Daily Pivots: (S1) 1.3274; (P) 1.3345; (R1) 1.3438

EUR/USD’s rise continues in early US session and reaches as high as 1.3585 so far, taking out mentioned 100% projection of 1.2329 to 1.3290 from 1.2549 at 1.3510. At this point, intraday bias remains on the upside as long as 1.3430 minor support holds. Focus now turns to 1.3768 cluster resistance. On the downside, below 1.3430 minor support will turn intraday outlook neutral first. But another rise is still in favor as long as 1.3250 support holds. Read the rest of this entry »

Weekly Review and Outlook: Euro Strengthened in Volatile Markets, Dollar Sharply Lower ahead of FOMC
by ActionForex

While the headlines might be dominated by the automaker bailout drama, risk aversion or dollar’s loss of its safe haven status last week, it’s Euro’s strength and momentum that should be paid most attention to and most closely watched. Dollar’s index’s sharp decline to as low as 83.22 last week was inline with the head and shoulder top scenario that indicates a medium term top is at least in place at 88.46. However, Dollar’s weakness was indeed not too severe except version the yen which saw USD/JPY dived to 13 year low of 88.54 before rebounding. GBP/USD, AUD/USD and USD/CAD are still kept by near term levels only, without significant technical breakthrough. On the other hand, while much volatility was seen in yen crosses, most of the are still held by near term low and thus there is no confirmation of a another round of massive yen buying yet. Read the rest of this entry »

Daily Report: Euro Leads Rebound against Dollar, SNB to Cut Again

Dollar’s decline continues today even though the $14b automaker rescue bill is passed in House and is set to vote in Senate on Thursday. One important thing to note is that dollar’s fall is lead by strengthen in European majors, in particular the Euro which is topping this week’s top movers chart. Swissy follows Euro’s strength despite expectation of another 50bps cut by SNB later today. Sterling is catching up in early US session as EUR/GBP retreats mildly. However, strength in Australian dollar and Canadian dollar is not apparent so far as both are still kept below this week’s high against the greenback. Yen crosses remains pretty steady so far except the apparent strength in EUR/JPY. Read the rest of this entry »

Mid-Day Report: Euro Extends Losses, Dollar Rebounds Further
Euro extends earlier losses after the release of record drop in inflation and rise in unemployment that spurs speculations that ECB could cut deeper than 50bps next week. EU/USD breaches 1.27 level briefly while EUR/GBP extends the correction that started at 0.8660, heading to 0.824 level. EUR/JPY is pressing 121 level. Dollar, on the hand, strengthens generally against most currencies except the yen. Dollar index’s break of 86.43 resistance argues that correction from 88.46 has completed and more upside could be seen to retest this high. Data released in US session saw Canadian trade surplus narrowed to 5.64b in Q3. Oct PPI was flat mom.

Eurozone inflation posted a record drop in November with HICP flash estimate sank further to 2.1% from 3.2% in October. After being above ECB’s target of 2% since Sep 07, inflation is now very close to such target. Unemployment rate came in at 7.7% for October, the highest level in 2 years (consensus: 7.6%). The number of jobless people jumped by 225K to 12 million. Among the 15 nations, Spain got hit the most, with unemployment rate rose to 12.8% in October (Sep: 12.1%, October 07: 8.5%), while Germany recorded a 7.1% rate in October, which is the same as September’ data and declined from 8.1% a year ago and unchanged from. September’ unemployment rate was also revised upward to 7.6% from 7.5%. While a 50bp cut is fully expected from ECB on Dec 4, there’re increasing speculations of a larger cut considering faster than expected deterioration of the economic outlook and moderation of inflation.

Earlier today, Japan released a number of economic data which indicated the nation is in deepening recession. Manufacturing PMI for November fell to 36.7 (Oct: 42.2), the ninth consecutive fall and a record low since the survey started in 2001. Concerning the components, output index fell to 30.9 from 39.7 a month ago, its sharpest fall ever. New orders plunged to 27.3 from 34.5 while new export orders also fell to 31.1.

Household spending fell -3.8% in October on annual basis worse than -3.4% as market expected. Though better than expectation, Japan retail sales still dropped 0.6% in October from a year ago and marked the decline for the second month. Accounting for more than 50% of Japan’s GDP slowdown in consumer spending signaled the nation will take longer to recover from recession. Unemployment rate fell to 3.7% in October, much lower than economists’ forecast of 4.2% and set a one-year low.
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Daily Pivots: (S1) 1.2695; (P) 1.2824; (R1) 1.3084

EUR/USD surges further to as high as 1.3080 in early US session and at this point, intraday bias remains on the upside as long as 1.2803 minor support holds. As discussed before, rise from 1.2423 should represent another rising leg of the consolidation that started at 1.2329 and further rally could be seen to 1.3290 or above. Though, upside is still expected to be limited below 1.3768 cluster resistance and bring down trend resumption. On the downside, below will turn intraday outlook neutral first. Further break of 1.2423 will indicate that such consolidation has likely completed and recent down trend is resuming for 50% retracement of 0.8223 to 1.6038 at 1.2131 next. Read the rest of this entry »

WTI crude oil for December delivery retreated after faltering below 71.77 today as the 10% rally Tuesday triggered some profit-taking and Obama’s victory was positive for the dollar. Currently trading at 67.70, there’s no clear direction for the black gold’s outlook and we think it’s likely to trade within recent range below 71.77.

Demand continued to be the main concern. US auto sales slumped 32% in October, the lowest monthly total since January 1991, with limited loan access and reduced consumption due to weak economy being the main causes. General Motors reported a 45% drop; Ford Motor reported a 30% drop in car and light-truck sales; Toyota Motor also declined 23%.

On the supply side, some OPEC members announced they have cut production significantly. Algeria’s energy ministry ordered a reduction of output by 71,000 bpd as of Nov 1 whereas Nigeria has canceled at least four crude cargoes originally scheduled to load in November and December.

Some of the new president’s policies were negative for oil. For instance, Obama favored a windfall profit tax on petroleum producers and promised to boost renewable energies.

Today, the market is waiting for EIA’s weekly inventory report. According to Bloomberg survey, analysts expected last week’s inventory for crude oil and distillate increased by 1mmb and 1.55 mmb respectively. However, they expected gasoline stockpiles to fall by 0.65 mmb.

Stock markets were mixed today. In Asia, the MSCI Asia Pacific Index added 4.6% to 94.36, paring its decline this year to 40 percent. Nikkei advanced for a second day, gaining 4.5% to 9521.24. Investment sentiments turned positive after Obama won the election with a big margin which suggested a stable government and that the president can carry out the policies more easily. On the other hand, European stocks fell for the first time in 7 days as ArcelorMittal and Carlsberg reported poor 3Q earnings. FTSE, CAC and DAX dropped 2.68%, 2.76% and 2.13%, respectively.

Gold declined in Asian and European sessions as investors believed Barack Obama’s presidency and Democrat’s gains in Congress would speed the dollar’s recovery against the euro. The precious metal for December delivery plunged to 755.7 (low: 750.8) after rising to 770. We expect price would continue to trade within range of 681 and 778.3 in recent days. The greenback climbed against the Euro, Sterling and Aussie.

Apart from election results, there are several factors supporting the dollar. US interest rate reached 1% after the 50 bps cut in FOMC meeting last week and other countries are going to catch up with the trend. ECB and BOE will announce rate decision Thursday (Both are expected to cut by at least 50 bps). The market has been talking about G7 ZIRP - zero interest rate policy. Convergence of yields removed one disadvantage of USD.

Moreover, the Euro zone should be more exposed to Eastern Europe bank debt than the US or Japan. Reasons pressures faced in Eastern Europe made investors cast doubt on the durability of the Euro zone monetary union.

Although investors are cheered by the Democrat’s victory, long term impacts of Obama’s government to gold prices are uncertain. While we believe the current result is positive for the dollar, recovery of economy, improved business investment (expansion in industrial production) and consumer spending (jewelry consumption) would spur demand for the precious metal.
By OilNGold

EUR/JPY rebounded strongly after edging lower to 113.63 last week and reached as high as 131.02. Subsequent retreat indicates that an intraday top is in place and turned outlook neutral. Near term focus is now on 121.38 minor support. As long as this minor support holds, the rebound from 113.63 may still extend further. However, below 121.38 will indicate that rebound from 113.63 has completed and will bring retest of this low.

In the bigger picture, the biggest question now is whether the fall from 169.96 has completed a five wave sequence already. The failure to break through the near term trend line provided no hints. But in any case, 113.63 is at least a short term bottom and some more consolidations should be seen as long as 113.63 low holds. Breaking of 132.18 will indicate that the five wave sequence has likely completed and a medium term bottom is in place at 113.63. In such case, medium term consolidation should be seen between 113.63 and 141.73 cluster resistance (50% retracement of 169.96 to 113.63 at 141.79) and will take a longer time to complete.

In other words, it’s just a matter of the time and range such consolidation will take. After all, upside is still expected to be limited below 141.73 cluster resistance. Whole down trend from 169.96 is still expected to resume. And break of 113.63 low is needed to confirm that such down trend has resumed. Read the rest of this entry »

EUR/USD Weekly Outlook

After edging lower to 1.2329 early last week, EUR/USD staged a strong rebound to as high as 1.3290. Even though EUR/USD weakens again towards the end of last week, it still ended the week higher. There is no doubt that a short term bottom is in place at 1.2329. With EUR/USD just missed 38.2% retracement of 1.4867 to 1.2329 at 1.3299, it’s believed that fall from 1.4687 has completed too and EUR/USD is developing into choppy sideway consolidation in the larger down trend from 1.6038.

Note that the path and length of the current consolidation could be quite unpredictable. Nevertheless, firstly, intraday upside momentum should start to diminish again in 1.3258/3768 resistance zone even in case of another rise. Secondly, as long as 1.2329 low holds, such consolidation could extend further. A break out on either side is needed to confirm that the consolidation has completed.

In the bigger picture, as discussed before, the strength of the fall from 1.6038 reinforces the case that whole decline from 1.6038 is developing into a five wave impulsive fall. The completed decline from 1.4867 to 1.2329 might represent the third wave decline in the five wave sequence. Consolidation from 1.2329 might represent the fourth wave consolidation. Hence, another decline is still expected before making a medium term bottom. Below 1.2329 will target next long term fibonacci level of 50% retracement of 0.8223 to 1.6038 at 1.2131 or even further to 1.1639 key medium term support. On the upside, sustained break of 1.3768 cluster resistance (38.2% retracement of 1.6038 to 1.2329 at 1.3746) is needed to invalidate this view and indicate that whole decline from 1.6038 has made a medium term bottom. Read the rest of this entry »

EUR/USD Weekly Outlook

EUR/USD’s down trend resumed last week and fell sharply to as low as 1.2496. Friday’s recovery after drawing support from the short term fall channel, with 4 hours MACD crossed above signal line, argues that a short term bottom might be in place. Though, break of 1.2754 minor resistance is needed to confirm. Otherwise, intraday bias remains on the downside and further fall should be seen to 100% projection of 1.4867 to 1.3258 from 1.3768 at 1.2159 next. Break of 1.2754 will bring stronger recovery to 1.3004 resistance or above. But upside should be limited by 1.3258 resistance and bring down trend resumption.

In the bigger picture, some key important long term support levels were taken out last week without much hesitation. The strength of the fall as well as the breaking of 100% projection of 1.6038 to 1.3381 from 1.4867 at 1.2710 reinforces that case that whole decline from 1.6038 is developing into a five wave impulsive fall. As mentioned before, if this is true, EUR/USD is probably still in the middle of it and should eventually extend to below 1.1639 key long term support before making a medium term bottom. Break of 1.3768 resistance is needed to invalidate this view and indicates that a medium term bottom is formed earlier than we thought. Otherwise, medium term outlook will remain bearish even in case of strong rebound. Read the rest of this entry »

EUR/USD’s rebound from 132.19 was limited at 141.73 and reversed. Further fall is now mildly in favor to retest 132.19 low. Break will confirm that recent down trend has resumed for next long term fibonacci level at 129.46 (50% retracement of 88.97 to 169.96). On the upside, though, above 138.96 will suggest that consolidation from 132.19 is still in progress for another test of 141.73 before completion. But still, upside should be limited below 147.03 resistance and bring down trend resumption.

In the bigger picture, the sharp fall from 169.96 is still in progress and has taken out long term fibonacci level of 38.2% retracement of 88.97 to 169.96 at 139.02 without hesitation. The development so far suggests that fall from 169.96 is developing into a five wave decline and EUR/JPY is probably in the middle of it only. Medium term outlook will remain bearish as long as 147.03 support turned resistance holds and another fall is still expected even in case of correction, targeting 61.8% retracement of 88.97 to 169.96 from at 119.90.

In the long term picture, the three wave corrective structure of the up trend from 88.97 (00 low) to 169.96 suggests that it’s merely a correction to the multi decade down trend from 285.56. The impulsive nature of the fall from 169.96 indicates that it’s likely resuming the down trend. Hence, 61.8% retracement of 88.97 to 169.96 at 119.90 should at least be reached with odds of extending the down trend further to retest 88.97 low in the long run.