- US Dollar: US Dollar Finds Support as European and Korean Concerns Fuel Safety Flows
- Euro Slips As ECB Takes Foot Off of Stimulus Pedal
- British Pound Troubled by Irish Downgrade, But Rising Yield Expectations Offers Support
- Aussie and Kiwi Rise Against Greenback, Loonie Falls on Anticipated Wholesale Prices
US Dollar Finds Support as European and Korean Concerns Fuel Safety Flows The US Dollar managed to build on its recent gains as traders started the week on a cautious note with the potential for increasing tensions in Korean and lingering concerns over the European debt crisis. Low Holiday trading volume limited potential follow through as traders remained conviction less heading into the New Year. An ECB report showing that the central bank has taken their foot off the stimulus pedal reignited concerns over the European debt crisis sending the Euro to a two week low against the greenback. A moody’s downgrade of nationalized Irish banks also added to existing fears which should remain a theme into 2011, and a supporting factor for the reserve currency
The Chicago Fed National Activity index was the only event risk on the calendar, with the second tier indicator provoking no reaction when it missed expectations. The metric which is designed to gauge overall economic activity and inflation was expected to show the economy was on trend in November with a 0.0 reading. The print of -0.46 pointed to a slowing of activity from the month prior’s reading of -0.25, adding to the overall bearish tone to markets.
Today’s reaction from markets makes it clear that the greenback is the primary shelter for traders which may remain a supportive factor as caution reigns. A holiday shortened week should lead to diminishing volume and conviction from markets limiting the potential for any new trend developments. However, markets may be prone to sharp spikes with limited follow through, making it prudent to resist chasing any sudden moves.
Related:Top Forex Trading Ideas for 2011, Top Mistakes of 2010
Euro Slips As ECB Takes Foot Off of Stimulus Pedal
Moody’s officially downgrading the credit ratings of Anglo Irish Bank Corp. and Irish Nationwide Building Society, both controlled by the Irish state started the Euro off on its back foot. The single currency was trying to regain its footing before sharply falling on the back of an ECB report which showed that the central bank had purchased its fewest bonds in seven weeks, signaling that policy makers are becoming uncomfortable with the amount of debt that is accumulating on their balance sheet. The actions are in stark contrast to the growing cries from European for more help from the monetary authority. The apparently opposing views on how to handle the crisis may further damage the single currency’s credibility and expose it to further losses.
An unexpected drop in Euro-zone consumer confidence to -11 from -9.4 added to bearish Euro sentiment as it was the first evidence that the debt issues are weighing on sentiment. A dimming outlook could lead Europeans to curb their spending as they brace for sharp cuts in government spending and higher taxes, potentially adding to the drag on the economy. The German GFK consumer confidence survey is the only noteworthy release left on the week, and signs that pessimism is growing in the region’s largest and most successful country could add to the Euro’s woes.
British Pound Troubled by Irish Downgrade, But Rising Yield Expectations Offers Support
The British Pound took its lead from broader trends with an empty economic calendar, ending the day slightly lower. U.K. banks have considerable exposure to Ireland and the downgrade of the nation run banks added to the discomfort that sterling bulls have had over the European debt issues. The Confederation of British Industry added to concern by forecasting that growth is expected to remain slow by a reduction in government spending and household consumption curbed by a higher VAT. However, the CBI also predicted that the higher tax and rising commodity prices will prevent inflation from falling from its elevated levels, forcing the BoE to raise rates by mid-2011 with interest rates reaching as high as 2.75% by the end of 2012. Rising yield expectations could be support for the pound and with the GBP/USD seeing its declines slowed at 38.2% Fibo of its May-November advance. The November budget numbers will cross the wires tomorrow and forecast for 16.8 billion pounds would nearly double the net public borrowing of 9.8 billion pounds the month prior. A rise in the deficit should raise growth concerns for the island nation, potentially generating bearish sterling sentiment.
Aussie and Kiwi Rise Against Greenback, Loonie Falls on Anticipated Wholesale Prices
The Australian and New Zealand dollars rose against their U.S. counterpart, as rising commodity prices triggered a “risk-on” trade for investors. The Aussie rose over 0.5 percent to $0.9937, while the kiwi gained nearly 0.8 percent to $0.7420. The Canadian Dollar, on the other hand, continued to decline against its American namesake, on investor concerns that tomorrow’s retail report will show that wholesale sales unexpectedly stalled last month, perhaps indicative of a broader slowdown. Other event risk that may provide volatility this week includes Canada’s Consumer Price Index, which is due out tomorrow, and New Zealand’s 3Q Gross Domestic Product figures which will be released on Wednesday. In addition, the Reserve Bank of Australia will release the minutes from its last monetary policy meeting tomorrow, which will likely indicate the possibility of a rate hike in the near future.
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ECONOMIC DATA
Next 24 Hours
|
Currency |
GMT |
Release |
Survey |
Previous |
Comments |
|
AUD |
23:00 |
Conference Board Leading Index (OCT) |
-0.1% |
Snapped 6-month rise. |
|
|
JPY |
Bank of Japan Interest Rate Decision |
0.10% |
0.10% |
Market implies no hike. |
|
|
GBP |
0:01 |
GfK Consumer Confidence Survey (DEC) |
-22 |
-21 |
Survey at 4-month low. |
|
NZD |
2:00 |
Credit Card Spending s.a. (MoM) (NOV) |
0.6% |
Card spending rose YoY in last 12 months. |
|
|
NZD |
2:00 |
Credit Card Spending (YoY) (NOV) |
4.6% |
||
|
JPY |
4:30 |
All Industry Activity Index (MoM) (OCT) |
-0.2% |
-0.8% |
Likely fell for 3rd month. |
|
EUR |
7:00 |
German GfK Consumer Confidence Survey (JAN) |
5.7 |
5.5 |
Activity at a 3-year high. |
|
CHF |
7:15 |
Trade Balance (Swiss franc) (NOV) |
2.05B |
Surplus widened in Oct. as exports posted largest gain since 2009. |
|
|
CHF |
7:15 |
Exports (MoM) (NOV) |
6.2% |
||
|
CHF |
7:15 |
Imports (MoM) (NOV) |
1.9% |
||
|
CHF |
8:00 |
Money Supply M3 (YoY) (NOV) |
6.1% |
M3 YoY growth was lower in Oct. than Sept. |
|
|
GBP |
9:30 |
Public Finances (PSNCR) (Pounds) (NOV) |
12.3B |
2.4B |
U.K. budget deficit declined substantially in October from a record reading the month prior. |
|
GBP |
9:30 |
Public Sector Net Borrowing (Pounds) (NOV) |
16.8B |
9.8B |
|
|
GBP |
9:30 |
Public Sector Net Borrowing ex Interventions (Pounds) (NOV) |
17.0B |
10.3B |
|
|
EUR |
10:00 |
Italian Unemployment Rate s.a. (3Q) |
8.3% |
8.5% |
Likely fell to 2009 level. |
|
12:00 |
Consumer Price Index (MoM) (NOV) |
0.3% |
0.4% |
Canada’s consumer prices advanced at the fastest pace in two years in October, on surging gasoline prices. |
|
|
CAD |
12:00 |
Consumer Price Index (YoY) (NOV) |
2.2% |
2.4% |
|
|
CAD |
12:00 |
Bank Canada Consumer Price Index Core (MoM) (NOV) |
0.2% |
0.4% |
|
|
CAD |
12:00 |
Bank Canada Consumer Price Index Core (YoY) (NOV) |
1.6% |
1.8% |
|
|
CAD |
13:30 |
Retail Sales (MoM) (OCT) |
0.5% |
0.6% |
Increased in the last four months. |
|
CAD |
13:30 |
Retail Sales ex Autos (MoM) (OCT) |
0.7% |
0.4% |
|
|
NZD |
21:45 |
Current Account Balance (3Q) |
-2.304B |
-0.880B |
C.A. deficit likely widened for 2nd quarter. |
|
NZD |
21:45 |
Current Account Deficit-GDP Ratio (3Q) |
-3.4% |
-3.0% |
|
|
USD |
22:00 |
ABC Consumer Confidence (DEC 19) |
-43 |
Sits at a 13-week high. |
|
|
Currency |
GMT |
Upcoming Events & Speeches |
|||
|
AUD |
0:30 |
Reserve Bank of Australia Meeting Minutes |
SUPPORT AND RESISTANCE LEVELS
CLASSIC SUPPORT AND RESISTANCE
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist 2 |
1.3840 |
1.6420 |
89.00 |
1.0460 |
1.0922 |
1.0600 |
0.8230 |
127.60 |
146.05 |
|
Resist 1 |
1.3700 |
1.5910 |
86.00 |
1.0000 |
1.0750 |
1.0200 |
0.8000 |
120.00 |
140.00 |
|
Spot |
1.3242 |
1.5633 |
84.02 |
0.9647 |
1.0062 |
0.9901 |
0.7405 |
111.26 |
131.36 |
|
Support 1 |
1.3000 |
1.5500 |
80.00 |
0.9500 |
0.9950 |
0.9600 |
0.6850 |
103.80 |
125.00 |
|
Support 2 |
1.2925 |
1.5300 |
75.00 |
0.9000 |
0.9700 |
0.9375 |
0.6585 |
100.00 |
119.00 |
INTRA-DAY PIVOT POINTS
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist. 2 |
1.3453 |
1.5742 |
84.49 |
0.9819 |
1.0216 |
0.9970 |
0.7457 |
112.58 |
132.09 |
|
Resist. 1 |
1.3320 |
1.5645 |
84.26 |
0.9756 |
1.0178 |
0.9928 |
0.7413 |
111.69 |
131.35 |
|
Pivot |
1.3227 |
1.5549 |
83.97 |
0.9658 |
1.0108 |
0.9884 |
0.7382 |
111.04 |
130.69 |
|
Support 1 |
1.3094 |
1.5452 |
83.74 |
0.9595 |
1.0070 |
0.9842 |
0.7338 |
110.15 |
129.95 |
|
Support 2 |
1.3001 |
1.5356 |
83.45 |
0.9497 |
1.0000 |
0.9798 |
0.7307 |
109.50 |
129.29 |
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETSSCANDIES CURRENCIES
|
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 |
1.5931 |
8.3675 |
7.8075 |
1.4655 |
Resist 1 |
7.5800 |
5.6625 |
6.1150 |
|
Spot |
12.4087 |
1.5458 |
6.8789 |
7.7782 |
1.3135 |
Spot |
6.8430 |
5.6477 |
5.9857 |
|
Support 1 |
12.0500 |
1.4724 |
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 PROBABILITY BANDS
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist. 3 |
1.3384 |
1.5726 |
85.00 |
0.9821 |
1.0247 |
1.0024 |
0.7475 |
112.39 |
132.40 |
|
Resist. 2 |
1.3335 |
1.5681 |
84.76 |
0.9789 |
1.0220 |
0.9989 |
0.7449 |
111.99 |
131.95 |
|
Resist. 1 |
1.3286 |
1.5636 |
84.51 |
0.9758 |
1.0193 |
0.9954 |
0.7422 |
111.59 |
131.51 |
|
Spot |
1.3188 |
1.5547 |
84.02 |
0.9694 |
1.0139 |
0.9885 |
0.7369 |
110.79 |
130.62 |
|
Support 1 |
1.3090 |
1.5458 |
83.53 |
0.9630 |
1.0085 |
0.9816 |
0.7316 |
109.99 |
129.73 |
|
Support 2 |
1.3041 |
1.5413 |
83.28 |
0.9599 |
1.0058 |
0.9781 |
0.7289 |
109.59 |
129.29 |
|
Support 3 |
1.2992 |
1.5368 |
83.04 |
0.9567 |
1.0031 |
0.9746 |
0.7263 |
109.19 |
128.84 |
v
Written by: David Rodríguez, Quantitative Strategist for DailyFX.com
Tosubmit Questions or Comments about an article; email drodriguez@dailyfx.com
The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. Forex Capital Markets, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. Forex Capital Markets, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. Forex Capital Markets, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.
