{"id":14246,"date":"2010-10-20T09:22:33","date_gmt":"2010-10-20T13:22:33","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=14246"},"modified":"2010-10-20T09:22:33","modified_gmt":"2010-10-20T13:22:33","slug":"forex-daily-market-commentary-136","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/10\/20\/forex-daily-market-commentary-136\/","title":{"rendered":"Forex Daily Market Commentary"},"content":{"rendered":"

By GCI Forex Research<\/strong><\/p>\n

Fundamental Outlook at \t\t\t0800 GMT (EDT + 0400)<\/strong><\/p>\n

USD<\/span><\/em><\/strong><\/p>\n

Risk appetite finally stabilized during the Asia session in the \t\t\taftermath of yesterday’s surprise policy hike by China. EURUSD \t\t\ttraded 1.3698-1.3811, USDJPY 81.32-81.67. The dollar has been slowly \t\t\tgiving back yesterday’s gains ever since Shanghai equities opened \t\t\tand quickly recovered their poise. Although several Fed officials \t\t\tspoke, there was little market impact given that many of their views \t\t\ton further easing were already known. Fed Presidents Evans, Dudley \t\t\tand Lockhart continued to support further easing while Fisher and \t\t\tKocherlakota continued to sound caution on more action. Lockhart, a \t\t\t2011 FOMC alternate and 2012 voter, mentioned a pace of $100 bn of \t\t\tpurchases a month is among the range of considerations. Chairman \t\t\tBernanke did not offer any new insights. Fed Governor Duke reminded \t\t\tmarkets that a further round of easing on Nov. 3 is not yet a done \t\t\tdeal, and that lowering the interest rate paid on excess reserves is \t\t\tanother policy option. Investors expectations for more easing remain \t\t\tin place but calibration of those expectations is key, as the \t\t\tquantity and duration of more easing are moving targets. Press \t\t\treports that a large US asset manager and the New York Fed are \t\t\tlooking to put-back bad mortgages to a major US bank contributed to \t\t\tthe atmosphere of risk aversion earlier, and mixed data did little \t\t\tto help investor sentiment as housing starts were better than \t\t\texpected and housing permits fell more. Between now and the Nov. 3 \t\t\tFOMC meeting, we expect pressure to remain squarely on the dollar.
\nEUR<\/span><\/em><\/strong><\/p>\n

ECB Executive Board Member Stark noted that there are risks \t\t\tassociated with the ECB’s bond purchases, and that the ECB must \t\t\tavoid intervening in functioning markets. He said that the bond \t\t\tbuying program risks becoming ‘quasi fiscal’ in nature, and that low \t\t\tinterest rates reduce the incentive for fiscal consolidation. These \t\t\tcomments bring Stark a little closer to ECB Governing Council Member \t\t\tWeber’s stance on the matter, but for now Weber is the only \t\t\tpolicymaker who has publicly called for the program to be disbanded.
\nStark added that he sees clear signs of normalization in money \t\t\tmarkets and cautioned that while there is no apparent currency war \t\t\tyet, there is the risk that ample liquidity could trigger more \t\t\tdefensive responses. Weber said it is too early to call an end to \t\t\tthe crisis, echoing Trichet’s comments at the latest press \t\t\tconference, but his comments focused more on regulatory issues than \t\t\tmonetary policy.
\nThe German ZEW survey was much stronger than expected at 72.6. \t\t\tHowever, the boost to the euro was limited as markets continue to \t\t\tassess whether QE2 is now fully priced and reduced risk-seeking \t\t\tworked against the euro.
\n GBP<\/span><\/em><\/strong><\/p>\n

Broader dollar strength kept sterling under pressure but the \t\t\tcurrency has its own obstacles to come in the next 24 hours. The BoE \t\t\tMPC minutes should show if a 3-way split has occurred, with \t\t\tpolicymakers Posen and Sentence possibly on opposite ends of the \t\t\tpolicy spectrum, and headlines from the Comprehensive Spending \t\t\tReview will be watched as fiscal austerity could hamper growth and \t\t\tweigh on sterling.
\nBoE Governor King said monetary policy is still a potent weapon but \t\t\tthat policy must balance risks to inflation and the MPC is conscious \t\t\tof risks to inflation expectations. He saw upside and downside risks \t\t\tto inflation though he did say it could be some time before \t\t\tinflation falls to target. King also said the weaker pound supports \t\t\trebalancing of the economy and that the G7 willingness to work \t\t\ttogether “has ebbed.” He also mentioned that M4, pay and demand \t\t\tgrowth are likely better guides to future inflation. M4 data is also \t\t\tdue today.
\n JPY<\/span><\/em><\/strong><\/p>\n

BoJ Deputy Governor Nishimura observed that the yen’s rise is a \t\t\tmajor downward risk to the economy, and that it may contribute to \t\t\tdeflationary forces. IMF First Managing Director Lipsky met with \t\t\tFinance Minister Noda, and said that the BoJ’s recent easing was a \t\t\twelcome move. Noda said that FX intervention was not discussed at \t\t\tthe meeting. Deputy Cabinet Secretary Fukuyama said there has been \t\t\tno change in Japan’s position on FX intervention.
\nNishimura added that China’s rate hike yesterday is a good decision \t\t\tthat would help ensure long and stable growth.
\n CAD<\/span><\/em><\/strong><\/p>\n

The BoC kept its policy rate unchanged as expected and revised down \t\t\tits growth outlook for 2010 and 2011, also in line with \t\t\texpectations. But the decision to tune down inflation forecasts was \t\t\tless expected, as the BoC pushed back its time-frame for when it \t\t\tsees the output gap closing. The BoC kept in place its policy \t\t\tguidance, saying again that further reductions in monetary stimulus \t\t\twould have to be “carefully considered” and seemingly expanded its \t\t\tview of downside risks. With the BoC on hold for now, the CAD will \t\t\tcontinue to lose luster to the other dollar-bloc currencies as a \t\t\trelative value G10 play. The BoC Monetary Policy Report will be \t\t\treleased and should echo the changes outlined in the policy \t\t\tstatement.
\n
\nTECHNICAL OUTLOOK<\/span><\/strong><\/p>\n


\n<\/span><\/strong> USDCAD 1.0380 tough resistance.
\nEURUSD BULLISH Break of 1.3775 reaction low exposes 1.3637\/1.3559 \t\t\tsupport zone.
\nUSDJPY BEARISH Next support at 79.75 ahead of 77.91. upside \t\t\tpotential capped at 83.03.
\nGBPUSD BULLISH Room toward support at 1.5606, but as long as it \t\t\tholds, view pullback as correction.
\nUSDCHF BEARISH Rise through 0.9729 exposes 0.9918 breakout low. Next \t\t\tbig support below0.9463 at 0.9225.
\nAUDUSD BULLISH Sharp decline yesterday exposed 0.9542 reaction low. \t\t\tMomentum is picking up; expect recovery towards 1.0004 trend high.
\nUSDCAD BEARISH Tough resistance in 1.0380\/1.0407 area. Initial \t\t\tsupport at 1.0162 ahead of 0.9981.
\nEURCHF BULLISH Upside potential holds below 1.3494; break of the \t\t\tlevel would expose 1.3665. Initial support lies at 1.3265 ahead of \t\t\t1.3072.
\nEURGBP BULLISH Momentum is positive; expect gains to target 0.8840 \t\t\twith scope for 0.8894 and 0.9039 next. Near-term support holds at \t\t\t0.8689.
\nEURJPY BULLISH Move below 111.77 exposes 110.66 ahead of 107.73. \t\t\t \t\t\t \t\t\tUpside capped at 115.68.<\/p>\n

Forex Daily Market Commentary<\/strong><\/em> provided by<\/em><\/strong> GCI Financial Ltd<\/strong><\/a>.<\/strong><\/p>\n

GCI Financial Ltd (\u201dGCI\u201d) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (\u201dForex\u201d) 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 (\u201dCFDs\u201d) 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.<\/p>\n

DISCLAIMER: GCI\u2019s 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.<\/p>\n","protected":false},"excerpt":{"rendered":"

The BoC kept its policy rate unchanged as expected and revised down its growth outlook for 2010 and 2011, also in line with expectations. But the decision to tune down inflation forecasts was less expected, as the BoC pushed back its time-frame for when it sees the output gap closing. The BoC kept in place its policy guidance<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-14246","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/14246","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=14246"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/14246\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=14246"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=14246"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=14246"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}