Forex News and Events:
It seems that neither economic releases nor unexpected Fed remarks about interest rate policy has been able to coerce major currency pairs out of their entrenched ranges this week. Despite comments from Bernanke on Monday, San Francisco Fed President Yellen on Tuesday, and St Louis Fed President Bullard yesterday, the USD seems unable to force a break out from the well-trodden consolidation zones. EURUSD has been locked between 1.4800 and 1.4990; with transient waves of risk appetite and aversion sending the pair from end to end without any sustainable momentum. Rumours of a sizeable 1.4800-1.5100 option structure expiring tomorrow has been suggested as a possible explanation for the stubborn resilience of key technical support and resistance; which if true would mean we may finally get a USD breakout and some fresh volatility injected into FX markets. This morning’s main data release has been the UK Retail Sales that posted at 0.4% MoM gain in October and a revision upwards to last month’s reading from 0.0% to 0.4%. M4 Money Supply data released at the same time showed an increase of 1.8% MoM (vs. 1.0% expected), and again there were slight revisions higher to the September numbers. GBPUSD withdrew from the brink of downside support levels (having touched a low of 1.6643 earlier in the morning), to recover to 1.6690 at the time of writing; well within its own 1.6650-1.6840 channel. With the European data calendar wrapped up, the US session ahead is light – but there is a raft of speakers from both sides of the Atlantic that will be making speeches this afternoon. Given the pattern of the week so far with official rhetoric providing the most pertinent driver of FX markets, we hope that Geithner, Fisher or Trichet can give markets some additional catalysts to play with.
Today's Key Issues (time in GMT):
13:30 USD Initial jobless claims, thous 14-Nov exp: 504 prev: 502
13:30 USD Continuing claims, thous 7-Nov exp: 5598 prev: 5631
13:30 CAD Wholesale sales, % m/m Sep exp: 1.0 prev: -1.4
13:30 CAD Leading indicators, % m/m Oct exp: 0.7 prev:1.1%
15:00 USD Philadelphia Fed manufacturing index Nov exp: 12.2 exp: 11.5
15:00 USD Leading indicators, % m/m Oct exp: 0.4 prev: 1.0
The Risk Today:
EurUsd Yesterday we mentioned the prior day’s bearish engulfing candle and that the following day can see a retracement back into that candle before fresh selling kicks in. Since then the pair has done exactly that, trading right up to the 10 day downtrend at 1.4990 before going back to the 12 month uptrend. We also said that such a move would be encouraging for the medium term bears as it means that the medium term uptrend is once again under attack whilst the breakout level of 1.5050 to the upside is not getting any visits. Whilst the risk reward ratio clearly lies with the long side, the clues for chances of success do not look good. Most of the action so far looks to be from intraday to short term traders as the pair is printing two hammer candles back to back off of the 1.4842 support, signalling some short covering and profit booking. But to reiterate, if the 10 day downtrend holds firm and we revisit these support levels over and over throughout the next 24 hours then the bears will be out of hibernation and the USD carry traders will be in for a serious surprise this side of Monday. Only an hourly close above 1.4994 negates this scenario.
GbpUsd As with the other pairs, the USD is flexing some muscle this morning and cable is now flirting with the 1.6663 support and rising wedge uptrend. One could argue that this is a sensible place to get long but since most rising wedges break to the downside rather than the upside I will sit out of this one and take more clues from the rest of the marketin the coming hours. If the wedge does break to the downside there will be no shortage of opportunity to get short in the coming days and if I miss a long opportunity then so be it. There is very little technical data to encourage a play for the upside so…..if in doubt, stay out.
UsdJpy An opportunity has arisen this morning for those looking to get long USD JPY intraday and potentially even those looking to scale into a more medium term long. The pair has been printing bullish candles on a 15 minute chart from the 88.84 level and although there is a downtrend bearing over head, the risk reward here for longs looks impressive with stops just below at 88.65. Scalpers will no doubt be looking to get out of the pair as early as 89.17 but there is scope here for a move to 89.30 intraday and all eyes on 89.75 for a sign of increasing USD strength.
UsdChf The pair picked up the short term vibratory channel yesterday off the Nov 16th lows and has made an immediate visit back to the resistance zone between 1.0186 and 1.0205 where it has printed a hanging man on the hourly chart and is slightly overbought (pretty much the inverse picture of EUR USD). Intraday shorts are having a whale of a time with this resistance - played correctly, some traders must have taken well over 200 pips just in the month of November by shorting a simple resistance level. Clearance of 1.0205 is still needed to pull the USD bulls into the pair and for the bears the support at 1.0110 will now meet the 3 day uptrend so expect a bounce on the first visit and use it as the sensible place to cover.
Resistance and Support
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot|