US markets will be on Thanksgiving holiday next Thursday but in general, we don’t expect market volatility to drop a lot as a number of important economic data are scheduled to release throughout the week. But in any case, main focus will still be on developments in the stock markets. As mentioned before, most major currency pairs and crosses are still bounded in established range and sustained selling in the stock markets is needed to trigger a decisive breakout from the current ranges.

From US, existing home sales, new home sales, house price index Q3 GDP revision, consumer confidence, Oct Personal income and spending, durable goods will be released. From Eurozone, main focus will be on Germany Ifo on Monday and HICP flash and unemployment on Friday. Other data include Germany Gfk and unemployment, Eurozone business climes, industrial orders, and current account. UK Q3 GDP, Gfk consumer sentiment will be featured. From Japan, main focus will be on Friday’s string of economic data including Oct CPI, household spending, industrial production, retail sales and housing starts. Canadian retail sales and PPI will be released. Swiss KOF will also be featured.

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Daily Pivots: (S1) 0.6648; (P) 0.6755; (R1) 0.6869

AUD/USD weakens again after failing to take out 0.6891 resistance but after all it’s still staying in established range. Further rise is still mildly in favor as long as 0.6549 minor support holds and break of 0.6891 will indicate that rebound from 0.6008 has resumed for 38.2% retracement of 0.9849 to 0.6008 at 0.7475. On the downside, below 0.6549 support will argue that rebound from 0.6008 has possibly completed and flip intraday bias back to the downside to retest this low. Read the rest of this entry »

Despite edging lower to 0.6008 early last week, AUD/USD was supported above 0.6 psychological support and 76.4% retracement of 0.4773 to 0.9849 at 0.5971 and rebounded strongly. Subsequent rebound was limited at 0.6891 and retreated mildly, turning intraday outlook neutral for the moment. On the downside, break of 0.6529 will suggest that the rebound from 0.6008 has finished and will flip intraday bias back to the downside for retesting this low. On the upside, above 0.6891 will indicate that rise from 0.6008 has resumed for 38.2% retracement of 0.9849 to 0.6008 at 0.7475.

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AUD/USD was bounded in consolidation between 0.6330 and 0.7237 last week and such choppy consolidation might continue further. Above 0.7076 will argue that rebound from 0.6330 is extending further to 0.7237 and above. However, upside is expected to be limited below 0.7674/83 cluster resistance (61.8% retracement of 0.8519 to 0.6330 at 0.7683, 38.2% retracement of 0.9849 to 0.6330 at 0.7674) and bring down trend resumption. On the downside, below 0.6495 will bring retest of 0.6330 low and break will confirm that recent down trend has resumed for next long term fibonacci support at 76.4% retracement of 0.4773 to 0.9849 at 0.5971.

In the bigger picture, the strength of the fall from 0.9849 strongly suggests that it’s developing into an impulsive fall in at least the same degree as the up trend from 0.4773 to 0.9849. The current interpretation is that first wave of such fall has completed at 0.7802. Second wave correction has completed at 0.8519 and fall from there should represents the third wave decline. In other words, AUD/USD is probably in the middle of such decline only. Any interim correction should be limited below 0.7802 support turned resistance and bring down trend resumption.

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Action Insight Daily Report
Dollar and yen are generally higher today as global stock markets tumble following DOW’s 678pts fall to 8579. Niikkei dropped nearly another 10% to 8276, having the worse weekly drop in history after a 98 year old Japanese insure Yamato Life files for bankruptcy. European stock markets also open sharply lower with FTSE 100, DAX and CAC 40 dropping nearly 10%. Dollar index resumes recent rally and climbs to as high as 81.91 so far. Crude oil tumbles another 5% to 82 level while gold climbs over 3% to above 930.

AUD/USD and AUD/JPY are the biggest loser today so far but are still holding above this week’s low. The more important developments these few days are the persistent weaknesses in Sterling and Canadian Dollar. Sterling is pressured by concern that UK-Iceland assets row may escalate further. The two nations are tussling over on who should compensate British savers with money locked in Icelandic banks after the system collapsed. Prime Minister Gordon Brown said UK may freeze the assets of Icelandic companies using anti-terrorism laws. GBP/USD took out 1.7047 key medium term support and falls to as low as 1.6786 so far. GBP/JPY drops to as low as 165.91. EUR/GBP is back above 0.8 level. USD/CAD on the other hand, surges sharply to as high as 1.1647 on falling oil prices. Euro is sold off sharply in EUR/CHF with the cross breaking Mar’s low of 1.5331 and diving to as low as 1.5167 so far. Though, the common currency remains relatively steady against dollar and yen.

On the economic data front, Swiss unemployment rate was unchanged at 2.4% in Sep. Main focus is on Canadian job report which is expected to show unemployment rate up to 6.2% in Sep, with 11k jobs added. Canadian and US trade balance will also be featured. Nevertheless, economic data will likely continue to take a back seat and focus remains on development in the global financial crisis. Also, attention will be on the G7 meeting which begins on Friday, followed by annual IMF/World Bank meeting from Oct 11-13.
By ActionForex

The Australian dollar is up against majors today after the Australia bureau of statistics released lower-than-expected housing finance data and Westpac released a plunging consumer confidence index. Still, economists say the currency is reacting very little to economic data.
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Central banks in Japan and Australia injected about $20 billion into their money markets today, stepping up efforts to revive confidence in the banking system amid the worst financial crisis in almost 80 years.

The Bank of Japan pumped 2 trillion yen ($19 billion) today, for a total of 10 trillion this week. The Reserve Bank of Australia added A$1.03 billion ($824 million) and has injected about A$12.3 billion this week.

“Injecting liquidity is a good job but is a temporary solution that central banks can provide,” said Sebastien Barbe, a Hong Kong-based strategist at Calyon, the investment banking unit of France’s Credit Agricole SA.

Today’s operations in Japan and Australia were separate from the plan agreed yesterday by the Federal Reserve to make $180 billion available to pump into markets through swap agreements with the BOJ, the European Central Bank, Bank of Canada, Bank of England, and the Swiss National Bank. The Australian central bank isn’t participating in this agreement.

Central banks globally are trying to revive confidence following the failure of Lehman Brothers Holdings Inc. and the U.S. government takeover of American International Group.

“In terms of credibility, it’s much better to have coordinated action instead of each central bank acting on its own,” said Barbe.

Borrowing Costs Drop

The cost of borrowing in dollars overnight tumbled after the coordinated action by Fed and other banks was announced yesterday. The London interbank offered rate, or Libor, for overnight loans fell 1.19 percentage points to 3.84 percent yesterday.

The U.S. Federal Reserve doubled the limit of dollars it will provide the ECB and Swiss National Bank to $137 billion, and authorized $110 billion of swap facilities with Japan, the U.K. and Canada.

The Bank of Japan said it will use its $60 billion swap arrangement to supply dollars to local and foreign financial institutions as required by market conditions. It will choose participants tomorrow.

“They will keep liquidity in the system because their goal is to revive the short-term liquidity in the dollar, which is the oil in the global financial system,” Barbe said.

Japan’s overnight loan rate was 0.48 percent at 10:47 a.m. in Tokyo after the central bank’s injection today. It rose as high of 0.6 percent earlier. The central bank’s target overnight lending rate is 0.5 percent.

Australia Banks

Australian banks’ borrowing costs fell today, according to a gauge that measures the availability of funds in the market. The difference between the rate banks charge each other for three- month loans and the overnight indexed swap rate declined to 77 basis points at 11:53 a.m. in Sydney, from as much as 82.25 basis points earlier today, Bloomberg data show. The average spread for the past year was 43.1 basis points.

New Zealand’s central bank will accept bank bills in its daily market operations to ease pressure on liquidity in the financial system.

The central bank will also offer longer terms of up to six months in its operations “in order to help ease pressure at the short end of the market,” it said in a statement released in Wellington.

Default protection costs for bonds from Australia and Asia outside Japan declined, according to traders of credit-default swaps.

The iTraxx Australia index fell 35.5 basis points to 169.5 as of 10:32 a.m. in Sydney, Citigroup Inc. prices show. The benchmark, tied to the debt of 25 companies including Qantas Airways Ltd. and BHP Billiton Ltd., declines as perceptions of credit quality improve.
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(CEP News) The Aussie dollar saw a quick boost today after a better-than-expected employment report before it “drifted back to 0.7995/0.8005,” according to economists at Westpac.

Earlier today, the aussie dollar lost ground after the Reserve bank of New Zealand cut rates more than anticipated.

Employment increased by 14,600, despite expectations for an increase of 5,000 jobs. This brought the unemployment rate down to 4.1% despite forecasts for an increase to 4.4% from last month’s 4.3% figure.

Still, Patricia Gacis, market strategist with ANZ markets said she didn’t see the report affecting the dollar much. She said, “the Aussie dollars’ fall (is) more of a U.S. story with the rebound in the American currency.”

Gacis said in an interview with CEP that in light of the Reserve Bank of New Zealand’s unexpected sharp cuts, “people are starting to question whether the RBA will be aggressive as well.”

The euro was down 0.0013 to 1.7461 against the Australian dollar.

The Australian dollar was down 0.0018 to 0.7998 against the greenback.

The Canadian dollar was down 0.0014 to 1.1633 against the Australian dollar.

The Australian dollar was down 0.3385 to 85.9715 against the yen.

The Australian dollar was down 0.0149 to 1.2259 against the New Zealand dollar.

All data taken at 11:17 p.m. EDT

Generated by CEP Newswires

(CEP News) - Markets are currently pricing in the following probabilities for future interest rate moves:
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(CEP News) - Speaking to the Australian parliament on Sunday night EDT, Reserve Bank of Australia Governor Glenn Stevens said the outlook for the Australian economy is for subdued growth in the near term, and that over the next six months Australia will see a slowdown in inflation, with a gradual return to the RBA’s target 2%-3% inflation rate next year.
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