Tuesday, July 19, 2011

Forex Market Updates & Commentary

Forex Market Updates & Commentary

Link to Forex News and Commentary by FXDD

EURUSD finds profit takers at 1.4182 intraday ceiling area

Posted: 19 Jul 2011 07:02 AM PDT

The EURUSD has continued the move higher and approaches the 1.4182 level where there was intraday ceiling resistance earlier in the London/early NY session. THe 1.4190 level is also resistance and also the 1.4196 level. 1.4161 remains support. If the price remains above this level, the bulls remain in charge.

Bank of Canada released statement

Posted: 19 Jul 2011 06:32 AM PDT

http://www.bankofcanada.ca/2011/07/press-releases/fad-press-release-2011-07-19/

Ottawa -

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The global economic expansion is proceeding broadly as projected in the Bank's April Monetary Policy Report (MPR), with modest growth in major advanced economies and robust expansions in emerging economies.  The U.S. economy has grown at a slower pace than expected and continues to be restrained by the consolidation of household balance sheets and slow growth in employment. While growth in core Europe has been stronger than expected, necessary fiscal austerity measures in a number of countries will restrain growth over the projection horizon. The Japanese economy has begun to recover from the disasters that struck in March, although the level of economic activity in that country will remain below previous expectations.  In contrast, growth in emerging-market economies, particularly China, remains very strong. As a consequence, commodity prices are expected to remain at elevated levels, following recent declines. These high prices, combined with persistent excess demand in major emerging-market economies, are contributing to broader global inflationary pressures.  Widespread concerns over sovereign debt have increased risk aversion and volatility in financial markets.

In Canada, the economic expansion is proceeding largely as projected, although the expected rotation of demand is somewhat slower than had been anticipated. Household spending remains solid and business investment robust. Net exports remain weak, reflecting modest U.S. demand and ongoing competitiveness challenges, particularly the persistent strength of the Canadian dollar. Despite increased global risk aversion, financial conditions in Canada remain very stimulative and private credit growth is strong.

Following an anticipated slowdown in growth during the second quarter due to temporary supply chain disruptions and the impact of higher energy prices on consumption, the Bank expects growth in Canada to re-accelerate in the second half of 2011. Over the projection horizon, business investment is expected to remain strong, household spending to grow more in line with disposable income, and net exports to become more supportive of growth. Relative to the April projection, growth in household spending is now projected to be slightly firmer, reflecting higher household income, and net exports to be slightly weaker, reflecting more subdued U.S. activity. Overall, the Bank projects the economy will expand by 2.8 per cent in 2011, 2.6 per cent in 2012, and 2.1 per cent in 2013, returning to capacity in the middle of 2012.

Total CPI inflation is expected to remain above 3 per cent in the near term, largely reflecting temporary factors such as significantly higher food and energy prices. Core inflation is slightly firmer than anticipated, owing to temporary factors and to more persistent strength in the prices of some services. Core inflation is now expected to remain around 2 per cent over the projection horizon.  Total CPI inflation is expected to return to the 2 per cent target by the middle of 2012 as temporary factors unwind, excess supply in the economy is gradually absorbed, labour compensation growth stays modest, productivity recovers, and inflation expectations remain well-anchored.

The Bank's projection assumes that authorities are able to contain the ongoing European sovereign debt crisis, although there are clear risks around this outcome.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be withdrawn, consistent with achieving the 2 per cent inflation target. Such reduction would need to be carefully considered.

Information note:

A full update of the Bank's outlook for the economy and inflation, including risks to the projection, will be published in the MPR on 20 July 2011. The next scheduled date for announcing the overnight rate target is 7 September 2011.

EURUSD finds profit takers against the 100 hour MA

Posted: 19 Jul 2011 06:19 AM PDT

The price fell below the 1.4148 level on the Merkel dampening comments (see prior post) and moved lower on the break.  However, the price quickly found support buyers/profit takers against the 100 hour MA at the 1.4136 level.  The area also has the 38.2% retracement of the move up from yesterdays low at the 1.4139 level, and the 200 hour MA at the 1.4142 level as reasons to buy (risk defined).  So although the price has moved lower from the highs, the price ability to hold above the 100 hour MA and other support levels, keeps the bulls in charge from an intraday basis. 

What changes the bias?  The obvious answer is a break below the 3 key levels with a move below the 100 hour MA at the 1.4136 level being the most important.  ON the topside, the intraday sellers would like to see the 1.4160 level hold in order to keep the low targets in site.   This is the 38.2% of the move up today (see chart below).  The bulls would likely be excited on a break of the 1.4195 level above (see chart below). This has been a double top intraday after reaching the peak at the 1.4216 level. 

Bank of Canada Leaves Interest Rate Unchanged at 1.00%

Posted: 19 Jul 2011 06:00 AM PDT

  • Canada rises ‘carefully considered’
  • Core inflation to stay around 2% throught 2013
  • Bank reiterates Canada to reach potential in mid 2012
  • Bank expects firmer household spending and weaker exports
  • Bank of Canada says U.S. growth has been slower than expected
  • Bank of Canada sees ‘clear risks’ Europe cant contain crisis 
  • Stimulus to be withdrawn; the word “eventually” is dropped which is indicative of more certainty by the central bank

The dropping of the word “eventually” from the comments is a clear hawkish stance and has sent the USDCAD lower. The price is making new lows and looks toward the May low of 0.94449 level.  ON the hourly chart, the price fell below channel support at the 0.9532 level. Staying below this channel trend line keeps the pressure on the pair intraday.

EURUSD fall on Merkel comments. Finds support against MA support intraday

Posted: 19 Jul 2011 05:59 AM PDT

German Chancellor Merkel commented that the solution for Greece on Thursday will not be spectacular and this has sent the EURUSD down to test the 100 bar MA on the 5 minute chart. The market has used this moving average and the 200 bar MA as levels for defining trade risk this week. The current 100 bar MA comes in at the 1.4148 level and that is where the price has bottomed. A break is needed to change the bias for the pair.

Germans Merkel says Thursday’s solution will not be a spectacular step

Posted: 19 Jul 2011 05:54 AM PDT

The Euro debt problems must be solved from the core. Overspending, low competitiveness causes of crisis.

The comments have put a lid on the EURUSD and has sent the pair back lower.

Canada Leading Indicators Fall

Posted: 19 Jul 2011 05:45 AM PDT

US Building Permits & Housing Starts Come Out Higher than expectations

Posted: 19 Jul 2011 05:31 AM PDT

Housing Starts:    Survey: 575K    Actual: 629K    Prior: 560K    Revised: 549K

Housing Starts (MoM)%:    Survey: 2.7%    Actual: 14.6%    Prior: 3.5%    Revised: 0.0%

Building Permits:    Survey: 595K    Actual: 624K    Prior: 612K    Revised: 609K

Building Permits (MoM)%:    Survey: -2.3%    Actual: 2.5%    Prior: 8.7%    Revised: 8.2%

The Housing Starts are the highest level since January 2011 when the starts peaked at 636K. The Building Permits, a measure of potential activity down the road, are at the highest level since December 2010 when the permits were at a 630 thousand annualized pace.

The increase was boasted by multi family dwellings like apartments. The increase may also be a catch up from bad weather in April and May which delayed starts until June. Nevertheless the report is solid.

Single family home increased 9.4% to 453 thousand, the highest since June 2010. Multifamily homes rose 30% for the month to 176 thousand.

To put things into perspective, the 2009 pace was 554 thousand the lowest on record (going back to 1959). The peak? 2.07 million in 2005.

Later this week the existing home sales will be released where 95 % of the activity occurs. The annualized rate is expecte to show a 4.95 million pace. This is up from 4.91 in 2010 but below the 7.08 million peak in 2005.

German coalition partner calls for Greece to exit the Eurozone

Posted: 19 Jul 2011 05:30 AM PDT

Report in the market. The EURUSD dipped to NY lows but has stabilized.

The NY Morning Forex Commentary for July 19th 2011

Posted: 19 Jul 2011 05:07 AM PDT

Canada Leading Indicators Expect .20% Rise

Posted: 19 Jul 2011 04:23 AM PDT

US Building Permits & Housing Starts Data Due at 8:30AM

Posted: 19 Jul 2011 04:19 AM PDT

ECB Notwotny says avoid any solution that stops ECB from taking Greek bonds

Posted: 19 Jul 2011 04:17 AM PDT

  • He adds that ECB action is not determined by rating agencies

If Greece is determined in default by a credit agency, the ECB would have a dilemma in perhaps accepting Greek debt of a country that is in a selective default situation. This would be a temporary situation he feels, but it may weaken the ECB stand in the market. Notwotny seems to be spinning both sides..Avoid default, but won’t be influenced by a rating agency.

The finance minister of Austria is also quoted as saying the leaders are working on a more comprehensive rescue package which will look to stop the contagion within the Eurozone and Greece. He added that Greece will need more time to repay.

Zew Comments

Posted: 19 Jul 2011 02:22 AM PDT

  • Question arises how long German economy will continue to grow at current pace.
  • Fiscal situation in the US watched with increasing concern.
  • Business cycle is basically robust in Germany.
  • Would have expected a bigger decline in sentiment than ZEW shows, due to debt problems.
  • Investors do not see US debt negotiations as too problematic.
  • Later answers to its survey were more pessimistic than earlier answers.
  • Inflation expectations are going down a bit.

Eurozone ZEW (m/m) -7.0 vs. -5.9; worse than expected.

Posted: 19 Jul 2011 02:02 AM PDT

German ZEW -15.1; worse than the -11.8 survey and -9.0 prior reading.
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