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Forex Market Reeling from Non-Farm Payrolls Shock
European Fiscal Worries Return, USD/CAD Short Opportunity
Gold Looks to Correct Gains before Retesting $1,400 an Ounce
Spot Crude Oil Support and Resistance Levels

Forex Market Reeling from Non-Farm Payrolls Shock

Posted: 08 Nov 2010 01:13 AM PST

Following two major news events last week, (the Fed stimulus decision and the US Non-Farm payrolls) this week will likely be slightly tamer. Still, there are several economic indicators set to be released in the coming days that traders will want to pay particular attention to.

Here is a roundup of the day’s main events:

11:00 GMT: EUR German Industrial Production

As the largest euro-zone economy, Germany tends to have a significant impact on the value of the euro. Today’s Industrial Production figure is widely considered to be a leading economic indicator, and promises to create volatility among euro pairs.

Analysts are predicting a substantial drop in today’s figure from last month. Should the figure come in around its expected level of 0.6%, the euro may see some short term losses in afternoon trading. That being said, a figure above 0.6% will likely boost investor confidence and may give the euro a boost.

13:15 GMT: CAD Housing Starts

The Canadian Housing Starts figure measures the number of new residential homes that began construction over the last month. The housing sector is considered to be one of the leading indicators of economic health, and as such, today’s report is likely to generate market volatility among CAD pairs.

Most analysts are predicting a figure of around 181K for today’s Housing Starts figure. If the forecasts are true, it would represent the lowest figure since last April. A figure at or below 181K will likely cause the loonie to drop against its main counterparts, particularly the US dollar, in afternoon trading.

European Fiscal Worries Return, USD/CAD Short Opportunity

Posted: 08 Nov 2010 04:11 AM PST

The dollar was stronger at lunchtime during the European trading session as the euro stumbled following renewed concerns over Greece and Ireland's fiscal troubles. Canadian housing data is due out this afternoon and the USD/CAD shows a setup to short the pair.

Following a better than expected US Non-Farm Payrolls report last week, the dollar continues to strengthen. Japanese traders bought the dollar from the opening bell and the buying continued into the European trading session.

Signs of fiscal difficulty are reemerging in Europe and have driven the euro lower today. Rising costs to insure the debt of Ireland have sparked worries that Ireland may be the next nation to activate the European mechanism for nations that cannot meet their bond payments.

The drop in the dollar comes despite a bright spot in Greece as voters there reaffirmed their support for the socialist ruling party and at the same time affirmed their support for the government's strict austerity measures. This should end the possibility of new elections in Greece and allow for the implementation of the tough austerity measures that Greece will undertake to shed its budget deficit.

At lunchtime in the European session the EUR/USD is trading lower near the 1.39 level, after opening the day at 1.4031. The USD/CHF is up at 0.9680, following an opening day price of 0.9610. The EUR/CHF is trading at 1.3450, down from its opening price of 1.3485.

The economic calendar is sparse for the US trading session with only Canadian housing starts set to be released. The USD/CAD is trading up at 1.0035, but better than expected data from Canada may reverse the price appreciation from today and send the pair lower in line with the long term trend. An opportunity to enter short on the pair may present itself as the pair has risen but failed to break the minor trend line that begins at the end of October. Traders may want to target the mid October low of 0.9980 while placing a protective stop above the trend line should the pair continue to appreciate today.

Gold Looks to Correct Gains before Retesting $1,400 an Ounce

Posted: 08 Nov 2010 01:08 AM PST

Gold finished last week's session with an extraordinary bullish move which took the metal commodity as high as $1,398 an ounce. At the moment, many analysts claim that gold is about to breach the $1,400. However, as the 4-hour chart shows us, a bearish correction might take place beforehand.

• The chart below is the spot gold 4-hour chart by ForexYard.
• It can be seen that as long as gold was trading above the Bollinger Bands, the bullish momentum proceeded. However, once gold dropped below the higher band, a correction of gains took place. As a result gold dropped to $1,386 an ounce.
• At the moment, the Slow Stochastic has completed a bearish cross, suggesting that further bearishness might be impending.
• The RSI is pointing down as well, yet it is still trading above the 70-line. If the RSI will drop below the 70-line, it might validate the extension of the current bearish move.
• The next support levels are located at the $1,386, $1,373 and $1,362 levels.
• The nest resistant level is found at the $1,400 level.
• Traders should take under consideration that once the bearish correction is completed – gold is likely bounce back up. And once gold breaches the $1,400 resistant level, the psychological effect is likely to boost gold prices further, with potential to reach $1,410 and even $1,420 an ounce.

gold 08 11

Spot Crude Oil Support and Resistance Levels

Posted: 08 Nov 2010 01:04 AM PST

While the dollar may be the largest casualty from the Fed's commitment to purchase 600 billion dollars worth of US government bonds, the biggest winner may be crude oil.

Following the Fed's announcement that essentially loosens US monetary policy, crude oil is testing its highest price since May.

A weak dollar is one reason for the rise in the price of crude oil. As the greenback weakens, crude oil becomes less expensive for those who hold foreign currencies. Another reason for the price increase in crude oil is the expected recovery in the US economy.

Looking at the weekly chart of crude oil, we can see that a key resistance level rests between $86 and $87 dollars. This resistance level stems from instances in December of last year and May of the current year.

We will be looking for a close above the $87 level to induce further buying of crude oil.

Two resistance levels traders should keep in mind are the $90.50 mark, along with the psychologically important $100 a barrel price.

This week's supports rest at the mid October low of $79.80 and the long term rising trend line at $76.

Crude Oil