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October Ends With Nervous Investors

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Nov 2, 2009.

  1. mercaforex

    mercaforex New Member

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    By Mercaforex

    USD:
    The USD continued to take no prisoners on Friday as it powered higher against the EUR. Equity markets in the States were pummeled as negative sentiment swept through share prices and took the major indexes sharply lower. The U.S. released Personal Spending data on Friday and it showed a decline of -0.5% compared to the forecast of minus -0.4%. While the Chicago PMI and Revised Consumer Sentiment numbers did show an improvement, investors showed that the Advance GDP statistics published on Thursday would not be enough to bolster a positive run on Wall Street two days in a row. October went out with a whimper in the stock markets and has now turned in a couple of nervous weeks straight. It could be a lack of strong fundamentals from corporate revenues that has investors worried. Also agitating the picture could be the significant gains made in equities the past six months and the ‘feeling’ that the markets may have been over bought.
    From the U.S. today the ISM Manufacturing PMI and Pending Home Sales data will come forward. The PMI report is expecting a reading of 53.1, which would be an improvement over the previous month. The Pending Home Sales projection carries an estimated gain of 0.2%. Both reports will be watched and because of the nervousness that seems to be shadowing the marketplaces any surprises could cause a ripple effect. Making news this weekend was CIT Groups filing for bankruptcy. However investors have known for some time that this corporation has been in a death spiral. Lurking in the wings is the upcoming meeting of the Federal Reserve on Wednesday, which will deal with interest rates and monetary policy. The FOMC Statement will be watched closely because of the awkward balancing act that will have to be carried out as the U.S. government says stability and growth are taking place but raise caution flags too. The USD gained on Friday as investors fled the EUR in search of the proverbial ‘safe havens’. Volatility has made a return to the equity markets and if this continues, the greenback could see traders push it higher.

    EUR:
    The EUR was taken lower on Friday as international bourses suffered. The German Retail Sales figures were published and proved disappointing with an outcome of minus -0.5% compared to the projected gain of 0.7%. The broad European Unemployment numbers were published too and met expectations with a 9.7% statistic. Today will be a quiet day of data from the European Union with only the Final Manufacturing PMI reading due from the continent. The week will remain fairly silent until Thursday when the ECB holds their monthly interest rate meeting. Like the U.S. and the U.K., Europe is not expected to increase their interest rate. The crux of the matter for Europe is that the EUR remains uncomfortably high for some of the most important countries making up its union. Germany relies heavily on exports and the strong currency is not helping the country extricate itself from the troubling economic onslaught. The EUR although taken lower last week remains near the upper end of its trading range against the USD and traders will be keen to see how risk appetite plays into the market this week.

    GBP:
    The Sterling has turned in a rather divergent performance the past couple of sessions. Though the GBP did lose a bit of ground to the USD on Friday it did not lose in the manner the EUR did compared to the greenback. The Nationwide HPI was published and produced a positive 0.9% statistic, which was slightly above the forecast of 0.8%. However the Construction PMI report came in with a negative 46.7 reading, below the estimate of 48.2. Today the Manufacturing PMI numbers will be released it the projection is calling for a reading of 50.1, which would be an improvement over the previous outcome. The Bank of England will meet this week and issue their interest rate declaration and discuss monetary policy. Like the U.S. the U.K. finds itself mired in a debate about economic perspectives. The Sterling did relatively well last week against the USD and traders may find that opportunity awaits them.

    JPY:
    The JPY rolled higher on Monday as equity markets showed negative returns. The status of the JPY as a ‘safe haven’ among Asian investors has not disappeared and has showed its merit the past couple of trading sessions. The JPY is nearing its high water marks against the greenback once again and is showing that a high degree of doubt remains in the marketplace. Gold finished around the 1046.00 USD mark and its rather tight band even in the face of USD strength, suggests that the broad market place is a jittery place for the time being.

    October Closes With A Fizzle (Yes, Thats Correct, Fizzle, Not Sizzle)

    SPX/USD:
    It seemed like there might be a glimmer of hope at the end of the day on Thursday. A light at the end of the tunnel if you will. And then there was Friday! With risk appetite disappearing quicker than Houdini himself, market players diverted there funds away from what they considered riskier products and threw them back at the safe haven dollar. On the weekly chart we are still holding the uptrend line! It is always easy to feel like the market is going to break support when it feels weak. However, there is a reason we like to call support, support. Play this trade with caution as a bounce off of these levels could happen easily. I would not get short at this point just because it is too risky a trade. The safer play at the moment would be to go long with a tight stop. On the other hand, my feelings towards the American equity market have long been negative, and I am looking for the opportunity to get short. As such, I will be standing aside until traders settle on one direction for the S&P. As a final note we did close the last gap that had been left from Oct 5th. Support 1033.4, 1019.6, 1009.1, 992.25 Resistance 1051.1, 1061.9 1073.2, 1081.5, 1086.2, 1095.8, 1101.4, 1132.2, 1153.8

    XAU/USD:
    You have to love Gold. As expected we moved higher and had a nice bullish candle on Friday in the face of a stronger US Dollar. As investors began piling into the safe haven bid, this precious metal proved its worth. At the time of writing we are trading $10 higher than our previous close. Friday’s post discussed gold being on a precipice, with a possible accumulation at these levels. This may well turn out to have been the case as we push back up towards the $1070 area. Look for strength as we near the all time highs. If this market arrives at $1070 like a runaway train, I would expect us to maintain the momentum and keep making new highs! Support 1047, 1042.58, 1036, 1024, 1009.65, 1006.2, 984.5. Resistance 1061.35, 1064.25, 1070.6

    GBP/USD:
    The strength in the American National Currency has finally caught up with the Sterling. We continue to trade the range but while we expected this currency to near 1.6741 it seems to have tucked its tail between its legs and reversed on itself. The long term forecast for this trade is still the higher end of the range, but it looks like we are returning back to the normal dollar dependent relationship. Another bounce off the 1.6249 level would require a higher high than 1.6604 before we continue the move up towards 1.6741. Keep a close eye on these levels, as well as the trading activity of the Greenback. Support 1.6249, 1.6112, 1.5776 Resistance 1.6488, 1.6604, 1.6692 1.6741, 1.7042

    EUR/USD:
    We started the day trading below uptrend line on the weekly chart. As usual this currency’s relationship with the US dollar is that of a dependent child on his mother. As the dollar moves higher the euro moves lower. With risk appetite drying up over the course of last week, and dollar strength on the horizon, there is not much hope for this currency pair. Unless of course we manage to close the day over the trend line and over 1.4683 which may turn out to be a significant level of support. Once again the safer trade (as well as being the better technical trade) is buying support and using a tight stop just below it. Until I am able to put my finger on the pulse of this market I will be standing aside waiting for some conviction, as my feelings are that we may see increased safe haven buying throughout the week, and that of course would mean further declines in the EUR/USD. Support 1.4683, 1.4480, 1.4370, 1.4176 Resistance 1.4766, 1.4842, 1.4985, 1.5062, 1.5284
     
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