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Daily FX Summary: November 9
From Talking-Forex
EUR/USD
EUR fell against the USD on Tuesday amid ongoing concerns over the unsustainable debt levels in Ireland and Portugal, which are both due to tap the primary markets on Wednesday. The move lower saw the pair breach the key 76.4% Fibonacci retracement level and also consolidate below 1.3900. The next major support is seen at 1.3700 and a convincing break below will indicate that a downtrend has began. As mentioned earlier, the attention is now firmly on the Portuguese Oct-16 issue on Wednesday, which will either help the pair move back above 1.4000 or instead confirm the fact that PIIGS (Portugal, Ireland, Italy, Greece, Spain) nations are indeed in dire need of EU/IMF bailout money. In terms of other major technical levels, 1.3835/10 support levels should contain any near-term selling.
GBP/USD
Position squaring ahead of the upcoming Quarterly Inflation Report by the BoE on Wednesday, as well as vague market chatter that the central bank may increase its mandated inflation target which currently stands at 2% meant that the pair finished lower on Tuesday. Also, weak RICS housing data, which fell to an 18-month low underpinned the view that the housing market in the UK may suffer a double-dip as a result of austerity measures that the coalition government has introduced. Still, GBP will be highly reactive to the Wednesday release of the Quarterly Inflation report and may enter into a bullish trade pattern if the BoE suggests that the UK’s economic outlook isn’t as dire as previously thought. In terms of key technical levels, the nearest support level is seen at the 10DMA at 1.6055, followed by 1.6000. Further below is the 21DMA at 1.5935 which will provide further support.
USD/JPY
The pair finished the session higher on Tuesday amid renewed strength in the USD as investors continued to fret over the implication the latest widening of the peripheral spreads will have on the PIIGS states ability to raise money in the primary markets. The price action will likely continue to depend on USD related flows and given the current uncertainty over the EU, the greenback may enter a period of consolidation and strengthen on the back of a safe-haven appeal. In terms of key technical levels, 80.60 is seen as key support, which once breached opens the door towards a test on the 80.00 handle.
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These past two days, the Japanese yen has become the risk currency du jour. I am sure that there are machinations going on behind the scenes to which I am not privy, so I can't comment as to the cause.
Edit: One may think about getting long CHF/JPY and USD/JPY.
:D
it looks a very good advice.
Umm this is already wrong... as the EU broke through 1.3850 earlier in the day
Uh Oh.
Who is Banco Parmalat this time???
Silver got beaten like a redheaded stepchild.
Can somebody tell me what the hell happened to the PM market today?!? It was warm in the morning, going straight up at lunch and now that I am back home seems to have crashed.
Any explanation from you market trader guys?
One view could be w/ yields shooting up, PM's falling hard, equities falling that somebody thinks America's credit card might be revoked and thus dollar might be strengthened (Fed can and is creating inflation of inputs but can't create wage growth, more HELOC credit from underwater homes) and ultimately can only push stagflation (stagnation of wages and financed purchased items but inflation of non-discretionary items) to end consumers (which really hurts corporations and consumers alike). Is already becoming clear QE2 will fail and Fed will...and then what?
Strange w/ the unexplained "event" in Cali coinciding w/ much QE2 revulsion from China officials. Seems the Fed may be reaching for a bridge too far.
And silver has gained 80 cents so far in the last 3 hours.
Precious metals are nothing more than a risk asset. They tank when the SPX and EUR tank.
/:
Interesting - dollar strengthened today while long bond yields shot up? If people are running to safety aren't they supposed to be willing to take a lesser yield? So what was happening to simultaneously strengthen dollar and dramatically lessen interest in T's?
Correlations and logic seems broken in many areas?
That's how I see it. The whole world is reversed in terms of traditional investing. Stocks, bond and PM's have been moving in tandem. I know the dollar strengthened but it didn't seem that much. Either there's some PM profit taking or someone sees a sustained stronger dollar.
I mention China and todays missile / not missile event because I think China is the 1st who can put the US in a head lock via no longer buying T's (China downgraded US today) and (gasp) could they start selling? A lot more T's would seem to require higher yields to gain buyers in the secondary market. Watch those T yields as this may be the tell that China is now selling???
Hambone,
China's bond holdings are like holding the knife at their own throat and threatening to insert it. I am not pro or con USA or China but they really are "all in" with America. Both hold pocket dueces and reality is pocket Aces. All that remains is to see the river card and make it official.
I guess I am pro USA as I prefer being here and only having to deal with 300m pissed off destitute people rather than 1B+ pissed off peasants once the top blows..
RE: Long end shooting higher/USD strength...
Somebody above mentioned it...if US credit card is revoked it's the bond market back in the drivers seat. ZIRP4EVA is only thing supporting the global finance system right now, God forbid the bond market begin repricing risk...save us all. The bear flattener trade is going to spell TEOTWAWKI for most with the end game being USG going tits up and severe austerity gripping the planet.
I really hope they can keep the long end under wraps as long as possible, once the short end follows...well, you get the picture.