Author: FX_Trdr

By Fast Brokers – The Cable is drifting lower towards its psychological 1.65 level after BBA Mortgage Approvals and Prelim Business Investment came in mixed.  While business investment registered a modest improvement, mortgage approvals printed a bit weak.  The moderation in mortgage approvals supports last week’s statements from Nationwide and Bloomberg concerning a slower than expected recovery in Britain’s housing market.  However, it seems BoE Governor King’s comments are having the larger impact on the Cable after King stated that Britain’s economy still faces ‘profound challenges’.  King’s statement also revealed that the BoE’s tightening of liquidity stretch out over a 2-3 year period.  Additionally, King still can’t rule out the use of further QE injections should the economic recovery take a negative turn.  King’s most recent statements are having a negative psychological impact on the Pound, highlighted by an upturn in the EUR/GBP.  Britain will release its Revised GDP data tomorrow, meaning volatility could pick up in the Cable should the GDP number surprise in either direction.  On the other hand, activity in the FX markets should wind down as investors clock out early for the Thanksgiving holiday.

Meanwhile, investors should keep an eye on the S&P’s ongoing battle with 1100.  Since the Dollar is negatively correlated with U.S. equities, the Cable’s near-term fate may depend on S&P’s decision on whether to duck back into a downtrend or finally leave 1100 behind.  The U.S. will release some key econ data of its own tomorrow, including Durable Goods Orders, New Home Sales, and weekly Unemployment Claims.  However, as we stated before, the holiday shortened weekend may cause any notable activity to carry over into next week.

Technically speaking, the Cable continues to find support along the psychological 1.65 level and our 2nd tier uptrend line.  Our 2nd tier uptrend line runs through previous November lows, meaning a retracement could result in a movement towards 1.63.  As for the topside, the GBP/USD faces multiple downtrend lines along with 11/23 and 10/23 highs.  Recent weakness in the Cable has created quite a few immediate-term topside obstacles, meaning the currency pair would likely need a sizable boost in buy-side activity to get above our top-end barriers.

Present Price: 1.6534

Resistances: 1.6577, 1.6619, 1.6638, 1.6664, 1.6694, 1.6730, 1.6761

Supports: 1.6527, 1.6489, 1.6457, 1.6427, 1.6398, 1.6341, 1.6301

Psychological: 1.65, November Highs and Lows, 1.70

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – The EUR/USD was rejected by its psychological 1.50 level once again, and the currency pair is fluctuating between our 2nd tier uptrend and downtrend lines as activity wanes in advance of the Thanksgiving holiday.  Today’s EU data releases were all positive with Germany’s Ifo Business Climate and EU Industrial New Orders topping analyst expectations.  The EUR/USD strengthened following the EU releases, but this morning’s U.S. econ data is keeping the currency pair in check.  U.S. Prelim GDP and the S&P/CS HPI Index data all came in weaker than anticipated and we are presently awaiting the CB Consumer Confidence number.  However, even if the CB number tops estimates, the sluggish GDP data may weigh on the markets.  On a positive note, the combination of positive EU and negative U.S. data is providing the Euro with a relative strength, as highlighted by the present performance of the EUR/GBP.  However, it seems the S&P futures may struggle with 1100 again today due to the less than stellar econ data from the U.S.  Therefore, the EUR/USD may be hard pressed to break through its topside barriers should U.S. equities not cooperate.

Technically speaking, the EUR/USD still faces our 2nd tier and 3rd tier downtrend lines, which run through October and November highs, respectfully.  Furthermore, the EUR/USD has to deal with its highly psychological 1.50 zone.  As for the downside, the EUR/USD does have multiple uptrend lines serving as technical cushions along with 11/20 lows.  Therefore, quite a few technical cushions and barriers are waiting nearby.  Hence, further consolidation may not be out of the question.

The EU will be relatively quiet on the data front tomorrow with only the release of the GfK German Consumer Climate number.  Therefore, the EUR/USD’s performance may rely more upon the S&P’s reaction to today’s data along with tomorrow’s Durable Goods Orders and New Home Sales data releases.  Meanwhile, activity may begin to wind down as investors clock out early for the Thanksgiving holiday.  However, the U.S. does have some important data releases on deck for tomorrow, meaning that the potential for volatility remains.

Present Price: 1.4979

Resistances: 1.4983, 1.4998, 1.5021, 1.5036, 1.5051, 1.5070, 1.5088

Supports: 1.4963, 1.4952, 1.4936, 1.4918, 1.4902, 1.4882, 1.4859

Psychological: 1.50, November Highs and Lows

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

Source: ForexYard

The Dollar decreased dramatically on Monday after a big day on Wall Street led to increased risk taking behavior among investors. An increase in equity and the price of commodities, as well as positive news on existing U.S. home sales had a dramatic effect on trading. Investors dumped their dollars in favor of high yielding currencies such as the EUR, which made impressive gains.

Economic News

USD – USD Falls Amid Gains In The Stock Market

Following Monday’s announcement that existing U.S. home sales in November were better then forecasted, Wall Street had an impressive trading day as confidence in the American economy began to return. This in turn led to a less then stellar day for the USD which traders abandoned in favor of riskier currencies such as the EUR. The Dollar Index went from 75.647 to 75.130, and the greenback was down against all major currencies. This further highlighted just how volatile the dollar is, as it was unable to maintain any of the gains made last week.

Looking to the days ahead, traders can expect the USD to make some dramatic moves ahead of the Thanksgiving holiday this Thursday. The Preliminary GDP report as well as the CB Consumer Confidence report, both set to be released on Tuesday at 13:30 GMT and 15:00 GMT respectively, could dictate which way the greenback moves in trading this week. If the data, as forecasted, shows a slower expansion of the U.S. economy, the dollar will likely improve slightly against its major counterparts, and its safe haven status could return.

EUR – EUR Makes Gains, But Can’t Break $1.50

Buoyed by impressive gains in the global stock market on Monday, the Euro rose against all major currencies, but still failed to break the psychologically important $1.50 barrier. Leveling off at 1.4980 against the dollar, the EUR seemed perpetually stuck between the 1.4800 and 1.4990 marks. Against the Yen the EUR also made gains, advancing to Y133.22 from Y132.26 in trading on Monday as the rise in stocks also hurt the safe haven currency.

On Tuesday, traders should look at the German Ifo Business Climate report, set to be released at 09:00 GMT. The report is seen as not only a measure of German economic health, but also of the other euro zone countries. With a predicted increase from last month’s figures, the EUR may get the incentive to push past the $1.50 mark.

JPY – JPY Bounces Back After Yesterdays Losses

The Japanese stock market took heavy losses in trading Tuesday, leading to impressive gains for the Yen a day after it sunk amid a global stock rally. Against the Euro, the yen moved from 133.22 to 132.77, signaling that the currency is rebounding from its previous losses. With the Nikkei 225 Stock Average falling for the fifth day straight due to concerns of deflation, investors seemed to be turning back to the yen as a safe haven currency.

At 23:50 GMT today, Japanese trade balance figures will be released. With most analysts predicting a positive number, traders can take these figures as an indication of where the yen is moving. If the predictions do indeed come true, traders can expect the JPY to further its gains, as there is a positive correlation between export demand and currency demand.

Crude Oil – Crude Prices Level Out

In light of the weak dollar, oil was able to make impressive gains in trading yesterday. Prices approached $80.00, but amid concerns about demand and inventories, oil retreated from its gains and prices stabilized at $77.55. With the dollar apparently set to rebound, and U.S. stock markets set to wind down in the coming days ahead of Thanksgiving, it is not very likely that the commodity will make any serious moves.

News coming from Iran, (the worlds fourth largest producer of crude oil), that it is testing a new missile defense system also played a role in the increase in prices. Uncertainties in the Middle East such as this one, may impact the direction oil prices are moving, but without a dramatic news event in the immediate future, the commodity should remain stable.

Technical News

EUR/USD

The typical range trading on the daily chart continues. Both the 4-hour RSI and Slow Stochastic are floating in neutral territory. However, the pair currently sits near the upper border of the weekly chart’s RSI, suggesting a downward correction may be imminent. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.

GBP/USD

There is a fresh bullish cross forming on the daily chart’s Slow Stochastic indicating a bullish correction might take place in the nearest future. The upward direction on the hourly chart’s Slow Stochastic also supports this notion. Going long with tight stops might be the right strategy today.

USD/JPY

The 4-hour chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the weekly chart’s RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.

USD/CHF

The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic providing us with mixed signals. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.

The Wild Card – Gold

Gold prices rose significantly in the last week and peaked at $1165.45 for an ounce. However, the daily chart’s RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

The U.K housing market has taken center stage over the last couple of months, as economic data has been showing that the sector is slightly improving. According to recent results, housing prices turned during August and presented a 0.2% increase in October, which brought the rate of house growth to -4.2%. Even though the housing market still has a long way to go, until it presents a full recovery, the sector is now being scrutinized by investors, as further improvement could lift sentiment, regarding the future outlook of the U.k’s economy.

Once again the U.K will release its BBA mortgage Approvals and Business investment figures today. The mortgage approvals result could spark volatility during the session as the number is expected to show that UK mortgage approvals will rise to 44,000 in October from 42,100 in September. Even though the news could be bullish for the Pound, the numbers in the re-mortgage market are still weighing on investor’s sentiment.

Technical Analysis – A Possible Trade Opportunity

Although the GBP/USD has been finding hard to climb higher over the last week, bouncing back and forth, today’s data could give investors a clearer picture of the upcoming trend. According to recent analysis, one can see that the GBP/USD has returned back into range, but is still trading around resistance.

Analysts Expectations for Wednesday 24^th November

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© 2009 eToro Blog.

By Robert Prechter

The following article is an excerpt from Robert Prechter’s Elliott Wave Theorist. For more information from Robert Prechter on bank safety, download his free report, Discover the Top 100 Safest U.S. Banks.

Perhaps the single greatest reason for the unbridled expansion of credit over the past 50 years is the existence of the Federal Deposit Insurance Corporation, another government-sponsored enterprise created by Congress. The coming rush of bank failures is an outcome made inevitable the very day that Congress created the FDIC. The reason is that the creation of the FDIC allowed savers to believe that their deposits at banks are “insured” against loss.

But the FDIC is not really an insurance company. No enterprise, absent fraud, could possibly insure all the banking deposits in a nation. Nor does the FDIC do so, despite its claims. The FDIC is like AIG, the company that sold too many credit-default swaps. It contracted for more insurance than it could pay upon. Because depositors believe the sticker on the door of the bank, they have abdicated their responsibility to make sure that their banks’ officers handle their deposits prudently. This abdication allowed banks to lend with impunity for decades until they became saturated with unpayable debts.

Today, most banks are insolvent, and the FDIC is broke. This condition is deflationary for three reasons: (1) Banks are coming to realize that the FDIC cannot bail them out in a systemic crisis, so they have become highly conservative in their lending policies, as described above. (2) The main way that the FDIC gets its money is to dun marginally healthy banks for more “premiums” (meaning transfer payments) to bail out their disastrously run competitors. The more money the FDIC sucks out of marginally healthy banks, the less money those banks have on hand to lend, which is deflationary. (3) The banks that have to cough up all this money will become more impoverished at the margin, so banks that otherwise might have survived a credit crunch will be thrown even closer to the brink of failure. This is another deflationary risk.

A friend of mine whose family owns a bank told me that the FDIC recently raised its 6-month assessment from $17,000 to $600,000. In the FDIC’s latest announcement, it is considering requiring banks to pre-pay three years’ worth of “premiums,” i.e. triple the normal annual fee in a single year. It will be a miracle if the money lasts through 2010. When these funds are gone, the FDIC will have two more options: to issue its own bonds and pressure banks to buy them; and to tap its “credit line” of up to half a trillion dollars with the U.S. Treasury. It’s the same old solution: take on more new debt to back up failing old debt. More debt will not cure the debt crisis.

Meanwhile, the FDIC is contributing to the deflationary trend. It has “tightened rules on required capital levels,” which forces banks’ loan ratios to fall; and it has “extended its extra monitoring of new banks from the first three years of operation to seven years” (AJC, 11/19), meaning that banks will now have to wait four additional years before they can go crazy with loans.

For more information from Robert Prechter on bank safety, download his free report, Discover the Top 100 Safest U.S. Banks. You’ll learn how to find a safe bank, the critical difference between lending and banking, tips on international banking, and more.

By CountingPips.com

Canadian Retail Sales increased by more than expected in September according to the monthly report released by Statistics Canada today. Retail sales increased by 1.0 percent to C$34.9 billion in September following a revised increase of 1.0 percent in August.  The rise in retail sales surpassed economic forecasts that were predicting only a 0.6 percent increase for the month. Canada’s retail sales have now increased in seven out of the last nine months.

Core retail sales, excluding automobile sales, advanced by 1.1 percent in September following a revised gain of 0.7 percent in August. The gain in core sales surpassed forecasts that were expecting a 0.4 percent increase.

Contributing to the rise in the retail sales numbers was an increase in the automotive sector by 1.0 percent with used & recreational motor vehicle & parts dealer sales increasing by 2.0 percent for the month. The food and beverages stores sector saw a 1.3 percent rise while furniture, home furnishings & electronic stores increased by 1.2 percent and pharmacies and personal care stores advanced by 0.5 percent. Negatively contributing to the monthly retail sales were decreases in General merchandise stores and miscellaneous retailers also saw gains of 1.9 percent and 1.7 percent, respectively for the month.

By Rita Ruvinski – The EUR strengthened for the first time in 3 days versus the Japanese yen on speculation the European Central Bank (ECB) will decide as soon as next month to stop some of its emergency stimulus measures.

The European currency also gained strength against the U.S dollar on speculation the Federal Reserve will keep its stimulus measures in place and ensure Interest Rates remain low. The EUR advanced on speculation that the economic recovery remains in place spurred investors to buy higher-yielding assets. The currency was trading at $1.4981, up from $1.4851 late Friday . At the same time, against the Yen the Euro-Zone currency rose to Y133.21 from Y132.26.

The European currency could garner further support as provisional purchasing managers’ indices on the Euro-Zone manufacturing and services sector sectors released at 0858 GMT showed a further improvement in the economic activity.

Market players will be watching for ECB President Jean-Claude Trichet speech, due at 13:00 GMT. The president of the European Central Bank has moved the EUR/USD in many occasions. Recently he has advocated a strong dollar. Trichet has said before that he would make sure extraordinary liquidity measures would be phased out in a timely and gradual fashion. The market remains highly sensitive to any Trichet’s comments on liquidity, his speech will move the market either way.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

While all the major currencies continue to provide mix results, there is still one extremely strong in the market – the bullish Gold. During last night gold reached over$1,163 an ounce, making another all time high. However, a recovery of the Dollar, if indeed takes place, has the potential to put an end to Gold’s uptrend.

Economic News

USD – Is the Dollar Recovering?

The Dollar corrected some of its losses against the Euro and the Pound during last week’s trading session. The Dollar gained about 200 pips against the Euro, and gained almost 400 pips against the Pound as the GBP/USD pair dropped to the 1.6470 level.

The main reason for the Dollar’s recovery seems to be the positive data that was published from the U.S economy. The Retails Sales rose by 1.4% in October, beating expectations for a 1.0% rise. In addition, the Long-Term Purchases report for September delivered much better figures than forecasted. This report measures the difference in value between foreign long-term securities purchased by U.S citizens to the ones purchased by foreigners. The surprising positive figures showed that foreigners have increased their investments in the U.S economy, and this usually tends to strengthen the Dollar. Also last week, the Core Consumer Price Index (CPI), which measures the change in the price of goods and services purchased by consumers, excluding food and energy, rose by 0.2%. The increasing CPI is one of the greatest signs that the U.S economy is indeed recovering.

As for the week ahead, many interesting publications are expected from the U.S economy. Traders are advised to follow the following news events: The Existing Home Sales, the CB Consumer Confidence, the Unemployment Claims and the New Home Sales. As for today, the most significant publication is likely to be the Existing Home Sales report. Positive end result will show that the U.S housing sector is recovering as well, and has the potential to boost the Dollar.

EUR – Euro’s Bullishness Halts

The Euro dropped against most of the major currencies during last week’s trading session. The Euro continued to drop against the Yen, and the EUR/JPY dropped below the 132.0 level. The Euro also fell against the Dollar.

The Euro’s drop seems to be a direct result to the disappointing data published from the Euro-Zone during the past week. The European Consumer Price Index dropped by 0.1% in October, and thus marked the fifth consecutive drop of this indicator. This is a warning sign that the European nations are far from being fully recovered. In addition, the European Current Account, which measures the difference in value between imported and exported goods and services, unexpectedly dropped in October.

Analysts have forecasted that the Current Account will stand on 0.6B on October, yet the end result showed a -5.4B figure. This means that foreign investments in the Euro-Zone have decreased, and that was enough to weaken the Euro.

As for the following week, a batch of data is expected from the Euro-Zone. The most impacting publications look to come from the German economy, as Germany holds the largest and strongest economy in the Euro-Zone. As for today, the economic calendar is filled with publications from the Euro-Zone. Analysts forecast relatively positive figures for the German and the French indicators. If the actual result will reach forecasts, the Euro could be supported as a result.

JPY – Yen Strengthens on Positive Japanese Data

The Yen rallied against all the major currencies last week. The Yen’s most remarkable appreciation was against the Pound, as the GBP/JPY pair dropped close to 400 pips. The Yen also saw rising trends against the Dollar and the Euro.

It seems that the main reason for the Yen’s strengthening is the positive data from the Japanese economy. The Preliminary Gross Domestic, which measures the change in the inflation-adjusted value of all goods and services produces by the economy, rose surprisingly by 1.2%. The unexpected rise showed that the Japanese economy might be doing better than estimated by analysts. The Yen is relatively quite strong, yet for as long as the Japanese economy will show signs for recovering, the Yen is likely to rise further. Also last week, the Bank of Japan decided to leave the Japanese Interest Rates at 0.10%, the lowest rate in the industrial world. However, this had a muted impact over the Yen, probably due to the fact that all the other major economies have also prevented hiking rates so far.

Looking ahead to this week, many impacting news events are expected from the Japanese economy. The economic publication which might have the strongest influence on the market looks to be the Trade Balance scheduled for Tuesday. The Trade Balance measures the difference in value between imported and exported goods. Considering that the Japanese economy relies greatly on its export, a positive figure has the potential to boost the Yen.

OIL – Oil’s Range Trading Continues; Tension in the Middle East Rises

Crude Oil saw a rather volatile session during last week’s trading. By the beginning of the week, crude oil rose to $80.85 a barrel. However close to the weekend oil dropped back down, and reached as low as $76.80 a barrel.

Currently, oil is back on a rise, and a barrel of crude oil is traded for over $78 a barrel. The main reason for the oil’s recovery appears to be the growing tension between Iran and the Western nation. The nations have failed to reach agreement regarding Iran’s nuclear facilities, and in addition the Iranian military is beginning a large scale air defense drills. It seems that if the Middle East tension will grow further, the prices of oil are likely to increase as well.

As for the week ahead, traders are advised to follow news updates from the Middle East as they are likely to have a significant impact on the prices of crude oil. In addition, traders are advised to follow the major economic publication from the U.S, as the value of oil is largely affected by them.

Technical News

EUR/USD

After reaching the 1.4950 level, a technical correction took place today, and the pair is currently traded around the 1.4920 level. However, a bullish cross is taking place at the 4-hour chart’s Slow Stochastic, suggesting that a bullish movement could be initiated. Going long with tight stops might be the right strategy today

GBP/USD

This pair shows no clear indication of direction for the moment. Nevertheless, there is one signal which does appear clearly. The Bollinger Bands on the hourly chart are tightening and the MACD on all charts is near 0, indicating a volatile movement is impending. When the price jump occurs, entering positions to ride the wave will be a wise choice.

USD/JPY

The hourly chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the daily Chart’s RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.

USD/CHF

There is a very distinct bearish channel forming on the hourly chart, as the pair is now floating in its lower section. In addition, all oscillators on the 4-hour chart are pointing down, suggesting that the downtrend might extend. Going short might be the right strategy today.

The Wild Card – EUR/GBP

There is a very accurate bullish channel forming on the 4 hour chart, as the pair has consecutively appreciated for the past 4 days. Currently, as the RSI on the daily chart is floating above the 50 line and the Slow Stochastic is pointing up, the pair might extend its bullish trend. This might be a great opportunity for forex traders to join a very popular trend.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

November’s secondary trend stalled towards the end of the week, as both the slide in the Dollar and the rally in the equity markets came to an abrupt halt.  The dollar index found support throughout the week after bouncing higher during Monday’s session. Even though economic news still favored lower levels for the U.S Dollar, the Dollar held its ground, which coincided with a turn in the equity markets. For the week, the S&P 500 index was down 4 points of .4% closing at 1089.

The week started off on a positive note as the broad US equity index broke through the 1,100 mark setting a high for the year 2009 at 1,110 points.  Global markets where lifted by positive news out of Asia.

Japan’s economy grew more than expected in the third quarter, at the quickest pace in more than two years. GDP annualized rose 4.8%, up from the 2.7% pace in Q2 and significantly quicker than the 2.9% pace that was expected by analysts. The economy expanded 1.2% in Q3 from the previous quarter, compared with 0.7% pace in Q2.

The main driver was the pickup in domestic demand boosted by government stimulus programs. Though the data was clearly encouraging, the numbers released throughout the week emphasized that cutting back in government spending could hamper growth in upcoming months.

On Tuesday and Wednesday a wave of U.S data was released, which caused major volatility on the Forex and equity market. On Tuesday US headline PPI rose 0.3% m/m in October (core fell -0.6%).  The market was expecting the headline to increase 0.5% and the ex-food and energy component to rise 0.1%.  The data provide little evidence that the US dollar’s weakness and the rise in import prices in Oct are feeding through to producer prices.

Wednesday, the Labor Department released the CPI figure.  The seasonally adjusted consumer-price index rose 0.3% in October, compared September’s 0.2% increase. The core CPI, which strips out food and energy, advanced by 0.2% in October, the same increase seen in September. housing starts data released on Wednesday decreased 10.6% to a seasonally adjusted 529,000 annual rate compared to the prior month, while economists surveyed by Dow Jones Newswires had forecast a 1.7% increase. The 10.6% fall carried construction to the lowest point in six months.  Meanwhile, building permits in October fell 4.0% to a 552,000 annual rate. Economists had expected permits to rise by 0.9% to a rate of 580,000. One must note that building permits are a sign of future construction. The numbers now show that despite all the government’s efforts the housing sector is still dealing with its share of problems. In addition, when taking a glance at the homeowner vacancy rates one can see that the numbers have shot up – this is a clear sign that there is still plenty of inventory on the market.

The equity markets came under significant pressure on Thursday as the dollar began to rally.  Market participants were apathetic with regard to jobless claims.  The number of U.S. workers filing new claims for jobless benefits last week remained unchanged from the prior week. According to the Labor department, initial claims for jobless benefits remained steady at 505,000 in the week ended Nov. 14. The previous week’s level was revised to 505,000 from 502,000.

On Friday The European Central Bank Friday took its first small step towards unwinding the unprecedented stimulus measures installed to rescue the financial system after last year’s global credit crisis.  The bank said in a surprise announcement that it will tighten the standards under which it accepts newly issued asset-backed securities as collateral from banks for its refinancing tenders from March 1, 2010. It also said it would extend the tighter standards to all ABS from March 1, 2011.

Forex:

Fed Chairman Bernanke’s comments on Friday about the dollar revealed a clear picture regarding possible price activity, expressing his concerns about the economy rather than the value of the Dollar.  In his speech Bernanke outlined the conditions under which the dollar’s movement would become more relevant to the conduct of monetary policy — if the change of its value jeopardized the Fed’s ability to achieve the dual mandate of full employment and price stability. It is this commitment to its dual mandate and to what Bernanke called the “underlying strengths of the US economy” that will “help ensure that the dollar is strong and a source of global financial stability.”  Bernanke took the chance in his speech to respond to recent comments from officials at the weekend APEC meeting that claimed that the low US interest rates and weak dollar were financing a “huge carry trade” that was having a “massive impact on global asset prices”. Bernanke essentially indicated that US monetary policy would be set according to the needs of the domestic economy (in terms of its dual mandate) rather than global capital flows.

Across the other side of the Atlantic, the Sterling came under pressure this week as investors preferred to jump out of riskier assets.  The BoE’s prediction that inflation would pick up came to pass with England’s CPI results (up 1.5% y/y pace from 1.1% in Sept). According to analysts, CPI is expected to post further gains in coming months given the base effects from last year; recent gains in fuel prices and an expiring VAT tax.  Despite the possible higher prices, the BOE warned that while inflation could be volatile in coming months, exceeding the 2% BOE’s target now was not the time to begin removing accommodation.

One must recall that after the release of the minutes from the Bank of England’s most recent meeting Nov 5, traders turned sour on the GBP. The Monetary Policy Committee voted to increase the bond-buying program by £25 billion, taking it to a total of £200 billion since inception. Investor’s now fear that the band could opt for further stimulus to help the U.K economy, something that could batter the Pound. Governor King said last week that he had an ‘open mind’ on whether further bond purchases would be needed.

On the housing front, UK house prices slipped back in November, breaking a run of three months of advances as demand dimmed in the run-up to Christmas. Rightmove said sellers reduced prices by 1.6% from a month earlier when they climbed 2.8%. Prices are 1.6% higher than they were a year ago, but still down more than 6% from the peak in May 2008. The continuing concerns about the flow of lending in the economy, not just though mortgage lending but also corporate credit, were reinforced by a report from the British Chambers of Commerce last week that said credit availability was getting worse.

From a technical point of view the Pound finished below its 20 day moving average, after dropping back into recent range.

Over in Australia, the Reserve Bank of Australia described the speed of prospective rate hikes in coming months as an ‘open question.’ The minutes from the last meeting Nov 3 revealed some caution from the policymakers in terms of balancing risks of inflation against the possibility of putting a brake on a vulnerable recovery, but failed to say whether recent rate hikes were coming to an end. According to officials, business and consumer confidence could prove ‘fragile’ as the effects of government stimulus programs and handouts fade. To date futures are suggesting a more than a 50% chance of a hike to 3.75% at the RBA’s next meeting.

Technically the AUD/USD seems to have held its 20 day moving average and is now trading on trend line support.

The Week Ahead

Next week the markets will be watching the EMU purchasing managers index to start the week, followed by US Existing Homes Sales.  On Tuesday EMU Industrial Order, will precede US GDP, Personal Consumption and Spending.  On Wednesday, the UK GDP will start off the day, with US Durable Goods and Jobless Claims to follow.  Thursday is a light day for economic activity and the US markets will be closed for US Thanksgiving.  On Friday EMU Consumer Confidence with close the week.

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By Fast Brokers – Gold is finally experiencing a period of consolidation following its incessant rise to $1150/oz.  Gold is consolidating around the $1140/oz level, right along our 3rd tier uptrend lien while setting lower highs in the process.  Gold’s weakness comes in reaction to pullbacks in the EUR/USD, AUD/USD, and GBP/USD.  Additionally, the S&P futures have ducked back below their highly psychological 1100 level.  All of these correlative forces are trimming gains and gold and allowing bulls to take a breather as investors closely monitor recent uncertainty in the FX markets.  That being said, despite heavy losses in the Cable, the EUR/USD and AUD/USD have experienced what could be considered healthy pullbacks at this point.  However, should losses in these currency pairs accelerate investors could opt to take further profits in gold since the precious metal tends to exert a negative correlation with the Dollar.  After all, some sizable profit taking in gold wouldn’t be abnormal because it has been on a tear since breaking through $1100/oz.

Meanwhile, investors are eagerly awaiting next week’s economic data, most notably housing data and U.S. Prelim GDP on Tuesday.  Should global econ data continue to disappoint, investors may choose to divest from riskier assets including gold since it tends to be negatively correlated with the Dollar and positively correlated with the S&P futures.

Technically speaking, we’re still hesitant to place a downtrend line on gold until we witness further consolidation/profit-taking.  That being said, gold’s psychological $1150/oz continues to serve as the only viable topside technical due to the lack of historical perspective.  As for the downside, gold has multiple uptrend lines serving as technical cushions along with 11/16 lows and the psychological $1100/oz level should conditions deteriorate over the near-term.

Present Price: $1139.20/oz

Resistances: $1143.05/oz, $1145.61/oz, $1150.09oz, $1152.65/oz

Supports: $1137.60/oz, $1134.71/oz, $1130.54/oz, $1127.24/oz, $1123.51/oz, $1118.39/oz

Psychological: $1150/oz, $1100/oz

Market Commentary provided by Fast Brokers.

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