Forex Market Updates & Commentary

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• GBPJPY breaks support at 119.56
• Euro stocks trimming gains
• EURUSD moves toward channel trend line support
• Merkel says common interest rates on Eurobonds is the wrong signal
• Italy Monti says deficit targets may have to be adjusted to economic cycles
• Merkel stand firmly against a Eurobond
• EURUSD up on the day but trading at midpoint
• Sarkozy says France and Germany are determined to help Italy
• Overview of overnight events/releases
• JP Morgan sees EURUSD at 1.3000 by March 2012 vs 1.3800 previous estimate
• China sovereign wealth fund CIC may aid Europe through investments.
• Fitch cut Portugals rating ffrom BBB- to BB+.
• RBA’s Stevens
• UK GDP (Q3) 0.5% as expected.
• IFO’s Abberger

GBPJPY breaks support at 119.56 Posted: 24 Nov 2011 06:48 AM PST GBPJPY has broken below the 119.56 trendline support on the hourly chart above. Staying below increases the bearish bias for the pair.  Traders will be looking for increased downside momentum. The next target on the downside comes in at the 119.10-20 area (see daily chart below) where a number of highs and lows were made in September and October (the last time the market price was down at these levels).  I would expect some support buyers against this level.  A break back above the 119.56 should solicit profit taking from the shorts.

Euro stocks trimming gains Posted: 24 Nov 2011 06:26 AM PST The FTSE is up only 0.12%.  The CAC and DAX are up about 1% now

EURUSD moves toward channel trend line support Posted: 24 Nov 2011 05:55 AM PST The EURUSD has moved to new lows for the trading day (low reached 1.3324). The 1.3319 level was the low from yesterday. The 1.3304 and 1.3307 levels are trendline support on both the hourly and the daily charts (see charts).  Keep these levels in mind as the next key targets for the pair on a new probe to the downside. On the topside now, the close from yesterday comes in at the 1.3341. This is close resistance for the pair now. A move back above this level could take the pair up to the 1.3354 area. A move above this level, would not be welcomed by the bears.  Look for sellers against this level (Yellow area in the chart below).

Merkel says common interest rates on Eurobonds is the wrong signal Posted: 24 Nov 2011 05:48 AM PST Adds that Eurobonds would weaken the EU The budget sanctions require the changing of the EU treaty The Eurozone stocks are losing some gains.

Italy Monti says deficit targets may have to be adjusted to economic cycles Posted: 24 Nov 2011 05:47 AM PST Must head toward fiscal union.  He also commented that a EU stability bond could make a significant contribution towards fiscal union. Germany/Merkel are at odds with regard to the idea of an EU bond.  The EURUSD trades at new lows for the day.

Merkel stand firmly against a Eurobond Posted: 24 Nov 2011 05:38 AM PST Sends the EURUSD back down.  The changes in the treaty seem to be focused on preventative actions rather than radical changes that would include the idea of a Eurobond.   Germany is concerned that such a bond backed by Germany would lead to a downgrade of their AAA rating.  Ironically, yesterday Germany failed in selling the full allotment of 10 year bunds (3.9 billion vs offering of 6 billion). The EURUSD is trading at the lows for the NY session. The close from yesterday came in at the 1.3341 level which is near the low from the day. Yesterdya the low extended to 1.33199.

EURUSD up on the day but trading at midpoint Posted: 24 Nov 2011 05:26 AM PST The EURUSD has moved higher from the close yesterday (at 1.3341). The price high came in at 1.3410 and currently trades at the midpoint of the days range at 1.3375.  The pair has moved a bit higher in the last few minutes on comments from Sarkozy that they are determined to support Italy and that France, Germany and Italy will announce a proposal for modification of the EU treaty.  The details are sketchy but likely to include having an EU finance minister of overseas fiscal issues.  He does comment that they will not make demands on the ECB.  The proposal for modifying the treaties will be made before December 9th. From a technical perspective the price moved higher from the start, but fell short of the 38.2% retracement at the 1.3414 level and recent lows at 1.3420 (see chart). The price is trading around the midpoint of the days range. The midpoint comes in at the 1.3375 level.

Sarkozy says France and Germany are determined to help Italy Posted: 24 Nov 2011 05:20 AM PST France and Germany to make joint proposal to modify EU treaty. Agreed with Monti and Merkel to not make demands on the ECB Monti will be associated with the EU treaty proposals The EURUSD has moved modestly higher on the comments

Overview of overnight events/releases Posted: 24 Nov 2011 05:08 AM PST US Holiday today (Thanksgiving) Stock futures at highs for the day France Cac Index 1.48% German Dax 1.6% UK FTSE up 1.92% ECB examining term in which it offers front month liquidity. Portugal downgraded by Fitch to junk status (to BB+ from BBB-) with a negative outlook.  The rating agency cited high indebtedness across all sectors and adverse macroeconomic outlook. Germany IFO Business CLimate rose to 106.6 from 106.4 (expected 105.2)

JP Morgan sees EURUSD at 1.3000 by March 2012 vs 1.3800 previous estimate Posted: 24 Nov 2011 04:56 AM PST But sees the EURUSD by 1.3800 by the end of 2012 For what it is worth.

China sovereign wealth fund CIC may aid Europe through investments. Posted: 24 Nov 2011 03:29 AM PST

Fitch cut Portugals rating ffrom BBB- to BB+. Posted: 24 Nov 2011 03:01 AM PST Sees Portugal GDP contracting by 3% in 2012. Sees them meeting deficit target of 5.9% this year. Debt rising to about 110% of GDP by the end of 2011.

RBA’s Stevens Posted: 24 Nov 2011 01:39 AM PST Policy change is a judgement call given the uncertainty of forecasts Policy should not be rigidly and mechanically linked to inflation forecasts. Without large shocks to the economy, inflation has a good chance of being 2-3% in 2012. Current inflation forecast is subject to uncertainties and many variables.

UK GDP (Q3) 0.5% as expected. Posted: 24 Nov 2011 01:30 AM PST Total business investment was -1.4%, worse than the 11.6% prior release and Index of services was 0.1%.

IFO’s Abberger Posted: 24 Nov 2011 01:23 AM PST Start of Christmas shopping went well for retailers. Debt crisis has not reached real economy in Germany yet. Further ECB interest rate cut of 25 basis points would be appropriate, after that we need to wait for further economic development. Germany has a good change to avoid a recession this winter.

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