in September, halting a six-month rise. |
|
USD |
14:15 |
Capacity Utilization (OCT) |
74.9% |
74.7% |
|
|
USD |
15:00 |
NAHB Housing Market Index (NOV) |
17 |
16 |
Likely rose to six-month high. |
|
USD |
22:00 |
ABC Consumer Confidence (NOV 14) |
-46 |
Posted -46 reading in last 2 weeks. |
|
Currency |
GMT |
Upcoming Events & Speeches |
|
AUD |
0:30 |
Reserve Bank of Australia Meeting Minutes |
|
EUR |
8:00 |
ECB’s Vitor Constancio Speaks on Economic and Financial Stability |
|
EUR |
14:30 |
ECB’s Juergen Stark Speaks on Economic and Financial Stability |
|
GBP |
15:30 |
BoE’s Tucker, Dale Testify in Front of Economic Affairs Committee |
|
USD |
19:30 |
U.S. Senate Banking Committee Votes on Peter Diamond Nomination |
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 |
1.4450 |
1.6715 |
89.00 |
1.0460 |
1.0922 |
1.0600 |
0.8230 |
127.60 |
146.05 |
|
Resist 1 |
1.3840 |
1.6420 |
86.00 |
0.9950 |
1.0750 |
1.0200 |
0.8000 |
120.00 |
140.00 |
|
Spot |
1.3578 |
1.6053 |
83.18 |
0.9851 |
1.0085 |
0.9849 |
0.7732 |
112.93 |
133.51 |
|
Support 1 |
1.3500 |
1.5650 |
80.00 |
0.9500 |
0.9950 |
0.9640 |
0.6850 |
103.80 |
125.00 |
|
Support 2 |
1.3310 |
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 |
12.2973 |
1.4464 |
6.9666 |
7.7525 |
1.3024 |
Spot |
6.8851 |
5.4906 |
5.9938 |
|
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 |
1.3811 |
1.6195 |
83.79 |
0.9938 |
1.0176 |
0.9968 |
0.7831 |
114.10 |
134.40 |
|
Resist 1 |
1.3694 |
1.6124 |
83.49 |
0.9894 |
1.0130 |
0.9908 |
0.7781 |
113.52 |
133.96 |
|
Pivot |
1.3635 |
1.6083 |
82.94 |
0.9829 |
1.0094 |
0.9861 |
0.7733 |
113.06 |
133.33 |
|
Support 1 |
1.3518 |
1.6012 |
82.64 |
0.9785 |
1.0048 |
0.9801 |
0.7683 |
112.48 |
132.89 |
|
Support 2 |
1.3459 |
1.5971 |
82.09 |
0.9720 |
1.0012 |
0.9754 |
0.7635 |
112.02 |
132.26 |
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 |
1.3775 |
1.6241 |
84.20 |
0.9983 |
1.0206 |
1.0009 |
0.7859 |
114.66 |
135.55 |
|
Resist. 2 |
1.3726 |
1.6194 |
83.94 |
0.9950 |
1.0176 |
0.9969 |
0.7827 |
114.23 |
135.04 |
|
Resist. 1 |
1.3676 |
1.6147 |
83.69 |
0.9917 |
1.0146 |
0.9929 |
0.7796 |
113.79 |
134.53 |
|
Spot |
1.3578 |
1.6053 |
83.18 |
0.9851 |
1.0085 |
0.9849 |
0.7732 |
112.93 |
133.51 |
|
Support 1 |
1.3480 |
1.5959 |
82.67 |
0.9785 |
1.0024 |
0.9769 |
0.7668 |
112.07 |
132.49 |
|
Support 2 |
1.3430 |
1.5912 |
82.42 |
0.9752 |
0.9994 |
0.9729 |
0.7637 |
111.63 |
131.98 |
|
Support 3 |
1.3381 |
1.5865 |
82.16 |
0.9719 |
0.9964 |
0.9689 |
0.7605 |
111.20 |
131.47 |
v
Written by: John Kicklighter, Currency Strategist for DailyFX.com
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