USD:
The USD scored a big gain against the EUR on Wednesday, traded within range against the GBP, and lost a bit of ground to the JPY. This occurred as Wall Street and global stock exchanges went down steeply. The fall in the U.S. indexes were triggered when the New Home Sales report came in with a number of 402K , which was far below the estimate of 443K. Not only did the result disappoint but it fell below last month’s outcome. The housing market unfortunately continues to remind investors of the ‘Humpty Dumpty’ tale in which all of the king’s horses and all of the king’s men could not put Humpty Dumpty together again. Today will be a huge day for data with the Advanced GDP and weekly Unemployment Claims being released.
The USD has gained well against the EUR this week as we have watched a wave of dark sentiment emerge the past week and a half over Wall Street. Quarterly earnings from corporations have proven to be a double edged sword. While these reports indicate that stability has been achieved many questions about company revenues persists. It has not helped that the investors were a bit jittery already within the equity markets because of the positive returns all summer, as share prices rose and began to be perceived in some corners as overbought. High unemployment is not helping the housing or retail sectors, thus today’s data which includes an estimated gain of 3.2% in the Advance GDP could prove to be critical. Government officials have been promising growth for months and today will be a chance to confirm this. If the data surprises on the downside, this would certainly not help Wall Street. USD traders will get a double dose of big figures when the American session opens and investors from around the world will be watching.
EUR:
The EUR continued to be the weakest of the major currencies as it lost ground to the USD on Wednesday. It must be pointed out that the EUR continues to be within the higher parts of its trend, but certainly some of its strength has disappeared the past few days. The Prelim CPI numbers were published from Germany yesterday and they met expectations with a miniscule 0.1% gain. German Import Prices did show a decline yesterday. Today the German Unemployment Change numbers are on schedule and tomorrow the Retail Sales figures will be brought forth. Volatility has seeming reappeared in the EUR/ USD pair as a battle between investors who have risk appetite and those who are risk averse fight it out – particularly in the equity markets. The data from Europe and its major counterparts economically continues to show signs of a rather lackluster recovery and because of this investors participating in bourses have wielded plenty of influence. The debate between the optimists and the pessimists will continue today.
GBP:
The Sterling has pulled off an interesting ‘stunt’ the past few days, showing that it can turn in a stable performance even as equity markets get pummeled. Part of this equation may be that the GBP was sold down in too rapid a fashion last week and the currency is finding its balancing point. There was little in the way of data from the U.K. yesterday, but that will change today with the Net Lending to Individuals and Mortgage Approval figures. Both reports are basically expected to show stability returning to the U.K. economy. Tomorrow on the schedule tentatively is the Nationwide HPI. The Sterling has had nothing short of a wild ride the past couple of months as it has traversed a wide range. The past few days of trading have produced consolidated movement and the question is whether any of the upcoming data will be enough to give it a new push.
JPY:
The JPY was a benefactor on Wednesday of fear coming into the Asian bourses. As indexes lost ground on the heels of similar retreats in the U.S., the JPY became a focal point for weary traders. The JPY is still within a well practiced range against the USD and today’s risk event filled day from the U.S. could set off some interesting fireworks. Gold traded slightly lower again on the strength of the greenback versus other currencies. The JPY and Gold will both be affected by the data unfolding in the U.S. later today.
Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst.
Technical Analysis
S&P Weakness, Dollar Strength, Risk Appetite Declines
SPX/USD:
Yesterday’s analysis was correct and equity markets continued to trade lower. We traded to within one point of the gap created on the 5th of October. This market is finally acting weak. Strangely enough throughout this selloff, you can sense how reluctant the buyers are to let this market trade lower. Each move down is met by an attempt to push back higher. Trading has been frustrating, but I repeat my favorite adage, “at what point does the market tell you, you are wrong?” Until I see a serious turn of events, I will disregard the market noise and continue to sell. Be cautious as when we finally fill the gap of 1040.1, we could see a small bounce, and considering we have been trading down for the last four trading sessions today or tomorrow could see some short covering. Support 1040.1, 1020.3, 1009.1, 991.97 Resistance 1073.2, 1081.5, 1086.2, 1095.8, 1101.4, 1132.2, 1153.8
XAU/USD:
As the dollar strengthened yesterday Gold neared the 1024 support level. With this precious metal currently trading at 1033, we have to consider that while this is not a terribly bullish bounce, we are still trading (barely) above the ever important 1032. If the week closes below, I am going to be a seller of gold as a continued slide to 984 is expected. Remember to keep an eye out for the trading ranges that create strong support and resistance. When we break into one range from another there is a tendency to be drawn to the mean (the center of that consolidation). Support 1024, 1009.65, 1006.2, 984.5. Resistance 1035.7, 1042.5, 1047, 1061.35, 1064.25, 1070.6
GBP/USD:
We seemed to have found some support at 1.6249. Considering the recent gains in the Greenback, I must say that I am impressed by the performance of what I considered to be a currency on the verge of a nice little breakdown. If I had to place a target on a long position I would most probably be looking for a move near and probably past 1.6741. However, I would consider the fact that we have been trading in this range for 5 months now, and at this point will probably continue to do so. Thus profit taking might occur anywhere in the 1.67 area. Support 1.6488, 1.6249, 1.6119, 1.5776 Resistance 1.6620, 1.6741, 1.7042
EUR/USD:
While the pound surprised us with its ability to maintain its value, the euro has been acting as expected. The US Dollar pushed higher, this sent the EUR/USD below the trend line, and down towards support. This move happened rather sharply as we gave back 200 pips in one trading day. The up move was a full five cents, and now we have given back about 50% of that. This retracement could just be a stop in the way to 1.5284, and for now will be traded as such. Support 1.4673, 1.4480, 1.4370, 1.4176 Resistance 1.4844, 1.5062, 1.5284
The USD scored a big gain against the EUR on Wednesday, traded within range against the GBP, and lost a bit of ground to the JPY. This occurred as Wall Street and global stock exchanges went down steeply. The fall in the U.S. indexes were triggered when the New Home Sales report came in with a number of 402K , which was far below the estimate of 443K. Not only did the result disappoint but it fell below last month’s outcome. The housing market unfortunately continues to remind investors of the ‘Humpty Dumpty’ tale in which all of the king’s horses and all of the king’s men could not put Humpty Dumpty together again. Today will be a huge day for data with the Advanced GDP and weekly Unemployment Claims being released.
The USD has gained well against the EUR this week as we have watched a wave of dark sentiment emerge the past week and a half over Wall Street. Quarterly earnings from corporations have proven to be a double edged sword. While these reports indicate that stability has been achieved many questions about company revenues persists. It has not helped that the investors were a bit jittery already within the equity markets because of the positive returns all summer, as share prices rose and began to be perceived in some corners as overbought. High unemployment is not helping the housing or retail sectors, thus today’s data which includes an estimated gain of 3.2% in the Advance GDP could prove to be critical. Government officials have been promising growth for months and today will be a chance to confirm this. If the data surprises on the downside, this would certainly not help Wall Street. USD traders will get a double dose of big figures when the American session opens and investors from around the world will be watching.
EUR:
The EUR continued to be the weakest of the major currencies as it lost ground to the USD on Wednesday. It must be pointed out that the EUR continues to be within the higher parts of its trend, but certainly some of its strength has disappeared the past few days. The Prelim CPI numbers were published from Germany yesterday and they met expectations with a miniscule 0.1% gain. German Import Prices did show a decline yesterday. Today the German Unemployment Change numbers are on schedule and tomorrow the Retail Sales figures will be brought forth. Volatility has seeming reappeared in the EUR/ USD pair as a battle between investors who have risk appetite and those who are risk averse fight it out – particularly in the equity markets. The data from Europe and its major counterparts economically continues to show signs of a rather lackluster recovery and because of this investors participating in bourses have wielded plenty of influence. The debate between the optimists and the pessimists will continue today.
GBP:
The Sterling has pulled off an interesting ‘stunt’ the past few days, showing that it can turn in a stable performance even as equity markets get pummeled. Part of this equation may be that the GBP was sold down in too rapid a fashion last week and the currency is finding its balancing point. There was little in the way of data from the U.K. yesterday, but that will change today with the Net Lending to Individuals and Mortgage Approval figures. Both reports are basically expected to show stability returning to the U.K. economy. Tomorrow on the schedule tentatively is the Nationwide HPI. The Sterling has had nothing short of a wild ride the past couple of months as it has traversed a wide range. The past few days of trading have produced consolidated movement and the question is whether any of the upcoming data will be enough to give it a new push.
JPY:
The JPY was a benefactor on Wednesday of fear coming into the Asian bourses. As indexes lost ground on the heels of similar retreats in the U.S., the JPY became a focal point for weary traders. The JPY is still within a well practiced range against the USD and today’s risk event filled day from the U.S. could set off some interesting fireworks. Gold traded slightly lower again on the strength of the greenback versus other currencies. The JPY and Gold will both be affected by the data unfolding in the U.S. later today.
Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst.
Technical Analysis
S&P Weakness, Dollar Strength, Risk Appetite Declines
SPX/USD:
Yesterday’s analysis was correct and equity markets continued to trade lower. We traded to within one point of the gap created on the 5th of October. This market is finally acting weak. Strangely enough throughout this selloff, you can sense how reluctant the buyers are to let this market trade lower. Each move down is met by an attempt to push back higher. Trading has been frustrating, but I repeat my favorite adage, “at what point does the market tell you, you are wrong?” Until I see a serious turn of events, I will disregard the market noise and continue to sell. Be cautious as when we finally fill the gap of 1040.1, we could see a small bounce, and considering we have been trading down for the last four trading sessions today or tomorrow could see some short covering. Support 1040.1, 1020.3, 1009.1, 991.97 Resistance 1073.2, 1081.5, 1086.2, 1095.8, 1101.4, 1132.2, 1153.8
XAU/USD:
As the dollar strengthened yesterday Gold neared the 1024 support level. With this precious metal currently trading at 1033, we have to consider that while this is not a terribly bullish bounce, we are still trading (barely) above the ever important 1032. If the week closes below, I am going to be a seller of gold as a continued slide to 984 is expected. Remember to keep an eye out for the trading ranges that create strong support and resistance. When we break into one range from another there is a tendency to be drawn to the mean (the center of that consolidation). Support 1024, 1009.65, 1006.2, 984.5. Resistance 1035.7, 1042.5, 1047, 1061.35, 1064.25, 1070.6
GBP/USD:
We seemed to have found some support at 1.6249. Considering the recent gains in the Greenback, I must say that I am impressed by the performance of what I considered to be a currency on the verge of a nice little breakdown. If I had to place a target on a long position I would most probably be looking for a move near and probably past 1.6741. However, I would consider the fact that we have been trading in this range for 5 months now, and at this point will probably continue to do so. Thus profit taking might occur anywhere in the 1.67 area. Support 1.6488, 1.6249, 1.6119, 1.5776 Resistance 1.6620, 1.6741, 1.7042
EUR/USD:
While the pound surprised us with its ability to maintain its value, the euro has been acting as expected. The US Dollar pushed higher, this sent the EUR/USD below the trend line, and down towards support. This move happened rather sharply as we gave back 200 pips in one trading day. The up move was a full five cents, and now we have given back about 50% of that. This retracement could just be a stop in the way to 1.5284, and for now will be traded as such. Support 1.4673, 1.4480, 1.4370, 1.4176 Resistance 1.4844, 1.5062, 1.5284