Mid-Day Report: Dollar Weakens as Consolidation Continues, FOMC Minutes Next
Dollar is sharply lower against European majors in early US session as consolidation continues. Technically speaking, as discussed in our technical outlook reports, more upside is still expected in EUR/USD and GBP/USD. Meanwhile, USD/CHF retreats sharply after edging higher to 1.2082 earlier today. Dollar index’s dip below 4 hours 55 EMA argues that some more pull back should be seen before resuming recent rally. Elsewhere, Crude oil, rides on dollar’s retreat and rebounds strongly from intraday low of 53.66 to above 55.6. Focus will now turn to FOMC minutes for inspirations on further volatility. Though, ,markets are pricing in 90% chance of another 50bps cut from Fed on Dec 16 and the minutes will likely have little impact to this view based on current economic and inflation outlook. Read the rest of this entry »

In addition to the routine economic data release, a couple of developments worth much attention this week.

Firstly, regardless of the different ways to interpret the structure of the consolidation pattern in DOW that started at 7884, be it in form of a triangle or an a-b-c flat sideway consolidation, such consolidation should be near to completion. A breakout is anticipated within the coming one or two weeks and break of 7884 low will likely trigger another round of dollar and yen buying which sees Euro and Aussie breaking out of recent ranges.

Secondly, as mentioned during the week, recent development has no conflict to the view that dollar index has completed triangle consolidation at 85.06. Hence, while some pull more pull back could be seen, downside of the dollar index should be contained above this 85.06 support and then bring up trend resumption that push the index to new high again. However, a break below this 85.06 level will open up a few bearish scenarios which should at least push for a retest of 83.11 support.
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Mid-Day Report: Markets Stay in Tight Range after Poor US Data

Dollar continues to stay in tight range in early US session as poor economic data from US fails to trigger much price action in the financial markets. New residential construction data showed housing market is still in deep recession. Housing starts dropped by -6.3% to 26 years low of 0.82m annualized rate in Sep. Building permits dropped by -8.3% to 27 years low of 0.786m annualized rate. Preliminary reading of U of Michigan consumer sentiments tumbled sharply to 57.5 in Sep. But after all, dollar index remains in tight range above 82 level while most forex pairs are bounded in sideway consolidation. DOW opens lower of lack follow though selling. Crude continues to struggle around above 70 as consolidation continues too even though gold dropped below 800 level again and reached as low as 779.
By : ActionForex

Daily Report: Forex Markets Follow Stocks in Consolidation

The forex markets continue to stay in tight range today with dollar and yen mildly softer against other major currencies. Note that intermarket relationship with stock is the main driver in the forex markets currently and will likely remain so for a while. Weakness in the commodity markets is apparent with oil breached $80 level briefly while gold also breached 800 level briefly too. However, the lift on dollar by commodities will likely be temporary and as stock markets’ choppy consolidations are still in progress, the forex markets will likely follow. After all, note that levels in major pairs and crosses as well as the dollar index still hold and there is no change in the medium term bullish outlook in dollar and yen yet. Also, DOW’s 7,884 low will be the key level to watch for and as long as this level holds, there is no confirmation of downtrend resumption in DOW yet. Thus, any breakout in the forex markets will be treated with caution as that may only be part of short term consolidation only. Breakout in dollar and yen needs to be confirmed by breaking of 7,884 in DOW too.

On the data front, main focus will be on new residential construction data from US today. The NAHB home builder confidence index released yesterday dropped three points to an all time low of 14 last month, suggesting deep pessimism in the housing industry. Housing starts is expected to drop slightly from 0.89m to 0.88m annualized rate in Sep while building permits is expected to be unchanged at 0.85m. Preliminary U of Michigan consumer sentiment is expected to drop from 70.3 to 65 in Sep. Eurozone Trade deficit is expected to widen from -2.3b to -6b in Aug.
Market Overview by ActionForex

FOMC rate decision and announcement will be the main event in a week of a jam packed calendar this week. Fed is widely expected to be on hold at 2.00%. Markets are starting to speculate that Fed will cut again by the end of this year after unemployment rate surged to 6.1% in Aug and with other economic data showing few signs of a turnaround. Inflation is expected to ease in the coming months on falling commodity prices and the turmoil in the financial markets is still on. Indeed interest rate futures are now pricing in 40% chance that Fed will cut by 25bps by the end of this year, up from nearly no change in Aug. Hence, markets will be particularly focused on whether Fed will lean towards an easing bias again in the accompanying statement after this week’s meeting.

A number of important economic data will also be released from the US this week, including Consumer Price Index, regional Fed survey from New York and Philadelphia and industrial production and new residential construction.

German ZEW and Eurozone final HICP inflation will be main feature from Eurozone. Trade balance will also be released.

It’s also an important week in UK with focus on Aug CPI, employment report and retail sales. More importantly, BoE minutes will be released.

In addition to Fed, BoJ and SNB will also announce rate decision this week and are expected to be on hold at 0.5% and 2.75% respectively. From Switzerland, focus will also be on combined PPI, retail sales and ZEW index.

RBA minutes will also be featured.

by ActionForex