Forex Market Updates & Commentary |  |
- Eurogroup Juncker says German debt level is a “cause for concern”
- Italian Bond Yields and the EURUSD
- Forex Basics Big Picture with Shawn Powell TODAY 4:00 PM
- Industrial Production and Capacity Utilization come in better than expectations
- GBPUSD confined in a narrow up and down range. Looking for direction clues.
- Merkel rejects Euro bonds
- US CPI comes in a touch lower than expectations. Ex F&E in line
- NY Morning Forex Commentary for November 16th 2011
- Bobbys Corner-Open Market-November 16.2011
- NAHB Housing Market Index due at 10 AM ET
- Industrial Production and Capacity Utilization due at 9:15 AM ET
- US CPI at 8:30 AM ET
- US Mortgage Applications come in at -10.0% vs +10.3 last month
- Italians Monti nominates himself to run the economy ministry
- EURUSD tests resistance area
| Eurogroup Juncker says German debt level is a “cause for concern” Posted: 16 Nov 2011 08:29 AM PST Juncker adds that:
The EURUSD has moved down from 1.3530 to the 1.3505 area. |
| Italian Bond Yields and the EURUSD Posted: 16 Nov 2011 07:33 AM PST
There is a lot of talk that as the Italian bond yields move, so does the EURUSD – only in the opposite direction. Today the yield of the Italian bond fell from above 6.80% to 6.62% at the start of the day, and then rebounded back higher toward the 7% level. The current yield is at 6.922. Why the volatility? There are basically two forces at work. One is that there is the desire to lessen the number of bonds on the books of banks – especially of those who’s countries are deemed risky. Italy has ousted their Prime Minister, has a new technocrat PM in Mario Monti (not a political member) in place with no support from either party in his cabinet. It is a grand experiment which has bond holders skeptical. Holders of sovereign debt have been burned with Ireland, Portugal, Greece and now Italy seems to be next in line. Whether it happens or not is not of a concern to the bond holders. The fact is that it may happen, This is more the concern in a time where preserving and raising new capital is THE FOCUS. Why risk capital in a risky country’s bonds? On the other side is the ECB. The central bank has been buying Italian debt in the market as a way to counter the selling taking place. The purchases typically cause a lowering of yields (rise in price). When the ECB enters the market, they deal directly with banks. Very few actually see it. The only clue is the scrambling that takes place as the spaghetti gets shuffled around the plate from A Bank to B Bank to C Bank to D Bank. Eventually, the ECB buying stops, the yield bottoms and the natural selling starts again. Needless to say, the markets are not normal while this goes on. As the chart above shows there is some correlation between the 5 year yield and the EURUSD but it is not perfect. Toward the beginning of the day the EURUSD was moving down, while the bond yield was moving sideways. Then bond yields started to move higher and the EURUSD in this case continued its move lower. Later, the EURUSD bottomed and started to move higher, while yields were continuing to the peak. Since the peak in the 5 year yields, the action in the debt instrument has been sideways to down. The EURUSD meanwhile has been more up and down. Can a retail trader benefit from the Italian yield information? Maybe. There is some correlation, but I like to argue that if trading EURUSD by watching another instrument like bond yields, where do you know you are wrong? The linkage can break and this can lead to a large loss on your EURUSD position. I still believe that following the technical clues from the EURUSD itself is the safest and most logical way to trade these markets. What is more certain perhaps, is the volatility that may grip the market while the artificial pegging of yields take place at the same time as a fundamental selling interest by the market in general. This increases risk in the market. With increased risk, traders should be sure to define risk and perhaps lower position sizes to account for the extra volatility. Technical levels will still give clues. If there is buying of the bonds and the EURUSD traders likes it, the price will move higher and will likely break above Moving average lines or trendlines. If selling takes place and the EURUSD traders don’t like it, the price will move lower and break below trendlines and Moving average lines. That may frustrate and force a more “trading” market, but that is what happens in a market that is not a true market anymore but one that is influenced by the artificial pegging of rates. Is it better or worse given the current fundamental backdrop? We willl never know as long as market forces are not in play anymore. |
| Forex Basics Big Picture with Shawn Powell TODAY 4:00 PM Posted: 16 Nov 2011 06:39 AM PST
Forex Basics Big Picture with Shawn Powell TODAY, Wednesday at 4:00 PM. We’ll be covering the importance of looking at multiple timeframes. Its my first webinar back after my trip to mainland China. - Register now |
| Industrial Production and Capacity Utilization come in better than expectations Posted: 16 Nov 2011 06:23 AM PST The Industrial Production came in at 0.7% vs 0.4% expectations. The Capacity Utilization was also better at 77.8 vs 77.6% expectations. The Capacity Utilization data is the strongest since July 2008. The Industrial Production data is also impressive. Yesterday, the US Retail Sales also for October came in better than expectations (0.6% vs 0.2% expectations). The increase in this data is positive for 4th quarter growth. US Manufacturers are benefitting from rising sales abroad and in the US. Growth may also be benefitting from a restocking of inventories. The EURUSD has dipped a bit on the better than expected data. The market may be getting away from the stronger data in the US means a stronger EURO and more toward stronger data is good for the dollar. I will be watching this dynamic going forward. |
| GBPUSD confined in a narrow up and down range. Looking for direction clues. Posted: 16 Nov 2011 05:55 AM PST
The GBPUSD is in a confined, up and down range today. The high to low range is 82 pips This comes after the sharp move down on Monday and Tuesday which took the price from a high of 1.6089 to the low today of 1.5744 (354 pips). When the market consolidates and has some up and down volatility, the market is not sure of the next move. Does it want to correct further to the upside, continue the trend down or stay in the range. Looking at the 5 minute chart below, the 1.5753 area will be eyed to see if support buyers come in early against the low for the day at the 1.5744 level. Seller will be encouraged by a move through this level and an extension lower would be likely. The 1.57172 level will be the next target on a break of the 1.5744 low. This is the 50% of the move up from the October low to the October high.
On the topside a move above the 1.5784 level (50% of the days range) will next look for a break above the 1.57936 level. The 1.58088 level wil be the next target on the topside and a break will continue the upside momentum. The high for the day occurred at the 1.5824 level and a move above opens the door for an extension toward the 1.5849 and then the 1.5875 level. The unemployment rate rose to 8.3% today vs expectations of 8.2%. Bank of Englands Mervyn King signalled today that the BOE sees weaker growth as a result of the EU debt crisis. Although he expects the country to remain out of a recession, he expects “broadly flat” economic growth. The BOE also expects inflation to fall below the 2% target in 2 years. If so, they may have to increase the bond purchase program from the current 275 billion. There are expectations that the central bank will increase the bond program by 50 billion by as early February. In October they raised the program by 75 billion to the current level. This should keep the pressure on the pound in the absence of any marked improvement in the EU situation (not expected). |
| Posted: 16 Nov 2011 05:37 AM PST She also says she wants the Eurozone to stick together |
| US CPI comes in a touch lower than expectations. Ex F&E in line Posted: 16 Nov 2011 05:32 AM PST US CPI MoM -0.08 vs 0.0% expectations Headline is lower than expectations of unchanged. |
| NY Morning Forex Commentary for November 16th 2011 Posted: 16 Nov 2011 05:19 AM PST |
| Bobbys Corner-Open Market-November 16.2011 Posted: 16 Nov 2011 05:16 AM PST
The ECB was out in the markets again buying Italian, Spanish and Portuguese debt, in a move to ease tensions in the Euro Zone’s credit markets. The ECB is still commenting that they will not be the lender of last resort for the EZ-but with Dutch,French, and Austrian bonds also under pressure-the ECB will need to become a vital part of cleaning up the credit crisis that is now growing out of control. Gold, silver and oil are all lower at this time. World equity markets were and are mostly lower (except the CAC). US Futures are also lower at this time. HAVE A GREAT DAY & GOOD LUCK |
| NAHB Housing Market Index due at 10 AM ET Posted: 16 Nov 2011 04:56 AM PST
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| Industrial Production and Capacity Utilization due at 9:15 AM ET Posted: 16 Nov 2011 04:53 AM PST
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| Posted: 16 Nov 2011 04:51 AM PST
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| US Mortgage Applications come in at -10.0% vs +10.3 last month Posted: 16 Nov 2011 04:32 AM PST |
| Italians Monti nominates himself to run the economy ministry Posted: 16 Nov 2011 04:31 AM PST
The market is likely to give the new government the benefit of the doubt. In the Italian bond market today, yields fell sharply to 6.62% as the ECB countered the market trend and bought bonds, but has since moved back toward the 7.03% level seen at the end of trading yesterday. The pattern seems to be intervention, followed by selling after the ECB buying is done.
The government is to be sworn in at 1600 GMT (11 AM ET). |
| Posted: 16 Nov 2011 04:18 AM PST
The EURUSD is bouncing higher as the market awaits the cabinet announcement of Italian Monti. The pair has resistance at the 1.3493-1.3505 where the 38.2% and 50% of the last sharp move to the downside is found. The pair on the hourly is currently above the 1.3487 level which is the channel trendline (see chart above). A move back below this level will be needed to satisfy the intraday traders. For the week, the trend is down. The high was reached on Sunday night in NY (in the first hour of trading). The 38.2% of the weeks range comes in at the 1.3573 level. This level will be eyed by the intermediate term traders. The high today, spiked to 1.3556.
Looking at the daily chart, there is bottom trendline support today at the 1.3411 level. This line connects the lows in the month of November.
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