Forex Market Updates & Commentary

Germany’s Merkel and Roesler on the Wires
EURJPY falls from upside trendline resistance
The GBPUSD moves toward the lower boundary
EURUSD continues to take it on the chin
Swiss Economy Minister says EURCHF should be 1.3500-1.4000
USDCAD moves toward channel resistance in choppy trading after BOC decision
BOC keeps rates unchanged. The statement from the BOC
Bank of Canada Leaves Benchmark Interest Rate at 1%
Fitch reiterates the likely default in the next few months
Bank of Canada Interest Rate decision at 9 AM ET
Empire Manufacturing 13.8. Better than expected. Big jump in employment.
Empire Manufacturing and Canada Data Improve
EURUSD holds onto the trend move
Dollar moves lower on better auctions/data. Greece default the wildcard
Canada Foreign Securities Purchases & US Empire State Manufacturing Index Data Due at 8:30AM

Germany’s Merkel and Roesler on the Wires

Posted: 17 Jan 2012 07:35 AM PST

Merkel said to tell lawmakers Greek contagion danger receding

Roesler Says:

Relaxed about S&P downgrade on EFSF
Market has ‘decided otherwise’ to S&P
S&P is only one rating company
Must move quickly toward stabily pact
No plan to contribute more to EFSF
Not at all in danger of losing AAA rating

EURJPY falls from upside trendline resistance

Posted: 17 Jan 2012 07:33 AM PST

The EURJPY extended to the topside trendline (see point 4 in chart above) and has pushed back toward the flatenning 100 hour MA. The price decline has stalled at the level as traders figure out the next move. I get the feeling the market may look to consolidate for a while at the 100 hour level and midpoint of the move.

The GBPUSD moves toward the lower boundary

Posted: 17 Jan 2012 06:41 AM PST

The GBPUSD tested the 200 hour MA (green line in the chart above) and found willing sellers against the level. The price is now back down and looking toward what is good support on the same chart at the 38.2% retracement and the underside of the trendline broken earlier today. Also, supporting the area is the 50% of the move up from the weeks low. That level comes in at the 1.5337 level. So with the hourly showing support at 1.5333 and 1.5336 and the retracement at the 1.5337, look for the price to respect the level and use it to define risk.

EURUSD continues to take it on the chin

Posted: 17 Jan 2012 06:30 AM PST

The EURUSD has fallen below the 50% of the days range and the 100 hour MA at the 1.2727. The level was also the 200 bar MA on the 5 minute chart which increases the importance of the level. I would expect traders to use the level as resistance now. 1.2708 is 61.8% of the days range and below that the 1.2687 will be the next target. This was the high from the non trending day yesterday.

Swiss Economy Minister says EURCHF should be 1.3500-1.4000

Posted: 17 Jan 2012 06:16 AM PST

Hopes hopes for easing of the CHF sooner rather than later

USDCAD moves toward channel resistance in choppy trading after BOC decision

Posted: 17 Jan 2012 06:15 AM PST

BOC keeps rates unchanged. The statement from the BOC

Posted: 17 Jan 2012 06:04 AM PST

The full statement from the Bank of Canada (http://www.bankofcanada.ca/2012/01/press-releases/fad-press-release-2012-01-17/)

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 outlook for the global economy has deteriorated and uncertainty has increased since the Bank released its October Monetary Policy Report (MPR). The sovereign debt crisis in Europe has intensified, conditions in international financial markets have tightened and risk aversion has risen. The recession in Europe is now expected to be deeper and longer than the Bank had anticipated in October. The Bank continues to assume that European authorities will implement sufficient measures to contain the crisis, although this assumption is clearly subject to downside risks. In the United States, while the rebound in real GDP during the second half of 2011 was stronger than anticipated, the Bank expects the U.S. recovery will proceed at a more modest pace going forward, owing to ongoing household deleveraging, fiscal consolidation and the spillovers from Europe. Chinese growth is decelerating as expected towards a more sustainable pace. Commodity prices – with the exception of oil – are expected to be below the levels anticipated in the October MPR through 2013.

The Bank's overall outlook for the Canadian economy is little changed from the October MPR. While the economy had more momentum than anticipated in the second half of 2011, the pace of growth going forward is expected to be more modest than previously envisaged, largely due to the external environment. Prolonged uncertainty about the global economic and financial environment is likely to dampen the rate of growth of business investment, albeit to a still-solid pace. Net exports are expected to contribute little to growth, reflecting moderate foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar. In contrast, very favourable financing conditions are expected to buttress consumer spending and housing activity. Household expenditures are expected to remain high relative to GDP and the ratio of household debt to income is projected to rise further.

The Bank estimates that the economy grew by 2.4 per cent in 2011 and projects that it will grow by 2.0 per cent in 2012 and 2.8 per cent in 2013. While the economy appears to be operating with less slack than previously assumed, given the more modest growth profile, the economy is only anticipated to return to full capacity by the third quarter of 2013, one quarter earlier than was expected in October.

The dynamics for inflation are similar to those anticipated in the October MPR, although the profile for inflation is marginally firmer. Both total and core inflation are expected to moderate in 2012 and subsequently rise, reaching 2 per cent by the third quarter of 2013 as excess supply is slowly absorbed, labour compensation grows modestly and inflation expectations remain well-anchored.

Several significant upside and downside risks are present in the inflation outlook for Canada. Overall, the Bank judges that these risks are roughly balanced over the projection horizon.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada. The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2 per cent inflation target over the medium term.

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 18 January 2012. The next scheduled date for announcing the overnight rate target is 8 March 2012.

Bank of Canada Leaves Benchmark Interest Rate at 1%

Posted: 17 Jan 2012 06:02 AM PST

Fitch reiterates the likely default in the next few months

Posted: 17 Jan 2012 05:57 AM PST

And in a stating the obvious comment, they add that the default should be orderly to limit the impact. The EURUSD has fallen below some intraday technical levels (see trendline in the chart below) on the comments, negating the bullish momentum in the process. The next key support is at the 1.2727 level.

Bank of Canada Interest Rate decision at 9 AM ET

Posted: 17 Jan 2012 05:50 AM PST

Source: Bank of Canada

The Bank of Canada interest rate statement is due at 9 AM ET. The expectation is for no change in policy. The last time the BOC changed rates was September 2010. The Central Bank will likely be concerned about potential headwinds from Europe and the high debt burden for Canadian citizens. The good is the better tone in the US data of late. The bank has been consistent in saying policy is accomodative and will need to be more normalized down the road, but when that is, is a different story.

Empire Manufacturing 13.8. Better than expected. Big jump in employment.

Posted: 17 Jan 2012 05:31 AM PST

Employmnent 12.09 vs 2.33 last
New Orders 13.7 vs 5.99 last
Shipments 21.69 vs 20.06 last

Empire Manufacturing and Canada Data Improve

Posted: 17 Jan 2012 05:31 AM PST

Canada International Securities Transactions: 14.99B Actual: B Prior: 2.03B Revised: 3.85B

Empire Manufacturing: Survey: 11.00 Actual: 13.48 Prior: 9.53B

EUR/USD moves lower on the news.

EURUSD holds onto the trend move

Posted: 17 Jan 2012 05:27 AM PST

The EURUSD is down looking to test the trendline in the 5 minute chart above. Earlier in the NY session the price fell below trendline and 38.2% retracement but quickly moved higher and made new highs. The second test at the line will be eyed as to the trends momentum.

On the hourly chart below the pair marches higher with topside trendline at the 1.2828 today. A move toward this topside trendline today should find some profit taking sellers against the level. The range today is healthy 161 pips today from low to high. That range can be extended. Watch the support for the traders “will” to take it higher and keep the pressure on the sellers.

Finally, the daily chart gives the next targets for the pair with the 1.2857 and the 1.2890 representing upside resistance. The 1.289o level is the topside channel trendline. The 1.2857 represents the low from the end of December