• The dollar and yen advanced as risk aversion increased on Thursday. The overbought stock and commodity markets fell as investors unwound some carry trades. The Conference Board US leading economic indicators index rose less than expected; still, indicating a robust economic recovery. US initial jobless claims remained unchanged from the prior week while continuing claims declined. Increasing demand for dollar liquidity sent 2- year yields to a yearly low. Dollar crosses and stock markets are at important technical levels and the resolutions of these technical levels will likely determine the directions of equities and currencies in the intermediate run. At important resistance, the S&P 500 dropped 14.90 to 1,094.90, pressured by a downgrade of semiconductor stocks. The EUR/USD, between resistance in the 1.50 area and support in the 1.48, fell to 1.4919. Sterling was pressured by lower-than-expected UK retail sales and worries about the UK banking sector. The Australian and Canadian dollars fell for a third consecutive day as commodity prices declined.
  • The dollar index rose today, having been testing the 75-area for nearly a month. If this support is broken, the dollar index may fall to the 71-area support which is the low set last year. There are resistances at the 76 handle and in the 77-78 area. If these levels are broken, the technical outlook will improve.


Financial and Economic News and Comments

US & Canada

  • The Conference Board US leading economic indicators index, measuring future economic activity, increased a slightly less-than-expected 0.3% m/m in October to 103.8, a seventh consecutive month-on-month gain, after a 1.0% m/m advance in September, suggesting the US economic recovery will extend into 2010. The coincident index, a measure of current economic activity, was unchanged at 99.8 in October after a 0.1% m/m decline the prior month.


  • US initial jobless claims in the week ending November 14 was 505,000, the lowest level since January and unchanged from the previous week's upwardly revised 505,000, figures from the Labor Department showed. The 4-week moving average of new jobless claims declined 6,500 to 514,000. Continuing claims in the week ending November 7 fell 39,000 to 5,611,000 from the preceding week's upwardly revised 5,650,000. The 4- week moving average of those continuing claims dropped 83,500 to 5,711,500. The insured unemployment rate for the week ending November 7 remained at 4.3%.


  • The Philadelphia Fed manufacturing index rose to a higher-than-expected 16.7 in November from 11.5 in October, indicating Philadelphia-area manufacturing expanded for a fourth month to the highest level since June 2007, according to the Federal Reserve Bank of Philadelphia's November 2009 business outlook survey. The new orders index remained positive for a fourth month in November, rising to 14.8 from 6.2. The shipments index also registered a positive reading for a fourth month, jumping to 15.7 from 3.3. The employment index improved to -0.5 in November from -6.8 the prior month. The prices paid index declined to 14.9 in November from 21.3 in October, while the prices received index increased to -1.5 from -4.3, suggesting manufactured goods prices are near steady this month, the Philly Fed said.


  • Canada's leading economic indicators index rose 0.7% m/m to 222.4 in October, a fourth straight monthly rise, after an upwardly revised 1.2% m/m gain in September, LEI data from Statistics Canada showed, indicating the Canadian economy steadily continues its recovery. Eight of the 10 LEI components expanded in October, with the housing index (+4.2% m/m) remaining the fastest-growing component and registering its sixth consecutive gain.


  • Canadian wholesale sales increased 0.2% m/m to C$41.019 billion ($38.55 billion) in September after a revised 1.5% m/m decline in August, Statistics Canada reported. September wholesale sales fell 10.4% y/y.


  • UK retail sales gained for a second month in October, growing a slightly less-than-expected 0.4% m/m, after an upwardly 0.4% m/m September increase, data from the Office for National Statistics showed. October retail sales rose 3.4% y/y, the largest year-on-year gain since May 2008, following September's upwardly revised 2.9% y/y advance.
  • The UK had a £11.4 billion ($19.0 billion) budget deficit in October, the most for the month since records began in 1993, compared with a £0.1 billion deficit a year earlier, according to figures from the Office for National Statistics. The public sector net cash requirement totaled £5.9 billion in October, compared with a £2.5 billion repayment a year earlier. Net debt totaled £829.7 billion in October, equivalent to 59.2% of GDP and the largest debt burden since at least 1974.
  • UK gross mortgage lending climbed 5% m/m to £13.5 billion ($22.5 billion) in October, according to the Council of Mortgage Lenders. Lending fell 27% y/y. The October outcome is in line with our updated forecast for gross lending of around £141 billion for 2009 as a whole, the CML said, expecting some seasonal slowdown over the remainder of this year.


  • Overall production by all sectors of the Japanese economy declined in September following five consecutive monthly gains, with the all industry activity index falling a more-than-expected 0.6% m/m after a 0.9% m/m August increase, data from the Ministry of Economy, Trade and Industry showed.
  • The Japanese leading economic indicators index, a measure of future economic activity, advanced to an unrevised 86.4 in September, a seventh consecutive monthly gain, from 83.2 in August, according to final September LEI data released by the Cabinet Office. The coincident index, measuring present economic activity, rose to 92.7, a sixth straight monthly rise and revised up from a previously reported 92.5, following 91.2 the prior month, indicating Japan's economic recovery is strengthening.

FX Strategy Update

Primary TrendPositiveNegativePositiveNegativeNegativePositiveNeutral
Secondary TrendNeutralNeutralNeutralPositiveNeutralPositiveNeutral
Start PositionN/A88.58N/A1.03851.08910.6601N/A

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