Forex Market Updates & Commentary

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• The Forex Week Ahead (week of November 28th)
• GBPUSD remains in channel downtrend
• Correction: Fitch did NOT change Belgium credit rating.
• Fitch follows S&P and cuts Belgium to AA from AA+
• Belgium cut to AA from AA+ by S&P
• Greek debt office says Greece will abide by October debt restructuring guidelines
• Fitch says Italy probably already in a recession
• Canada Finance Minister Flaherty says will respond again if global turmoin threatens domestic economy
• Dutch finance minister says increased roll for IMF would open up second path other than EFSF
• EURUSD falling back lower after move higher fails
• Greece has started talking to creditors directly about bond swap
• EU Rehn says Italy facing challenges.
• BOE Weale says productivity performance signals slow UK recovery
• There is no statement from SNB. The EURCHF falls sharply
• Greek says 2012 deficit to GDP to be 5.4%

The Forex Week Ahead (week of November 28th) Posted: 25 Nov 2011 12:40 PM PST CLICK HERE FOR THE FOREX WEEK AHEAD (PDF)

GBPUSD remains in channel downtrend Posted: 25 Nov 2011 10:14 AM PST The GBPUSD remains in a downward trend channel that has defined the lows and highs this week. On the lower channel, I have outlined two parellel trendlines.  Each has been used during the week to define risk for traders.  The higher trendline has support at the 1.5416 currently. The lower comes in at the 1.5390 level.  On the topside, the move higher tested the upper trendline today but was not able to push above it

Correction: Fitch did NOT change Belgium credit rating. Posted: 25 Nov 2011 09:49 AM PST Reuters retracted the headline saying it was only S&P that cut Belgiums credit rating

Fitch follows S&P and cuts Belgium to AA from AA+ Posted: 25 Nov 2011 09:43 AM PST

Belgium cut to AA from AA+ by S&P Posted: 25 Nov 2011 09:37 AM PST The EURUSD has moved lower on the news and moves closer tot eh low for the day at the 1.3211 level

Greek debt office says Greece will abide by October debt restructuring guidelines Posted: 25 Nov 2011 09:36 AM PST This contradicts the comments that Greece was negotiating with the private investors for a different plan.

Fitch says Italy probably already in a recession Posted: 25 Nov 2011 09:34 AM PST

Canada Finance Minister Flaherty says will respond again if global turmoin threatens domestic economy Posted: 25 Nov 2011 09:21 AM PST Will be flexible, pragmatic and ensure any governemtn spending is targeted and efficient.

Dutch finance minister says increased roll for IMF would open up second path other than EFSF Posted: 25 Nov 2011 09:12 AM PST Adds, that the EU did not discuss the sums but it would have to be substantial.  IMF role must be big enough to help both Spain and Italy. Remember, Greece is 400 billion of debt. Italy and Spain has around 2 trillion of foreign debt each.  There are talks that the EFSF cannot get 1 trillion of levered funds.

EURUSD falling back lower after move higher fails Posted: 25 Nov 2011 08:39 AM PST The EURUSD failed on its correction higher as action heats up and the bearishness reasserts itself.  The market is nervous and nervous means down.  There is talk that a more direct involvement from the IMF is needed. There is an apprehension to have a EU bond by Germany.  There is talk of Greece petitioning private holders of debt to swap bonds at 25% of NPV. The banks want to swap at 40% of NPV (I assume that means at a higher proceed amount for Greece on the bond swap).  The market is moving toward the ledge as the “bid/offer spreads” on solutions continue to be the name of the game and wider than the market traders may like. I would think that the EU/ECB/IMF would not want to test what happens if there is a full forced liquidation of EU debt due to the confussion, uncertainty and total distrust in what is said or promised.  This suggests that the weekend should have some news.  Is there enough time for some meaningful solutions to be announced? Yesterday comments from France and Greece were focused on a new EU treaty announcement by the 9th of December.  Can the market wait for that? With the auction schedule next week for the EU, I am not sure time is on their side or something the market can provide them. Right now, I would be more negative but if the price moves above the 1.3264 level, I would be more cautious. I have to let the technicals dictate my mood as news is unpredicatble.  The 1.3224 is the next target, followed by the low for the day at the 1.3211 level. By the way, the move higher today peaked near the underside of the broken trendline on the daily chart (see chart below).  The trendline was broken at 1.3293 today. The high on the move higher came in at 1.3296.  That has helped contribute to the decline since, but the market will now be looking for momentum lower to continue.

Greece has started talking to creditors directly about bond swap Posted: 25 Nov 2011 08:30 AM PST The report says that Greece is demanding 25% NPV of new bonds (Higher proceeds) and creditors want 40%

EU Rehn says Italy facing challenges. Posted: 25 Nov 2011 08:27 AM PST Italy economic fundamentals are by and large sound Need comprehensive reforms to boost growth. Welcomes economic program of new Italian Government

BOE Weale says productivity performance signals slow UK recovery Posted: 25 Nov 2011 08:26 AM PST Quite likely BOE policy to be loose for some time Inflation forecast signals strong case for more QE NO case for more QE until the current round ends BOE has thought about how to provide bank liquidity Might consider early QE if the economy weakens sharply He is speaking on Bloomberg

There is no statement from SNB. The EURCHF falls sharply Posted: 25 Nov 2011 08:02 AM PST The SNB was rumored to make statement to a new peg for the EURCHF at 1.2500. That did not happen and the EURCHF moved sharply down. The pair has broken through a steep trend line but has support at the 38.2% level at the 1.23284 level. Holding the level will be eyed as trading works toward the weekend. A move above the 1.2351 level will now eyed by the bulls. Otherwise look for  two way trading. The idea that the SNB wants the EURCHF higher has not been a secret.When the EURCHF approached the 200 day MA at the 1.2235 level yesterday and the 50% of the move up since the intervention, perhaps this was the low threshold for the central bank.  Whether they peg a new higher rate or not,  is unknown. However, they may have been successful in turning the bias back away from selling the EURCHF.  With pressure on the EURUSD keeping the pair supported will be difficult. For the EURCHF to move higher, and if the EURUSD remains pressured, it is up to the USDCHF to stay more supported.

Greek says 2012 deficit to GDP to be 5.4% Posted: 25 Nov 2011 08:00 AM PST 2013 is 6.1%, 2014 is 5.1% and 2015 is 4.2% Total debt to fall to 285billion in 2015 from 309 billion in 2012.  This is 125.6% of GDP This compares to around 400 billion currently and Debt to GDP of around 166% This is according to the Greek Finance minister. Of course the success of these budget projections are highly subjective.

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