Forex News and Events:
Markets are clearly in a lull, as the lack of drivers and low liquidity has kept the majors rangebound. The EURUSD traded between 1.4980 and 1.5040, while the USDJPY traded between 86.20 and 87.50. Gold was stable for most of Asia and then saw some strong demand, as Europe opened trading up to $1194.50oz. Asian regional indexes were higher across the board, as better economic data and events out of Dubai oddly have failed to shift risk taking. Yesterday the Dubai government announced that it would not guarantee Dubai World's debt and then officials proceeded to reprimanded creditors for expecting expect a government bailout for private enterprise. However, traders now are pricing in the fact that, on the surface ,the numbers floating around should not pose a systemic risk to the broader financial system. In a surprise move, the BoJ announced an unscheduled meeting. On the announcement, speculation ran high with rumors of QE reintroduction, which were then assisted by MoF member’s pro-QE remarks. In the end, the BoJ announced the injection of liquidity (additional ¥10 trln) through 3-mth loans at 0.1%, which disappointed the market, that wanted additional purchases of JGB. This is a similar solution the BoJ provided last year. Contrary to many participants belief, this meeting was never expected to contain a FX policy adjustments (Yen Sales). Outside this fact, we are still bewildered by the strength of the JPY and the lack of concern traders have with the possibility of intervention. While a USDJPY at 86 is above Japanese policy makers pain threshold, however a move to 83-85 will pose a real threat to any domestic recovery and rhetoric will increase exponentially. In Australia , the RBA rate hiked rates 25bp to 3.75% as was widely expected (by the time the meeting rolled around). The accompanying statement shifted significantly in two areas. First, the RBA believe that unemployment rate has peaked at 5.8% and second suggest that policy moves were “material adjustments.” This wording weighed on the AUD, as traders initially interpreted this statement as potentially signaling a RBA pause. The statement again referred to the appreciation in AUD, commenting that it will have some impact in containing prices for traded goods and services in the period ahead and will dampen growth in the trade-exposed sector of the economy. Initial reaction was to sell AUDUSD but the pair was then caught up in the earlier European USD selling extravaganza and trade up to 0.9230 (critical trigger resistance 0.9280). Elsewhere in Asia, Chinese PMI was unchanged on the month at 55.2, the Taiwan and Australian data both dropped even if they remain in expansionary territory. Overall, risk correlated trades remain positive with US equity futures currently pointing to a strong gain at the open.
Today's Key Issues (time in GMT):
09:00 GBP Norges Bank Financial Stability report published
09:28 GBP Manufacturing PMI, index Nov 53.7prior
10:00 USD Unemployment rate, % (000s, sa) Oct 9.7 (183) prior
10:00 USD Construction spending, % m/m Oct -0.6 exp, 0.8 prior
10:00 USD ISM manufacturing index Nov 55.0 exp, 55.7 prior
10:00 USD Pending home sales, % m/m Oct -1.0 (25.9) exp, 6.1 (21.1) prior
00:00 Vehicle sales, mn Nov 10.5 prior
17:00 Philadelphia Fed President Plosser (FOMC non-voter) speaks on the economic outlook
18:00 ECB Executive Board member Tumpel-Gugerell speaks Answers to the crisis - challenges for economic policy
The Risk Today:
EurUsd The rangebound action continues with bids at 1.4815 support and offers above 1.5090. A break above 1.5060 obviously targets the 52 week high of 1.51445 and I would not give much credit to the ascending triangle until we see a daily close above those levels.
GbpUsd Once again cable is forming a massive compounded head and shoulders with 1.6272 as a neckline and 1.6663 as the top of the second shoulder. Core sterling shorts are likely to be considering the newly formed downtrend channels and this compound H&S as a very good medium term risk reward scenario so look for signs of weakness slightly before at 1.6618 and at the upper downtrend channel which is also at 1.6663.
UsdJpy Only two ways to play USDJPY longs today as we have the lower daily downtrend channel at 84.96 where we would likely see some short covering. Below there we have the steeper 4 hourly downtrend channel at 84.46. For the short side I would be paying attention to the much steeper 1 hourly downtrend channel which comes in at 86.46 and only a break and hourly close above 87.10 would negate this powerful short term downtrend.
UsdChf Last week’s low of 0.9937 should provide a good floor this week as it was the target from the channel breakdown and unfortunately I failed to see it or mention it. Prior to that level we have a decent bit of support building at 0.9993 but 1.0186 will likely cap this pair until some further bad news in risk assets rears it’s ugly head. Intraday players may well be looking at 1.0080 as a decent short entry level with stops above 1.0110.
Resistance and Support
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot|