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Daily FX Summary: November 22

Submitted by Tyler Durden on 11/22/2010 18:28 -0400

EUR/USD

The pair finished the session lower on Monday after the initial bout of optimism over the resolution to the Irish sovereign crisis waned and in turn prompted investors to question the possibility of assistance from the EU/IMF for other EU states. Still, the final details of the aid package are yet to be released and current consensus sees the need for around EUR 80-90bln in loans. Britain with its large exposure to Ireland has committed GBP 7bln in bilateral loans, which should mean that UK banks’ sovereign loans exposure to Ireland will not be affected. To make matters worse for Ireland, Moody’s ratings agency said that it will likely downgrade Ireland by several notches, while Ireland's Green Party, a partner in the government's coalition, called for an early general election in the second half of January next year, a sentiment which was also echoed by the main opposition party. As such, the selling pressure on EUR is unlikely to abate in the near-term and going forward, apart from uncertainty over the EU periphery, the price action on Tuesday will also be driven by the economic data in form of manufacturing and services PMIs. In terms of technical levels, key support levels are seen at 1.3550/30 and then at 1.3480.

GBP/USD

In a similar trend to the EUR, GBP finished lower against the greenback on Monday as uncertainty over the Eurozone periphery prompted flows into safe-haven related assets. The move lower saw the pair make a test on 1.5900, which is now the nearest support level. Worth noting that Britain with its large exposure to Ireland has committed GBP 7bln in loans, which should mean that UK banks’ sovereign loans exposure to Ireland will not be affected. Going forward, given UK banks’ high exposure to other states in the Eurozone which may also require monetary assistance from the EU/IMF suggests that GBP may struggle to post substantial gains. As such, a near-term correction towards 1.5500 is more than possible.

USD/JPY

The pair finished the session little changed on Monday as concerns continued to linger whether other EU states will be forced into activating the EU/IMF led bailout mechanism. Immediate support is seen at 83.13, which is Friday's bottom. Looking forward the price action will continue to depend on the USD and unless EU policy makers come up with a resolution to the EU crisis, the JPY will appreciate yet again on the back of its safe-haven appeal. In terms of technical levels, to the downside an Ichimoku Cloud base is seen at 82.73 while the Cloud top is seen at 83.63.

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Mon, 11/22/2010 - 18:35 | 747883 SilverIsKing

New Currency Pair:

CHMSCT

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http://usa-ebiz.com/web-marketing/wp-content/uploads/2009/05/charmin.jpg

VS.

http://www.bluegrasssavers.com/wp-content/uploads/2010/10/scott_toilet_p...

Mon, 11/22/2010 - 18:51 | 747923 erik

Let's see if Euro weakness follows the Ireland bailout as it followed the Greece bailout. Same thing, initial ramp, then selling and more selling.

Mon, 11/22/2010 - 19:05 | 747959 CrashisOptimistic

I'll offer up some controversy.

Ireland had to do this. I know it's popular among the ZH chest beaters to demand default on the debt, but default means the budget deficit goes to zero immediately. That's austerity X 20.

The "create your own currency" crowd also fails to understand the lifeblood of civilization. Oil. Ireland is an importer. No oil producer is going to accept unexchangeable Irish currency for oil. And a defaulter will find no more lenders to fund oil.

They had/have no good choice. The selection is minimum 10 years of galling restriction of lifestyle, or outright deaths via lack of medical care over a 12 month period before growth resumes. They chose the first selection.

Mon, 11/22/2010 - 19:07 | 747966 TeamAmerica

Stop talking sense! You're gonna get junked for sure.

Tue, 11/23/2010 - 05:42 | 748857 Djirk

there is something in between a outright default and a bailout...it is called a workout, or a haircut. creditors reduce the amount or extend the timeline so that debtors can continue to pay.

So England which is more than broke is giving Ireland more loans to pay off the loans they are already owned? That is a great solution!!!

Mon, 11/22/2010 - 19:54 | 748077 Mr Lennon Hendrix

I will add silver made its bid as a currency today. Technicals due to the fact it could rally hard eith the dollar (harder than gold) and against commodities (commodities are on paper) and fundamentals as it satisfied the simple reasons defining a currency. If you want a commodity play, buy a few pounds of coffee and stick it in your cold cellar. If you want a currency buy silver.

Mon, 11/22/2010 - 21:56 | 748284 99er