Mid-Day Report: Euro Weakens, Dollar and Sterling Rebounds to Close the Year

First of all, wish our readers happy and prosperous 2009!

Just after we mentioned the possibility of reversal in Euro yesterday, selling of the common currency intensifies in thin holiday trading on New Year’s Eve. Most importantly, EUR/GBP dropped over 300 pts to to as low as 0.9473 in early US session. Bearish divergence condition in 4 hours MACD and RSI argues that a short term top is formed at 0.9799 and more weakness will likely be seen, probably to retest 0.9 psychological level. EUR/USD is back below 1.39 and is set to test key near term cluster support at 1.3629. EUR/CAD will probably test double top neckline support at 1.6750 too. Note that Euro’s rally in Dec is partly fueled by speculations that ECB will pause rate cut in early Jan but markets are getting doubtful on such expectations as outlook of the Eurozone economy is getting worse. Some more profit taking on Euro longs could be seen leading to to ECB meeting on Jan 15. Read the rest of this entry »

Daily Pivots: (S1) 154.61; (P) 158.15; (R1) 162.61

No change in GBP/JPY’s outlook as consolidation continues inside range of 153.35 and 165.02. While the corrective price actions from 165.02 suggests that further upside is likely, break of this high is still needed to confirm. In such case, the near term falling trend line will also be taken out and stronger rebound should then be seen towards 181.37 resistance. On the downside, note that break of 153.35 minor support will suggest that rise from 139.02 has completed and bring retest of this low. Read the rest of this entry »

Dollar and yen regained their medium term strength last week. Dollar index finally took out 80.38 high and confirmed that medium term rally from 71.31 has resumed. This is also reflected with EUR/USD and AUD/USD breaking prior lows and USD/CAD bring key 1.08 medium term resistance. Similar situation was seen in the Japanese yen with EUR/JPY and AUD/JPY resuming medium term down trend. Hence, on of the focuses this week is on how these trends are continuing to development.

In addition, RBA is widely expected to cut rates again this week and the questions are firstly how much and what’s next. Most economists expect a 50bps cut in the OCR to 6.50%. Further Aussie selling could be seen if RBA hints there will be more policy easing down the road.

GBP/USD and GBP/JPY are still holding above prior low but remain vulnerable. Another main focus will be BoE rate decision this week. BoE is expected to cut by 25bps to 4.75%. And should the bank deviate from markets’ expectation, the Pound will most likely be rocked.

Another major focus is FOMC minutes and Bernanke’s speech on Tuesday. Markets are pricing in over 80% chance of a “50bps” cut from Fed on Oct 29. The rest of the odds are for a 75bps cut!. Bernanke’s words will be heavily scrutinized for confirming such expectation.

Other events include the release of US pending home sales, wholesale inventories trade balance; Eurozone Q2 GDP; BoJ rate decision and minutes; UK industrial and manufacturing production, nationwide consumer confidence, trade balance; Canadian Ivey PMI , building permits, housing starts, trade balance and job report; Australian job report.
By ActionForex

Action Insight Weekly Review and Outlook
All financial markets around the world were rocked by the financial tsunami last week which started with Lehman Brother announcing bankruptcy and Merrill lynch selling to Bank of America. Panic in the markets reached a climax after AIG’s bailout failed to restore confidence. Dow once had the sharpest fall since 2001 and dived to 11459 level. Yield on three-months US T-bills dropped to near 0% as investors flocked to the safest short-term assets. Dollar yen tumbled to as low as 103.54. Gold, on the other hand, soared to as high as 926 on safe haven buying. Crude oil dropped to near to $90 level. However, markets’ sentiment had a drastic turn following coordinated actions from world’s major central banks to almost quadruple the fund injected to the financial markets from $67b to $247b. Risk appetite came back with the sharpest two days rally in stocks since 1987 following US government’s bank $700b bank rescue bank and rule to limit short selling in financial stocks. Yen crosses were sharply higher as carry trades returned and the greenback was generally lower across the board. Crude oil, on the other hand, bounced back to above 100 on hope of improved economic outlook.

So, after all the events, how’s the forex markets different from a week ago?

Firstly, dollar index’s high of 80.38 made on Sep 11 is confirmed to be a short term top. More pull back is now expected to be seen probably to 75.84 level. That is, the greenback should be generally weak in short term. Such weakness should be apparent against higher yield currencies and commodity currencies, in particular against Aussie, Kiwi, Sterling and also against Euro and probably Canadian dollar too.

Secondly, rebound in yen crosses is expected to extend further after making a short term bottom last week. Further upside are expected to be seen, in particular in AUD/JPY, NZD/JPY and GBP/JPY. USD/JPY and USD/CHF will like remains mixed as weakness on both sides counter each other.

Thirdly, Gold’s strong rebound indicates that medium term correction from 1033 level should have already completed and more upside is expected in gold in short term. This is consistent with the short term dollar bearish view as well as the carry trade return view.

But after all, there is no change in the medium term dollar and yen bullish view yet and markets are expected to resume prior dollar and yen up trend after the current corrections complete. Though, the key factors to pay attention will likely be the development in both the stock markets and oil. DOW’s rebound, though strong, is still limited by 11867 key near term resistance. Meanwhile, crude oil is also limited below 111/122 resistance zone. Markets will likely resume to it’s prior state once rebound in DOW and oil completes. But Dow’s break of 11867 and oil’s break of 122 will serve as important evidence that markets’ sentiment has turned and will dampen the dollar and yen medium term bullish view.
Read the rest of this entry »

Daily Pivots: (S1) 199.68; (P) 200.41; (R1) 201.02;

GBP/JPY’s down trend is still in progress and breaches mentioned 199.78 support today. At this point, further decline is still expected as long as 202.28 minor resistance holds. As discussed before, break of 199.78 is now encouraging deeper fall to test 192.60 medium term bottom. ON the upside, though, above 202.28 will indicate that a short term bottom is possibly in place and bring rebound towards 206.51 resistance before staging another fall.

In the bigger picture, medium term rebound from 192.60 has completed at 215.87 after being limited below 100% projection of 192.60 to 208.99 from 199.78 at 216.17 as well as 55 weeks EMA, on bearish divergence condition in daily MACD. The three wave structure of rise from 192.60 to 215.87 is consistent with the view that it’s merely a correction to the the medium term down trend from 241.35. Break of 199.78 support confirms this case and bring retest of 192.60 low. On the upside, above 210.54 structure resistance is needed to indicate fall from 215.87 has completed. Otherwise, another decline is still expected even in case of strong rebound.

FXCM 2008: Even Lower Spreads

FXCM’s (www.fxcm.com) No Dealing Desk trading platform recently added an additional bank as a price provider, bringing the total to seven global banks that compete to provide pricing for FXCM’s Trading Station. Over the last three months, typical spreads have already tightened.

Watch closely for lower spreads in the following currency pairs:

Currency Pair
Typical Spread
As Low As

EUR/USD
2.3
0.9

USD/JPY
2.9
0.5

GBP/USD
3.7
0.8

USD/CHF
3.8
1

EUR/CHF
2
0.1

AUD/USD
3.7
1

USD/CAD
4.8
1

NZD/USD
4
0.8

EUR/GBP
2.4
0.6

EUR/JPY
3.9
0.6

GBP/JPY
5.3
3

CHF/JPY
3.5
1

"FXCM’s No Dealing Desk trading platform aims to provide transparent and fair execution. Every trade is executed back to back with one of the world’s premier banks, or financial institutions, which compete to provide FXCM with bid and ask prices," said Drew Niv CEO of FXCM. "The best spreads available to FXCM are streamed to you with a small mark-up, which is generally one pip or less for major currency pairs."

For a complete list of currency pairs and their new tighter spreads, please go to www.fxcm.com

If you have any questions, please call one of our currency specialists, who are available 24 hours a day, at 888-503-6739, or email us at info@fxcm.comThis email address is being protected from spam bots, you need Javascript enabled to view it .

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FXCM Facts
Forex Capital Markets LLC is one the Largest Forex Dealer Members
More than 100,000 live accounts are traded on FXCM trading platforms
Over $200 billion in notional volume is traded each month on FXCM trading platforms
As of January 2008, there is in excess of $700 million in customer funds trading on platforms offered by FXCM.
FXCM provides customer support with native speakers in more than a dozen languages in 6 offices around the world
Registered with the CFTC as a Futures Commission Merchant, FXCM (Forex Capital Markets LLC) has received numerous awards from the investment community, including Best Currency Broker from Shares, Best Retail Foreign Exchange Platform from FX Week and Best Foreign Exchange Specialist from Technical Analysis of Stocks & Commodities. In addition to currency trading, FXCM offers educational courses on forex trading, and provides research through DailyFX.com.
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Leveraged foreign exchange trading carries a high level of risk, and may not be suitable for all investors. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose.

More Information:
Jaclyn Sales
Public Relations Coordinator
FXCM
Financial Square
32 Old Slip, 10th Floor
New York, NY 10005
Dir (646) 432-2463
Tel (212) 897-7660