| Speculators Maintain Sizable EUR Short Position Posted: 13 Dec 2011 03:16 AM PST 
The most recent CFTC IMM data shows speculators reduced their EUR bearish bets though the market’s short position remains close to levels last seen in the summer of 2010. The EUR non-commercial short position declined to 95k which is just shy of the May 2010 high of 113k. While non-commercial shorts reduced their position by over 1.5k contracts the decline in the net short position may be explained by a resurgence of EUR bulls with the non-commercial long position rising by 6.9k contracts. To put this data in perspective the cutoff date for the report was Tuesday December 6th, just prior to the ECB meeting and EU economic summit. It is also worth noting that CHF shorts have climbed to their largest position since June. 
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| EUR Sinks Following Rating Agency Criticism Posted: 13 Dec 2011 12:39 AM PST
The EUR sunk to its lowest level since early October following comments by both Moody's and Fitch. The rating agencies criticized last week's EU economic summit which fell short of a solution to the current fiscal problems. There is a risk of additional sovereign credit downgrades before the end of the year which would weigh on market sentiment and the EUR. Equities are off to a poor start today with the Shanghai Composite finishing lower by 1.9% to close on a 33-month low. Today we'll be getting a slew of data releases from Europe. This morning there will be UK CPI which is expected to show a decline from last month's high. Should inflation come in under last month's 5% reading this would support additional QE from the BoE. The GBP/USD has support at 1.5520 followed by the November 25th low of 1.5420. German sentiment is expected to fall further as the EU economy looks set to slip into a recession. The EUR/USD has support at 1.3145 from the October low. A break here will put 1.3050 in play, the 61% Fibonacci retracement of the 2010-2011 rally from 1.1875 to 1.4940. Resistance is found at 1.3210 the November 25th low and 1.3240 the bottom of the channel line from December. The highlight of the day will be the FOMC meeting. No policy changes are expected though the Fed could restructure some of its methods of communication with the public. The recent appreciation in the USD/JPY appears to be a result of overall USD strength rather than JPY weakness as the JPY is strengthening in the crosses. As such the USD/JPY could find resistance at 78.50 from its long term trend line from 2007. Read more forex trading news on our forex blog.  |
| Dovish Norges Bank Could Weigh on NOK Posted: 12 Dec 2011 05:20 AM PST
On Wednesday at 13:00 GMT the Norwegian central bank will meet. Markets have already priced in a 25 bp cut but there may be scope for further easing of monetary policy which would likely weigh on the NOK. The 25 bp rate cut would take the Norwegian interest rate lower to 2.00% though some economists are calling for a 50 bp reduction. Recent inflation data suggests there is room for additional interest rate cuts in 2012. Statistics Norway said inflation for the month of November remained unchanged at 1% while year-over-year inflation is up 1.2%. The Norges bank keeps an inflation target of 2.5%. As is the case with most central banks the Norges Bank is facing headwinds from the European debt crisis and is affecting Norwegian monetary policy. At the last Norges Bank press conference Governor Oeystein Olsen made it clear interest rates would decline if global growth were to turn lower. As of the latest EU economic summit the European debt crisis remains unsolved and European bond yields are once again falling under pressure. In addition Europe looks headed for a recession in 2012 given the sharp fall in PMI surveys. Thus, the Norges bank could sound more dovish in its press conference that will begin at 13:00 GMT on Wednesday. The USD/NOK has support from last week's low at 5.7110 with resistance in a range between the November high of 5.9350 and the October high of 5.9700. A break here would expose 6.1465, the 61% Fibonacci retracement from the June 2010-July 2011 move. Read more forex trading news on our forex blog.  |
| Central Bank Interest Rate Results Posted: 08 Dec 2011 05:59 AM PST
As expected the Bank of England left its interest rate unchanged and did not add to its quantitative easing (QE) program today. The European Central Bank lowered its key refinancing rate by 25 bp. Investors are anticipating additional easing measures to be announced by Mario Draghi during his press conference today at 13:30 GMT. The major currencies are little changed as a tense two days lie ahead for both European leaders and financial markets. Investor will likely react following Draghi's press conference as traders are on the lookout for two major policy moves: 1. Additional loosening of ECB monetary policy in the face of an EU economy that is slipping towards a recession. 2. The likelihood of the ECB to support European nations with additional sovereign bond purchases. Even if the ECB hints at additional rate cuts, should the ECB shows its willingness to buy more bonds of Italy, Spain, and Portugal, this may support the EUR going into the two day EU economic summit. The EUR/USD has resistance at 1.3440 from the 20-day moving average followed by 1.3550 off of last week's high. Support comes in at 1.3360 from the rising trend line off of the November low. A break here would expose the November low of 1.3210. Read more forex trading news on our forex blog.  |
| New Zealand Interest Rate Decision Posted: 07 Dec 2011 06:24 AM PST
Today at 20:00 GMT we will get the interest rate decision and press conference from the Reserve Bank of New Zealand. The RBNZ is expected to hold rates steady at 2.50% unlike the RBA which lowered Australian interest rates by 25 bp. Given the headwinds facing the global economy the RBNZ would most likely enjoy loosening monetary policy. However, because of higher inflation the RBNZ may keep interest rates on hold. Currently New Zealand inflation stands at 4.6% y/y. The RBNZ targets inflation between 1-3%. The NZD/USD should be supported in the near term if some of some sort of compromise comes from this week's EU economic summit. The 6-month trailing correlation between NZD/USD and EUR/USD stands at 0.80. A correlation closer to 1.00 means the currency pairs move in the same direction. This should help keep the NZD supported versus the USD and the NZD/USD has resistance at the top of the recent consolidation pattern at 0.7840 followed by 0.7980 off of the falling trend line from the August high. Support comes in at 0.7730. For those traders looking to avoid exposure to the EUR the AUD/NZD may offer just that as the pair has a 6-month trailing correlation of with the EUR/USD of -0.16. This indicates there is a weak relationship between the movement of the two currency pairs. The technical picture for the AUD/NZD shows a triangle consolidation pattern from the November 18th high and the November 25th low. The initial resistance from the pattern is 1.3210 followed by 1.3380 off of the trend line from the yearly high. Read more forex trading news on our forex blog.  |
| USD Up Following German Rejection of Double Bailout Plan Posted: 07 Dec 2011 04:10 AM PST
The EUR has been unable to hold onto its gains following yesterday's Financial Times story indicating EU negotiations are taking place to keep the existing European bailout when the new fund takes effect in mid-2012. The drop in the value of the EUR/USD comes after a German response threw cold water on the possibility of the ESM and EFSF running simultaneously With both the ECB meeting and the EU economic summit only a day away the rumor mill is running at full speed. Yesterday evening the FT reported the EU is debating the possibility of keeping the current European bailout plan when the new ESM mechanism is expected to take over and this sparked an EUR rally into the NY close. This morning the story was denied by German officials and the EUR gave up those gains. The EUR/USD rose as high as 1.3450 before running into resistance at the 20-day moving average, a level the pair has failed to move above for the past week and a half. Support is seen back at the rising support line from the November low at 1.3350. Additional support may be found at 1.3260 from the November 30th low. Read more forex trading news on our forex blog.  |
| Crawling Towards the EU Economic Summit Posted: 06 Dec 2011 04:57 AM PST
The news stream over the past 24 hours has been EUR negative with the exception of German industrial orders from October. Yet the EUR has begun to crawl back above the 1.34 level before the strong German data. As I was writing the latest entry for the FOREXYARD forex blog German industrial orders were released and the data simply blew away the consensus forecasts. The October numbers rose 5.2% m/m on expectations of an increase of only 0.9%. The September numbers were revised lower to -4.6% m/m from -4.3% but this did not deter EUR bids. The data underlines comments from German Economics Minister Philip Roesler whom Dow Jones quoted as saying, "Germany is the stability anchor in Europe…Germany is not concerned by short-term decisions of one ratings agency." This morning's statement that the Bundesbank and the US will not support IMF contributions to the EFSF added to the negative sentiment from yesterday's move by S&P to put 15 euro zone nations on negative credit watch. The announcement by S&P came on the heels of press conference with Merkel and Sarkozy to implement additional oversight and penalties on those nations who violate EU budget parameters. These issues will be debated at the two day EU economic summit in Brussels which is set to begin on Thursday. Despite the news of the past 24 hours being mostly EUR negative the EUR/USD has climbed as high as 1.3425. One reason for this may be market positioning. The most recent CFCT IMM data shows EUR non-commercials have their largest short position built in the futures market since June of last year. The one sided positioning could create a short squeeze if European leaders begin to instill a bit of investor confidence towards the end of the week. EUR/USD resistance is found at yesterday's high of 1.3490 and at Friday's high of 1.3550. Support looks to be at the November 30th low of 1.3260. 
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| Bundesbank Adds to EUR Woes Posted: 06 Dec 2011 12:38 AM PST
A report this morning that the German Bundesbank won't support using additional IMF funds for a European bailout added to the EUR's woes a day after S&P placed 15 euro zone nations on a negative ratings watch. S&P did not spare the AAA countries as six of the countries placed on negative credit watch hold the top rating including Germany and France. These nations could face a downgrade within the next 3-months. The report comes on the heels of the negotiations between Merkel and Sarkozy which look to have made some progress going into this week's euro zone summit. The EUR/USD has support at last Friday's post NFP low of 1.3260. Swiss CPI will be released this morning and a contraction in the inflation rate may have traders attempting to get out in front of any future move by the SNB to weaken the CHF. Any gains in the EUR/CHF will likely be capped by the 1.25 level. In the North American trading session we'll get an interest rate decision from the BoC which is expected to hold rates steady. The USD/CAD could test the rising trend line from the July and October lows at 1.0090 followed 0.9890 at the October low. Read more forex trading news on our forex blog.  |
| EUR Stable Following Italian Budget Reforms Posted: 05 Dec 2011 05:01 AM PST
In light trade this morning the EUR is higher after Italy presented new austerity measures to help calm bond investors who have been pressuring Italy over the past two months. According to the most recent IMM data FX traders continue to favor bearish bets against the EUR. Italy unveiled an austerity program designed to save EUR 30 bn over the next 3-years. This has helped 10-year Italian bond yields to fall as low as 5.83% from their highs above 7%. This week is an important week in the European debt crisis. Today there will be meetings between Sarkozy and Merkel in Paris. US US Treasury Secretary Geithner will be making the rounds to push European leaders to come to an agreement. The hectic week of meetings will culminate with the EU economic summit in Brussels where EU leaders are expected to form an agreement for closer fiscal ties. What this all means for currency traders is that the FX markets will be more driven by the headlines and press conferences that follow these meetings. FX markets appear to be fairly illiquid this morning with the EUR up slightly both versus the USD and in the crosses. The Financial Times has reported a number of liquidity providers have seen lower volumes since the end of Q3. The most recent COT report of the IMM data shows EUR speculative shorts continue to grow, rising to a net short position of -104K contracts, the largest short position since the summer of 2010. The risk is for European leaders to come to an agreement on Friday which would induce a large amount of EUR short covering. The EUR/USD has support at last Friday's low of 1.3360 with a rising trend line on the hourly chart from the November 25th low which comes in at 1.3315. Resistance is found at last Friday's high of 1.3550 and the November 18th high of 1.3610. The EUR/JPY is moving higher towards the resistance of 105.65 where the pair's 55-day moving average comes into play. Support is seen back at the November low of 102.50. Read more forex trading news on our forex blog.  |
| FX Majors Consolidating after Yesterday’s Rally Posted: 01 Dec 2011 04:59 AM PST
Successful bond auctions in Spain and France have kept the markets buoyant with Asian equities rallying, though this may be just be markets playing catch up with their American counterparts after yesterday's rally. European stocks are mixed while the major currencies appear to be consolidating. This is not surprising as we approach some important US data both this afternoon and tomorrow. European bonds are up for the day with French 10-year bonds the best performers following decent bond auctions in both Spain and France. The move to increase USD liquidity has carried over into today but market players may be overlooking European data that was released this morning. Euro zone final manufacturing PMI was in-line with market expectations at 46.4 but is down for the sixth straight month and well below the 50 boom/bust level. Traders will now turn their attention to US data releases with the ISM survey today and the jobs report tomorrow. The EUR/USD is within yesterday's wide range but a move above yesterday's high and the pair could test the 1.3610 resistance from the November 18th high. Support is found back at 1.3410 from this morning's low. The kiwi is looking stretched after rallying 5.5% from last week's lows against the USD. The NZD/USD has found resistance at its 55-day moving average at 0.7820. A break here could propel the pair to the 0.8020 from the trend line off of the August and October highs. Support comes in at yesterday's low of 0.7575 and the November low of 0.7400. Read more forex trading news on our forex blog.  |
| Central Banks and US Data Boost Risk Appetite Posted: 01 Dec 2011 01:13 AM PST
Today's data releases from the UK and the US may help higher yielding assets receive a bid following yesterday's coordinated central bank move and a reduced Chinese reserve requirement. This morning we'll get UK manufacturing PMI which is forecasted to fall to 47.1 from 47.4. Sterling has been bid the past 3-days versus the USD and the GBP/USD may find initial resistance at yesterday's high of 1.5780, followed by the November 18th high of 1.5890. Support comes in at the November low of 1.5420. Building on yesterday's positive ADP jobs report and pending home sales the strong US economic data looks to continue into today and tomorrow. ISM manufacturing PMI will likely show the momentum from Q3 is carrying over in to Q4 which could translate into stronger GDP and finally put to bed the idea of a double dip US recession. Stronger data will likely keep the USD on its back foot and the USD/JPY could test yesterday's low of 77.30 with scope for the November 18th low of 76.55. Read more forex trading news on our forex blog.  |
