InvestMacro FX

By GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

The dollar continued to weaken in the wake of the FOMC as markets priced in the prospect of a further round of quantitative easing later this year. Lower US yields continued to weigh on USDJPY. EUR and GBP continued top rise vs. the USD as did AUD and NZD. The exception was CAD, which lost some ground to the USD today as a result of a weaker than expected Canadian retail sales result. EURUSD traded 1.3271-1.3441, while USDJPY traded 84.27-85.18. US equity markets closed lower for the second consecutive day following Tuesday’s FOMC announcement.

EUR

The Portuguese bond auction was relatively firm. Bid to cover ratios came in at 4.9x and 3.5x for the 10 year and 4 year bonds respectively, though the yields were both higher. Spread of Ireland and Portugal over bunds had already risen sharply ahead of the auction, clearly showing that even though investors are still willing to fund these economies, the challenges remain immense.
Industrial new orders were much weaker than expected at -2.4%m/m (cons. -1.4%m/m) and +11.2%y/y (cons. 16.2%). Euro-zone consumer confidence for September was unchanged from its August reading at -11. Ahead Thursday, Germany’s PMI for manufacturing and Services are released, as well as Euro-area PMI services and manufacturing. The German Ifo will be released on Friday.
JPY

BoJ Board Member Miyao said that the BoJ would continue to provided ample liquidity but has no preset idea about future policy. Miyao said that an increase in the pace of monthly JGB buying is one option. While the BoJ has traditionally been less then enthusiastic in its assessment of the benefits of past episodes of quantitative easing, intriguingly Miyao said that how the policy is assessed today could differ from how it was assessed in the past. This is the clearest sign yet that further BoJ easing could be on the cards in the near term.
On the back of the falling dollar, PM Kan reiterated Japan’s active plans for intervention in the currency markets, stating that intervention would be unavoidable” if the market pushes JPY stronger. It appears that policymakers have set a clear floor for the currency which will be habitually maintained if and when it is breached.
GBP

BoE minutes fell broadly in line with expectations, showing an 8-1 vote split, with Andrew Sentence again calling for a rate hike. Sentence effectively revealed this information in an interview last night where he stated that the UK should “gradually move interest rates up in a slow way which will not destabalise business confidence”.
CAD

Canada’s retail sales for July came in below expectations, falling 0.1% m/m at the headline and 0.4% m/m for the ex auto figure. This weighed on CAD vs. the USD during the trading session, but was not enough to break the current CADUSD trading range.

TECHNICAL OUTLOOK

EURUSD resistance at 1.3509.
EURUSD NEUTRAL Climb through 1.3334 has scope for 1.3509 and 1.3818 next. Near-term support comes in at 1.3268 ahead of 1.3159.
USDJPY NEUTRAL Pullback from 85.93 targets 84.05 ahead of 82.88.
GBPUSD BULLISH Momentum is positive; move above 1.5729 would expose 1.5999 key high. Support holds at 1.5297 holds.
USDCHF BEARISH Break through 0.9933/18 region reinstates the bearish trend. Next support lies at 0.9786 ahead of 0.9625. Resistance at 0.9983 intraday high.
AUDUSD BULLISH Move above 0.9850 would open up the way towards 1.0211 Fibonacci level. Near-term support is at 0.9442 ahead of 0.9309.
USDCAD NEUTRAL Choppy action holds between 1.0108 and 1.0509.
EURCHF NEUTRAL While resistance is at 1.3391 ahead of 1.3482, support comes in at 1.2991.
EURGBP NEUTRAL Continues to rally towards 0.8609, with scope for 0.8774 next. Support defined at 0.8459 ahead of 0.8390.
EURJPY NEUTRAL Break of 114.74 would put odds in favour of positive tone. Next resistance at 116.68. Support holds at 110.66 ahead of 107.73.

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

By Russell Glaser – The dollar continues to fall as traders sell the dollar in light of the Fed’s recent comments that open the door for more quantitative easing. However, the euro is rising despite a selloff in equities.

Yesterday the Dow Jones Industrials finished the day down 0.2%. Despite the down day for equities, the dollar was also weaker with the euro and the Swiss franc putting in a strong performance.

Today traders are going to be eyeing data releases in the US for direction in the FX markets.

USD – Unemployment Claims – 12:30 GMT
Expected: 451K. Previous: 450K.

The weekly data for new unemployment benefits may surprise the market with a positive outcome, helping to increase risk appetite and a rise in the rate of the EUR/USD. Traders should be targeting their EUR/USD bets at 1.3510.This level is the 50% Fibonacci retracement from the 2009 high. Support is found at the height of the June to August bullish move at 1.3330.

USD – Existing Home Sales – 14:00 GMT
Expected: 4.11M. Previous: 3.83M.

This report measures the annualized number of residential buildings that were sold in August. If the report comes in positive, it is typically dollar positive. But this time we may see the report serve to increase risk taking and provide a boost to the weakened US equity markets. This would in turn spur traders to sell the dollar and buy higher yielding currencies such as the Aussie dollar. The AUD/USD could rise to yesterday’s high just below the 0.9600 level.

Forex Market Analysis provided by ForexYard.

© 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

The US dollar traded near a five-month low versus the EUR before a U.S. report today that may show existing home sales are close to a 10-year low, adding to signs the world’s largest economy is struggling to recover.

Economic News

USD – US Dollar Extends Losses

The US dollar fell against most of the major currencies on Wednesday, a day after the Federal Reserve said it was ready to take further action to boost the U.S. economy and fend off any deflationary threats. As a result, the dollar fell to its lowest level versus the yen since Japan intervened last week and closed around 84.50. The dollar experienced similar behavior against the EUR to trade at session highs above 1.3400.

The U.S. Federal Reserve’s policy-making open market committee on Tuesday set the tone after it said it was prepared to take new stimulus measures if necessary. While the Fed left interest rates at record lows, it suggested further credit easing in a statement. Those measures would likely include buying treasury bonds, causing the market to brace for further dollar losses. The Fed comments will likely keep the dollar weak in the near-term, as the bank’s stance is expected to keep downward pressure on U.S. interest rates, analysts said.

Today’s Unemployment Claims and Existing Home Sales releases are expected to have a strong impact on the US currency. Any result could be a surprise, and the dollar could go either way as a result. In any case, traders are unsure how the market will react to today’s data. A weak report could feed risk aversion, boost Treasuries and actually aid the US dollar. Then again, a better than expected result might be seen as a sign of relative US economic strength, and lift the dollar. Or it could also encourage risk-taking and aid commodities and higher-yielding currencies at the dollar’s expense.

EUR – EUR/USD Hits 5-Month High

The EUR experienced a bullish trading session yesterday, as it appreciated in most of its major currency pairs. The 16-nation currency extended gains versus the dollar during yesterday’s trading session, rising to its highest level in five months to trade above 1.3400 amid a broad sell-off in the USD. The European currency finished around 60 pips higher against the JPY to finish yesterday’s trading session at the 113.30 level.

The pound slipped against the EUR on Wednesday to the lowest level since May, after the report showed the British budget deficit widened in August more than expected, increasing the possibility of further budget spending cuts. The EUR/GBP reached today 0.8560, the highest level since May 28th, after it dropped to the intraday low of 0.8462.

The UK public sector net borrowing was £15.9 billion in August, compared to the borrowing of £14.1 billion in a year ago. The current budget posted the deficit of £13.3 billion in August. Analysts say that the pound may fall further versus the EUR.

JPY – Yen Makes Big Gains on Dollar

The Yen rose on Wednesday to its highest level against the dollar since Japan intervened last week, fuelling speculation of more intervention after the Federal Reserve raised expectations it would print more dollars to help the U.S. economy. The USD/JPY fell yesterday as low as 84.26 before correcting itself. Currently the pair is trading around the 84.60 level.

Top Bank of Japan officials flagged rising risks to the nation’s growth as the yen climbed in the aftermath of the US Federal Reserve signaled its willingness to consider more monetary stimulus. The remarks came a week after Japan sold yen for the first time in six years in response to a strengthening currency that threatened to derail the economy’s recovery. The BOJ may be pressured to consider further liquidity injections after the government’s decision to intervene and the Fed’s signal it may ease more.

Many traders expect Japan to step in between 83.00 and 85.00 yen. They said the authorities had called banks to ask if they will be staffed on Thursday, a Japanese national holiday, in an apparent attempt to keep traders cautious over intervention.

OIL – Crude Oil Rises Above $75 a barrel

Oil prices rose above $75 a barrel Wednesday, boosted by a weaker dollar. But gains were limited by a report showing an unexpected rise in US supplies last week, a sign demand for crude oil may not be improving.

Oil and other commodities denominated in dollars for global trading tend to rise when the U.S. currency falls as they become cheaper for holders of other currencies. A move away from dollar-based pricing of the world’s leading commodity could further weaken the greenback.

As for today, traders should pay attention to the US Crude Oil Inventories report as it tends to have a large impact on Crude Oil prices recently, especially for the short-term.

Technical News

EUR/USD

After a strong rally over the last few days, the pair is finally seeing some downward correction with some room for the trend to continue. Looking at the daily chart, a breach of the upper Bollinger Band is evident with the RSI for the pair floating in the overbought territory. A bearish cross is evident on the 4 hour and 8 hour chart’s Slow Stochastic. Going short with tight stops may be preferred for the day.

GBP/USD

The pair is currently range trading between 1.5630 and 1.5690 with most indicators in neutral territory. The RSI for the pair floats near the overbought territory on the 4 hour and daily chart indicating some downward movement may still be expected from the pair. Going short with tight stops for the day may be advised.

USD/JPY

After a strong downward move some correction may be expected for the pair as the RSI is floating in the oversold territory on the 4 hour and 8 hour charts and a bullish cross is evident on the 8 hour chart’s Slow Stochastic. Going long for the day may be a good option.

USD/CHF

A breach of the lower Bollinger Band is evident on the daily chart with the RSI for the pair floating in the oversold territory on the 8, 4 and 2 hour charts. Furthermore, a bullish cross is evident on the 8 hour chart’s Slow Stochastic. Going long with tight stops may be advised for the day.

The Wild Card

AUD/CAD

After a long bullish run, some correction may be in store for the pair. A bearish cross is evident on the daily chart’s Slow Stochastic with the RSI for the pair floating in the overbought territory on the 4 hour, 8 hour and daily charts. Moreover, a breach of the upper Bollinger Band can be seen on the daily chart, indicating an imminent downward move. Forex traders are advised to go short for the day.

Forex Market Analysis provided by ForexYard.

© 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.

EUR/USD

Break through key pivotal resistance at 1.3332 today has sparked fresh gains through 1.3417/22, April highs, to reach 1.3438 so far. Market now looks for test of 1.3510/23, 50% of 1.5144/1.1875 decline/20 Apr high. 1.3266/32 zone supports the advance.

Res: 1.3419, 1.3438, 1.3510, 1.3523
Sup: 1.3350, 1.3300, 1.3266, 1.3232

GBP/USD

Rally off 1.5502 low failed at 1.5714, just under key 1.5728 resistance, increasing risk of lower high and fresh weakness that will re-expose 1.5502. Break above 1.5728 will confirm higher low and signal a continuation of near-term uptrend from 1.5295.

Res: 1.5685, 1.5714, 1.5728, 1.5760
Sup: 1.5600, 1.5585, 1.5569, 1.5535

USD/JPY

Extended reversal after completing the latest 82.86/85.92 ascend, breaking below 84.72/48 supports, and looking for test of 84.05, possibly 82.86 on a break. Upside, 85.20 offers immediate cap.

Res: 84.76, 85.00, 85.20, 85.51
Sup: 84.26, 84.05, 83.75, 83.34

USD/CHF

Reversal off 1.0181 broke below 0.9916, 2009 low, posted 26 Nov, extending weakness to 0.9836 so far. Bears look for test of 0.9785, ahead of possible return to the 0.9630 all-time low. Upside, 0.9931, now reverted to resistance, is expected to cap.

Res: 0.9900, 0.9931, 0.9980, 1.0014
Sup: 0.9836, 0.9808, 0.9800, 0.9785

USDCAD broke below 1.0215 support and reached 1.0191 only, the subsequent bounce had bring price above 1.0349 key resistance, suggesting that a cycle bottom had been formed on 4-hour chart, and the fall from 1.0672 had completed. Further rally is now in favor and target would be at 1.0600 area. Key support is now at 1.0191, only break below this level could indicate that the downtrend from 1.0672 has resumed, then deeper decline could be seen to 1.0150 zone.

Daily Forex Analysis

By CountingPips.com

The Canadian “loonie” dollar has been on the defensive today in forex trading as news  released showed that Canadian retail sales fell unexpectedly in the month of July. Retail sales decreased by 0.1 percent to C$35.9 billion following no change in sales for August, according to the monthly report released by Statistics Canada today. The fall in retail sales was unexpected as economic forecasts were predicting a 0.6 percent increase for the month.

Core retail sales, excluding automobile sales, declined by 0.4 percent in July following a decline of 0.6 percent in June. The decline in core sales was also unexpected and worse than the forecasts that were expecting a 0.4 percent increase.

Contributing to the slide in the retail sales numbers was a decrease in furniture, home furnishings & electronic stores by 8.4 percent in July. Electronic and appliance stores also had a declining month with a decrease of 4.9 percent while building material & garden equipment & supplies fell for a fourth straight month with a decrease of 2.3 percent. Positively contributing to the monthly retail sales report was an increase at general merchandise stores by 2.4 percent.

Canada’s Leading Indicators rise in August.

A separate report from Statistics Canada showed that the Leading Indicators index increased by more than expected in the month of August. The Leading Indicator Index, which measures future economic activity, rose by 0.5 percent in August following an increase of 0.4 percent in July. Market forecasts were expecting a 0.3 percent advancement.

Boosting the leading indicator index in August was an increase in new orders for durable goods by 5.2 percent. The business and personal services employment indicator rose by 0.4 percent while the US conference Board leading indicator also increased by 0.4 percent. On the downside, the housing index fell for fourth straight month and declined by 4.0 percent in August.

Canadian dollar falls in currency trading.

The Canadian dollar has been trading lower today in the currency markets following today’s disappointing retail sales data. The Canadian dollar also known as the “loonie”, has lost ground verses the U.S. dollar, euro, British pound, Japanese yen, Australian dollar and the New Zealand dollar.

USD/CAD Forex Chart – The US dollar has gained against the loonie from today’s opening exchange rate of 1.0241 to trading at 1.0319 this afternoon in the US trading session at 1:56pm ET. The American currency had fallen for two straight days against the Canadian currency before today’s turnaround.

EUR/USD

Break through key pivotal resistance at 1.3332 today has sparked fresh gains through 1.3417/22, April highs, to reach 1.3438 so far. Market now looks for test of 1.3510/23, 50% of 1.5144/1.1875 decline/20 Apr high. Overextended hourly conditions warn of possible correction, with 1.3266/32 offering initial support.

Res: 1.3438, 1.3510, 1.3523, 1.3545
Sup: 1.3300, 1.3266, 1.3250, 1.3232

GBP/USD

Rally off yesterday’s 1.5502 low failed at 1.5714, just under key 1.5728 resistance, increasing risk of lower high and fresh weakness that will re-expose 1.5502. Break above 1.5728 will confirm higher low and signal a continuation of near-term uptrend from 1.5295.

Res: 1.5714, 1.5728, 1.5760, 1.5820
Sup: 1.5600, 1.5585, 1.5569, 1.5535

USD/JPY

Continues to move lower after completing the latest 82.86/85.92 ascend, with today’s break below 84.72/48 supports, now looking for test of 84.05, possibly 82.86 on a break. Upside, 85.20 offers immediate cap.

Res: 85.20, 85.51, 85.80, 85.92
Sup: 84.36, 84.05, 83.75, 83.34

USD/CHF

Today’s break below 0.9916, 2009 low, posted 26 Nov, sparked fresh weakness. Bears look for test of 0.9785, ahead of possible return to the 0.9630 all-time low. Only regain of  0.9983, today’s high, would offer relief and open 1.0075 instead.

Res: 0.9926, 0.9933, 0.9980, 1.0014
Sup: 0.9808, 0.9800, 0.9785, 0.9700

By Russell Glaser – The Swiss franc continues to rally against the dollar as the pair moved past parity and today has taken out the 2009 low in a sustained downtrend that shows further signs of continuing.

The swissie has been rallying, taking out multiple support levels on its way below the 1.0000 level. Signs of a trending market appear which may make for entry good opportunities on pullbacks in the price.

Using multiple moving averages, a trader can identify the USD/CHF is in a sharp downtrend. The 200-day, 100-day, 50-day, 20-day, and 10-day simple moving averages are in a perfect order, appearing from top to bottom in this order. This is one indication of a trending market.

Another sign of the trending environment is the ADX indicator which reads 33. Anything above an output of 25 indicates a currency pair that is in a strong trend.

The moving averages and the ADX indicator are not shown on the chart below.

Now that the trending environment has been identified, entry opportunities can be found on pullbacks to known resistance levels for the USD/CHF.

Resistance is found at 1.0060, the low from September 1st. Resistance can also be located at 1.0000. This is a big round number and traders have a tendency to flock to big round numbers.

The support at 0.9915, the 2009 low was taken out today and will now act as a resistance level.

Short term price targets can be found by drawing a parallel channel line below the price action for the current downtrend. Today traders can look for the 0.9870 to come into play.

Forex Market Analysis provided by ForexYard.

© 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.

By GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

Yesterday was a quiet NY trading session until the FOMC announcement caused a boost to risk seeking sentiment. The September FOMC statement read more dovish than the August statement. While the growth outlook was unchanged, the Fed had a downgrade to its inflation assessment. The FOMC noted that “Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability.” The policy guidance sentence was changed a bit to “the Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.” The phrase “prepared to provide additional accommodation if needed” compares to the August statement language of “will employ its tools as necessary to promote economic recovery and price stability”.

EUR

Peripheral spreads tightened, following a successful Irish auction, as limited supply and domestic demand ensured it ran smoothly. The Spanish and Greek auctions were also well received. Portuguese 10y spreads fell around 6 bps, while secondary market buying in the run up to the Irish auction also helped events. The Euro reached a 2-month high versus sterling in the run-up to this, up 0.6% on the day as real-money accounts followed consensus of a solid auction. There now appears to be an emerging pattern of successful peripheral auctions and sell-offs in between.
The ECB announced that €323 mn (prev. €237 mn) in sovereign bond purchases settled last week. ECB activity in the sovereign bond space is clearly trending higher and yet bond spreads of Portugal and Ireland continue to rise steadily.
GBP

Public borrowing figures were released in the UK, sporting record numbers of £15.302bn public sector net borrowing, as higher inflation increased interest payments on index-linked gilts. Even though some of the upward EURGBP movement can be attributed to this, the bond markets were fairly unmoved by the figures, as the yearly borrowing figures seem set to fall broadly in-line.
CHF

Switzerland’s trade balance fell to CHF 0.57bn in August, as real exports declined by 1.4% m/m. However, the annualized figure was impressive at 8.6% y/y, despite the strong CHF. Money supply figures were also released, with M0 falling well below consensus at 17%, while M3 beat estimates, increasing by 6.6%. the result may raise questions about the scale of credit growth in Switzerland and whether the SNB is being too dovish.
AUD

The minutes of the RBA’s September 7 meeting echoed the hawkish sentiments expressed yesterday by RBA Governor Stevens. Our team notes that the key phrase “…higher interest rates would be required, at some point, to ensure that inflation remained consistent with the medium-term target” represents a clear escalation of hawkishness relative to the August meeting minutes. Our economists expect another 25bp hike either at the October or the November meetings, with a greater probability of a move in October.

CAD

Canada’s headline CPI came in lower than expected at -0.1%m/m and 1.7% year-on-year. The core CPI came in on expectations at +0.1%m/m and 1.6% year-on-year. Ahead tomorrow are Canada retail sales for July.

TECHNICAL OUTLOOK

EURGBP resistance at 0.8532.
EURUSD NEUTRAL Model is neutral; 1.3334 and 1.2919 mark the key near-term directional triggers.
USDJPY NEUTRAL Pullback from 85.93 has scope for 84.05.
GBPUSD BULLISH Model is bullish; while support at 1.5297 holds, expect gains to target 1.5729 ahead of 1.5999.
USDCHF BEARISH Focus is on 0.9933/18; move below this range would expose 0.9786. Near-term resistance comes in at 1.0183 ahead of 1.0392.
AUDUSD BULLISH Clearance of 0.9500 exposes 0.0.9563 and then 0.9850. Near-term support is at 0.9309 ahead of 0.9196.
USDCAD NEUTRAL Momentum is slowing; while support holds at 1.0216, resistance comes in at 1.0509 ahead of 1.0673.
EURCHF NEUTRAL Recovery found resistance at 1.3391 ahead of 1.3482 retracement level. Near-term support comes in at 1.2991.
EURGBP NEUTRAL Sustained break of 0.8532 would trigger positive trend. 0.8311 marks the near-term support ahead of 0.8142.
EURJPY NEUTRAL Break of 114.74 would put odds in favour of positive tone. Next resistance at 116.68. Support holds at 107.73 ahead of 105.44 key low.

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.