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: Risk Aversion Back ahead of ECB and BoE Meetings

Risk aversion is back to the market following 486 pts fall in DOW and broadly lower Asian stock markets. The Japanese yen and dollar fight back with the usual candidate, the Aussie, hit most in spite of a better than expected job report from Australia. Dollar index climbs back to above 85, oil weakens to below $65 while gold also drops below $738. Markets’ focus now turns to two of the biggest events of the week, ECB and BoE meeting and much volatility is anticipated throughout the day.

ECB is widely expected to cut the benchmark rates by 50bps from 3.75% to 3.25%. Eurozone CPI peaked at 16 year high of 4% in July and moderated steeply to 3.2% yoy in Oct since then. With falling commodity prices, inflation is believed to be a much lesser threat now, giving room for ECB to cut rates to revive growth in the Eurozone and avoid a recession. Due to recent sharp deterioration in growth outlook, there are some speculations on a wider than expected cut by 75bps today. Also, markets are pricing in as much as 125bps cut in the coming nine months. Hence, be it a 50bps cut or more, Trichet will likely sound dovish and signal further rate cuts in the near term in the post meeting conference.

BoE is also expected to cut rates by 50bps from 4.50% to 4.0% today but there are even more speculations of a larger than expected cut of 100bps. It’s no doubt that UK is entering a recession with sharp deterioration in growth data and confidence in consumers and businesses. Markets are speculating that UK will be the next to follow US to get itself close to near Zero Interest Rate Policy. This is reflected in the fact that Sterling was the weakest European major currency in Oct and it’s even weaker than Aussie and Kiwi this month.

On the technical side of the story, a few things to note. Firstly, AUD/USD and USD/CAD are showing sign of momentum loss and the correction might be completing. Secondly, similar situation is seen in USD/JPY which argues that the rebound might have completed. Though, EUR/JPY and GBP/JPY remains relatively steady in range so far. Thirdly, Dollar Index’s rebound left the fall from 86.98 to 83.9 in three wave corrective structure which suggests upside potential in near term. But after all, note that the major pairs and crosses are mostly still bounded in established range and the current choppy consolidation could extend further in unpredictable path as long as the range holds.

On the data front, New Zealand unemployment rate rose less than expected from 3.9% to 4.2% in Q3. Australian unemployment rate was unchanged at 4.3% in Oct, better than expected 4.4%. Japan leading indicator rose 0.2% to 89.2% in Sep. Germany factory orders is expected to drop -0.2% mom, 3.2% yoy in Sep. US jobless claims is expected to edge higher to 480k. Q3 labor cost is expected to rise 2.8% with productivity up 0.8%. Canadian building permits and Ivey PMI will also be released.
By ActionForex

Action Insight Mid-Day Report
Euro dives further in early US session after ECB Trichet left rates unchanged at 4.25% but delivered a much softer message in the following press conference. A few points to note. Firstly, the governing council did discussed two options, on hold and cut rates, even though the rate to hold rates was unanimous. Secondly, Trichet noted weakening of Eurozone economic activity has been “very visible” and recent data suggests there are “increased downside risks” to growth. Thirdly, Trichet acknowledged that upside inflation risks have diminished even though they didn’t disappear yet. All in all, Trichet stressed that ECB is aware of the high level of uncertainty that has developed due to intensification of the financial market turmoil. After all, the markets generally believe that Trichet is paving the way for a rate cut, probably by year end and another cut early next year.

Technically speaking, note that EUR/USD and EUR/JPY both took out this year low’s today which confirm that recent medium term down trend has resumed. USD/CHF is pressing 1.1416 high and should set to take this out to confirm resumption of medium term rise. Another pair to watch is USD/CAD, which surges sharply with support of falling oil prices and is now back pressing key medium term resistance at 1.8 level. Dollar index takes out 80 level today, confirming that rise from 71.31 has resumed. And after all, more upside is expected from the greenback.

Economic data released today saw US jobless claims remains elevated at 497k. Eurozone PPI dropped -0.5% mom in Aug, with yoy rated moderated to 8.5% as expected. UK nationwide house price dropped further by -12.4% yoy in Sep. Australia trade surplus came in wider than expected at 1364m in Aug.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3922; (P) 1.4178; (R1) 1.4346

EUR/USD’s break of 1.3851 key medium term support indicates that whole decline from 1.6038 should have resumed. At this point, intraday bias remains on the downside as long as 1.3936 minor resistance holds. Further decline is expected to 61.8% projection of 1.6038 to 1.3881 from 1.4867 at 1.3543 next. On the upside, above 1.3936 will indicate that a short term bottom might be formed and bring consolidation. But recovery should be limited well below 1.4574 resistance and bring fall resumption.

In the bigger picture, sustained trading below 1.3851 medium term support will confirm that whole decline from 1.6038 has resumed. Next medium term target will be 61.8% retracement of 1.1639 to 1.6038 at 1.3319. On the upside, above 1.4867 resistance is needed to indicate that a medium term bottom is formed. Otherwise, medium term outlook remains bearish even in case of strong rebound.

Action Insight Mid-Day Report
Euro dives further in early US session after ECB Trichet left rates unchanged at 4.25% but delivered a much softer message in the following press conference. A few points to note. Firstly, the governing council did discussed two options, on hold and cut rates, even though the rate to hold rates was unanimous. Secondly, Trichet noted weakening of Eurozone economic activity has been “very visible” and recent data suggests there are “increased downside risks” to growth. Thirdly, Trichet acknowledged that upside inflation risks have diminished even though they didn’t disappear yet. All in all, Trichet stressed that ECB is aware of the high level of uncertainty that has developed due to intensification of the financial market turmoil. After all, the markets generally believe that Trichet is paving the way for a rate cut, probably by year end and another cut early next year.

Technically speaking, note that EUR/USD and EUR/JPY both took out this year low’s today which confirm that recent medium term down trend has resumed. USD/CHF is pressing 1.1416 high and should set to take this out to confirm resumption of medium term rise. Another pair to watch is USD/CAD, which surges sharply with support of falling oil prices and is now back pressing key medium term resistance at 1.8 level. Dollar index takes out 80 level today, confirming that rise from 71.31 has resumed. And after all, more upside is expected from the greenback.

Economic data released today saw US jobless claims remains elevated at 497k. Eurozone PPI dropped -0.5% mom in Aug, with yoy rated moderated to 8.5% as expected. UK nationwide house price dropped further by -12.4% yoy in Sep. Australia trade surplus came in wider than expected at 1364m in Aug.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3922; (P) 1.4178; (R1) 1.4346

EUR/USD’s break of 1.3851 key medium term support indicates that whole decline from 1.6038 should have resumed. At this point, intraday bias remains on the downside as long as 1.3936 minor resistance holds. Further decline is expected to 61.8% projection of 1.6038 to 1.3881 from 1.4867 at 1.3543 next. On the upside, above 1.3936 will indicate that a short term bottom might be formed and bring consolidation. But recovery should be limited well below 1.4574 resistance and bring fall resumption.

In the bigger picture, sustained trading below 1.3851 medium term support will confirm that whole decline from 1.6038 has resumed. Next medium term target will be 61.8% retracement of 1.1639 to 1.6038 at 1.3319. On the upside, above 1.4867 resistance is needed to indicate that a medium term bottom is formed. Otherwise, medium term outlook remains bearish even in case of strong rebound.

World investors are deeply concerned with the widening of financial crisis after the unexpected rejection of US $700b bailout plan sent DOW to a historical fall yesterday. Asian and European stock markets open sharply lower today. Though, follow through selling is not apparent and the markets recover mildly instead. Yen crosses are still holding above Sep’s low and recovers mildly after edging lower earlier today. Dollar remains bounded in range against European majors.

There are a large amount of uncertainty for the moment, depending on how Bush and colleagues will modify the plan before House meets against on Thursday. The vote was just 228 to 205 and some cosmetic changes might be good enough to win 13 votes to get the bill passed. On the other hand, the Senate might vote the the bill first on Wed and then send it over to the House but some Senates has already expressed that they have no inclination to take up a bill without being certain of its fate in the House. In addition, markets are starting to speculate an intermeeting 50bps cut from Fed if no progress is seen this week. Indeed, speculations went even further for a coordinated 50bps cut from world central banks which could include BoE, BoC and RBA. With the amount of uncertainty lying ahead, sentiments of investors could flip either side as things develops

Read the rest of this entry »

Action Insight Mid-Day Report
Dollar remains generally weak across the board in early US session with dollar index pressing 77 level. Most major currencies extend gains against the greenback as expected and such trend will like continue in near term. In particular, the USD/CAD is now trying to take out 1.0410 key near term support level on the back of strength in oil prices. Markets are still accessing the impact of US government’s $700b bailout plan to the economy but it’s generally agreed that the widened budget deficit is negative to the dollar.

Data released from Canada saw Jul retail sales rose 0.1% in mom while ex-auto sales rose 0.4%. UK rightmove house prices dropped -1.0% mom in Sep with yoy rate -3.3%. Japanese all industry index rose 0.8% in Jul as expected. Taro Aso was elected president of Japan’s ruling LDP and will likely succeed Yasuo Fukuda as the Prime Minister of Japan. Other news said Nomura is close to acquiring Lehman’s European Units, Mitsubishi UFJ will invest up to $8.4b in Morgan Stanley.

BoJ minutes released showed members generally agreed that US economic outlook is considerably uncertain. “Members shared the view that global financial markets remained unstable due mainly to concerns about further losses that U.S. and European financial institutions might incur”. Also, “members agreed that there was considerable uncertainty regarding when and how the negative-feedback loop between financial markets, asset prices and economic activity would diminish.”

Read the rest of this entry »

Action Insight Daily Report
Dollar index is seen losing steam and fails to sustain above 80 level so far despite reaching as high as 80.38 yesterday. The greenback retreats further against most major currencies today. Is the market turning around? We’d like to point out a few facts, firstly, EUR/USD is now close to a key medium term support at 1.3851 with 50% retracement of 1.1639 to 1.6038 at 1.3839. GBP/USD is being supported by 50% retracement of 1.3680 to 2.1161 at 1.7421. USD/CAD just failed to sustain above a key medium term resistance level at around 1.08. Crude oil is near to 100 key psychological support while Gold is also near to key medium term support at 732. In other words, a break of near term levels in these pairs will probably trigger some chain effects in others which in turn trigger a broad based correction in the overbought greenback.

The Japanese yen also reversed sharply after rebound in the equity markets. The development of Lehman is the dominant theme in the equity markets now. There are reports that Lehman is in intensive discussions with US officials which could eventual lead to a sale to a consortium of private firms. Such deal could be announced as soon as during the weekend. Since no money from the government is expected to be involved, a relief rally is triggered in global stock markets and the development could lead to more broad based improvement in investor’s sentiment.

Data released overnight saw New Zealand retail sales dropped more than expected by -0.8% in Jul but the Kiwi paid little attention to this piece of news. Japanese Q2 GDP annualized growth. was revised slightly higher from -4.0% to -3.0%. Industrial production was up from 2.0% to 2.4% yoy in Jul.

Looking ahead, main focus in the European session will be Eurozone industrial production which is expected to contract -0.2% mom, -0.7% yoy in Jul. Eurozone Q2 employment will also be released.

From US, main focus will be on Aug retail sales which is expected to grow 0.2% in Aug, but ex-auto sales is expected to drop by -0.2%. PPI is expected fall -0.5% mom, rise 10.2% yoy in Aug, with core PPI up 0.2% mom, 3.7% yoy. U of Michigan consumer sentiment is expected to improve from 63 to 64.
By ActionForex

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