Forex Market Updates & Commentary

EURUSD marches higher by Slovak vote and technical buying
Gold Struggles to Recover
Market talk of BOJ to introduce USDJPY limit
Mexico Industrial Production Sinks Lower to 3.1% vs 3.3%, Prior 3.2%
Canada New House Price Index Stays
Bobbys Corner-Open Market-Oct.12.2011
French gov’t says it won’t use EFSF to recapitalize banks.
ECB’s Weidmann says a haircut on Greek debt cannot be ruled out.
According to reports, German private banks oppose more help for Greece.
Eurozone industrial production 1.2%; better than expected. Euro continues higher.
Aussie breaks daily resistance
USD/CHF breaks trend line support
Risk appetite in play as Slovak Parliament is expected to ratify EFSF, possibly this afternoon.
UK claimant count change 17.5K; better than the 24.7K forecast and 20.3K prior reading.
German fin. minister regrets Slovakia vote, however is confidence EFSF will ultimately pass – EUR firmer.

EURUSD marches higher by Slovak vote and technical buying

Posted: 12 Oct 2011 07:35 AM PDT

The EURUSD has been aided by Slovak opposition party agreement to approve the EFSF. Prior to that, firm technical buying (led by additional short covering) has led to another surge higher. The Slovak opposition leader Fico have announced there will be an early election (as a concession for the Yes vote on EFSF). That will take place in March of 2012. The ratification will occur by Friday at the latest according to the leader.

From a technical perspective, the EURUSD buying was ignited overnight by the move above the key 1.3680 level (38.2% of the move down from the August 2011 high – see daily chart) and that prompted a wave of buying in the pair. The price is just above the last high spike in the pair that occurred on September 21st at the 1.3796 level. Staying above this level would keep the bulls happy and in control. On the daily chart the next key target is the 1.38465 level which is the 50% retracement of the move down from the same end of August 2011 high. The bullish momentum resumes for the pair.

On the 5 minute chart, the momentum from the break of the 1.3680/89 area is evident as a mad scramble to buy ensued. The buying slowed but the holding of the 38.2% of that surge higher at the 1.37495 level (see 5 minute chart) has given the bulls new lifein the NY session. The consolidation in the laste London/early NY session, also allowed the 100 bar MA (blue line) to catch up with the price and that too provided support for the pair. Longs will be following the 38.2% retracement and the 100 bar MA for clues of a possible continuation of the trend. If the price can remain above these technical levels, the bulls remain in firm control. A move below will be needed to potentially lead to a further corrective move to the downside. The 100 bar MA currently comes in at the 76.55 level (and moving higher).

Gold Struggles to Recover

Posted: 12 Oct 2011 07:22 AM PDT

Gold (daily chart) as of Wednesday (10/12/2011) has continued its struggle to recover from the precipitous drop that brought price down from its latest all-time high of 1920 in early September down to a low of 1532 in late September. That three-week plunge of almost $400 culminated in a large hammer candle right down at the 200-period simple moving average support, indicating a temporary price failure to further its plummet. Since that candle formation, price has essentially consolidated sideways with a slight upside bias. This pullback/consolidation has formed a rising wedge-type pattern that may also be seen as a large pennant formation. This consolidation pattern would fulfill its role as a continuation pattern if there is a break to the downside below the bottom border of the pattern. In this event, the key initial downside target resides around the 1550 price region. The key event that could presage a recovery of gold and a potential resumption of the long-term entrenched uptrend would be a breakout above the 1730 resistance region.

(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)

James Chen, CTA, CMT
Director of Technical Research and Education
FXDD

Market talk of BOJ to introduce USDJPY limit

Posted: 12 Oct 2011 07:00 AM PDT

….This sounds similar to the SNB “peg” of the EURCHF and has led to the USDJPY (and all JPY pairs) moving sharply to the upside in the last hour of trading. This is unconfirmed, so be aware.

The pair – after falling below support trend line in the London morning session and failing miserably – has now broken higher and moved above the 50% of the range that has confined the pair since early September at the 76.976 level. It has moved above the high in October of 77.25. It has also breached the highest high since September 12th. The next target to surpass is the 77.845 high reached on September 9th.

On the daily chart the pair’s surge higher has stalled at another key level at the 77.36 level. This is the downward sloping trendline extending back to the April 2011 high at 85.509 and connecting to the July 2011 high at the 81.46 level (see chart below). Looking at the daily chart a move above this level should solicit additional buying with the 100 day MA (blue line in the chart below) at the 78.35 level the next key target. Before that the September high price at the 77.85 will likely provide some profit taking.

The USDJPY has been consolidating in a narrower and narrower non-trending trading range. This suggests that the possibility exists for a break- a trend move away. The pair has had its share of false starts in the past. The question is, will this be another dud or the real thing. Clues will come from the technicals. I will be watching the 38.2% of the move up today as the line in the sand. If the price on a correction can stay above this line (currently at the 76.98 level), the move should keep the buyers interest. If the price is able to break abov the 77.41 spike high, I will be looking for momentum to take charge.

Mexico Industrial Production Sinks Lower to 3.1% vs 3.3%, Prior 3.2%

Posted: 12 Oct 2011 06:04 AM PDT

Canada New House Price Index Stays

Posted: 12 Oct 2011 05:42 AM PDT

Canada New House Price Index(YoY): Survey: 2.3% Actual: 2.3% Prior: 2.3%

Canada New House Price Index(MoM): Survey: 0.1% Actual: 0.1% Prior: 0.1%

Aug vs. Jul
Total(MoM)%: 0.1% vs 0.1%
House Only: 0.1% vs 0.0%
Land Only: 0.1% vs 0.2%

Total(YoY)%: 2.3% vs 2.3%
House Only: 2.2% vs 2.3%
Land Only: 2.2% vs 2.1%

Total(3-Mon Annualized)%: 3.0% vs 3.2%
House Only: 3.5% vs 4.3%
Land Only: 1.8% vs 1.9%

Bobbys Corner-Open Market-Oct.12.2011

Posted: 12 Oct 2011 05:20 AM PDT

Good Morning:

Risk was back on the table overnight as equity markets traded higher, thus forcing the USD and JPY lower as investors seek higher-yielding assets-and forfeit the safer havens for now.
Aussie and Kiwi jumped higher, as did the Euro. The Euro rose to a 3 week high as news that the European Commission will present proposals to recapitalize the European banks today.
The Swiss Franc also rose overnight-as investors anticipate that the Swiss Nat’l Bank may act to further weaken the CHF by adjusting the original cap that the SNB put into place last month versus the Euro.
In other news from accross the pond-the BOE stated that their new round of stimulus is needed, and that the BOE will do whatever needs to be done to keep the UK economy on track.

World equity markets rose-as did Gold, and Oil.
US Futures are also higher at this time.

HAVE A GREAT DAY & GOOD LUCK

French gov’t says it won’t use EFSF to recapitalize banks.

Posted: 12 Oct 2011 03:50 AM PDT

ECB’s Weidmann says a haircut on Greek debt cannot be ruled out.

Posted: 12 Oct 2011 03:31 AM PDT

According to reports, German private banks oppose more help for Greece.

Posted: 12 Oct 2011 02:45 AM PDT

Eurozone industrial production 1.2%; better than expected. Euro continues higher.

Posted: 12 Oct 2011 02:27 AM PDT

Aussie breaks daily resistance

Posted: 12 Oct 2011 02:21 AM PDT

AUD/USD well surpassed daily resistance at 1.00102, now trading at 1.01056. Next stop could possibly be 1.01697; and old support level.

USD/CHF breaks trend line support

Posted: 12 Oct 2011 02:03 AM PDT

We noted earlier that the pair was testing recent trend line support, but with the recent rally in risk appetite the pair traded off over 60 pips not testing the recent low of .90006.

Risk appetite in play as Slovak Parliament is expected to ratify EFSF, possibly this afternoon.

Posted: 12 Oct 2011 01:54 AM PDT

We’ve seen a Euro rally leading the trend following comments from EU’s Rehn that Ireland is on its way to an export-led recovery and additional commentary about the ratification of the EFSF. Prior to the rally there was some hourly consolidation in the EUR/USD between 1.35655 and 1.36783 until the pair made a stronger push higher recently breaking the recent high of 1.36972.