FOREX TIPS: November 2011

Wednesday, November 30, 2011

FOREXYARD: Forex News Blog

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EUR/USD False Breakout from Wedge Chart Pattern

Posted: 29 Nov 2011 04:35 AM PST

This morning's EUR/USD price action looks like a false breakout from the falling wedge pattern on the daily chart.

The Bank of Italy saw good demand in today's auction where it sold EUR 7.499 bn worth of bonds. The trouble is the yield at which Italy will now pay to finance those debts. The yield for the new 3-year bond is at 7.89% while the yield for the 10-year Italian bond is trading at 7.56%. For Italy the cost to borrow funds is rising at an alarming rate.

Demand was strong for the Italian debt and the EUR climbed to its highest level in a week before coming off after the ECB failed to drain all of the EUR 203.5 bn from its deposit auctions. The ECB only succeeded in draining EUR 194.2 bn. Could this be the start of back door quantitative easing for the ECB to support the struggling euro zone economy?

The North American trading session will see the release of US consumer confidence numbers. FOMC doves Yellen and Raskin will also speak.

As the EUR/USD climbed to a new weekly high of 1.3440 there were willing sellers waiting to enter at better levels and the pair was sent back to 1.3330. The price action looks to be a false breakout from the falling wedge chart pattern that runs from the October 27th high. The base of the chart pattern may now be supportive at 1.3170. A break here could open the door to the January low of 1.2870.

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Saturday, November 26, 2011

FOREXYARD: Forex News Blog

USD/SEK Breaking 2-Year Downtrend

Posted: 25 Nov 2011 12:45 AM PST

The Swedish krona continues to weaken as the USD/SEK breaks higher above its 2-year downtrend.

Barring any surprises today the USD/SEK looks poised to close on a weekly basis above the downward sloping trend line from February 2009. The pair will encounter initial resistance at the September high of 6.9915, followed by the November 2010 high of 7.0700. A break here will open the door to the 2010 August and June highs of 7.5100 and 8.1350. The broken trend line may prove to be supportive at 6.6860 followed by the October low of 6.3075.

USDSEK_Weekly

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Friday, November 25, 2011

FOREXYARD: Forex News Blog

German Economic Data Temporary Lifts EUR

Posted: 24 Nov 2011 02:27 AM PST

Germany received some good news today with the release of a better than expected German Ifo survey and a strong GDP reading. The positive data comes on the heels of a tough 24 hours for both the EUR and risky assets.

According to Destatis, the German economy grew by 0.5% in Q3 and GDP rose by 2.6% y/y. Both metrics were in-line with consensus forecasts. The other positive on the day was the strong Ifo business climate survey, rising to 106.6 from 106.4. The EUR/USD rose as high as 1.3410 before falling back to 1.3370 as investors wait for comments from today's meeting between Merkel, Sarkozy, and Monti.

The data caps a poor 24 hours for the EUR and risky assets in general. Yesterday's release of European PMIs along with awful industrial new orders numbers hint at a euro zone economy that is sliding towards a recession. A potential restructuring of the Dexia bailout threatens to weigh on the France's credit rating. Yesterday's failed bund auction also highlights the arrival of the European debt crisis to the core European nations. Investors are looking for a political solution from the European elite but this solution may be further down the road.

The movement of the EUR/CHF back below the 1.23 level highlights the amount of stress in the markets. A move back towards 1.20 could bring additional jawboning from the SNB which may support the pair. For the EUR/USD yesterday's low of 1.3320 has so far held this morning with resistance located at the base of the consolidation pattern from the November 17th low at 1.3430.

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Potential EUR Short Squeeze Before the Weekend?

Posted: 24 Nov 2011 12:33 AM PST

The EUR and equity markets have come off of their lows though sentiment remains fragile and any potential rally in riskier assets may only prove to be temporary. With US markets closed for the Thanksgiving holiday flows will be on the lighter side today. Today's highlight will be the meeting between the three leaders of Germany, France, and Italy. There may be a possibility for a EUR rally going into the weekend should German PM Angela Merkel signal her willingness to compromise.

Today investors will be focusing on the meeting between Merkel, Sarkozy, and Monti. Perhaps this will be a prelude to the key Dec 9th European Council Meeting. The three leaders of Germany, France, and Italy are expected to hold a press conference at 13:00 GMT today. Should Merkel signal a more open minded approach to euro bonds or additional ECB involvement, EUR shorts could get squeezed going into the weekend. Strict risk management would be a necessity in this situation.

EUR/USD support is at yesterday's low of 1.3320 followed by the October low of 1.3145. Resistance comes in at the base of the consolidation pattern from the November 17th low at 1.3430 and at 1.3610 from the November 18th high.

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Thursday, November 24, 2011

FOREXYARD: Forex News Blog

EUR Sinks Following German Bund Auction

Posted: 23 Nov 2011 06:32 AM PST

The EUR was sent to a 6-week low versus the USD after multiple bearish events came one after another. The final straw was a weak bond auction by Germany.

After being sent lower overnight following a poor Chinese PMI survey and reports the Dexia bailout will need to be restructured the selling of the EUR increased. Disappointing European PMI surveys point to a contraction in European GDP. Both the manufacturing survey and services surveys came in below the 50 boom/bust level. Industrial new orders for the month of October collapsed by -6.4%, more than twice the drop the market was expecting.

The final straw came when Germany failed to auction all EUR 6 bn of 10-year bunds. The auction only drew EUR 3.44 bn with a yield of 1.98%. A weak bond auction from Germany highlights the transition of the European debt crisis from the periphery to the north as ultra-safe German bonds are now being influenced by the market stress.

The EUR came under pressure following the auction with the EUR/USD trading as low as 1.3370. Support is located at the October low of 1.3145. Initial resistance is found at 1.3480 followed by the November 18th high of 1.3610.

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Economic Calendar Packed with Data

Posted: 23 Nov 2011 12:23 AM PST

Today will have a significant amount of data on the economic calendar. European PMI data will likely show the euro zone slipping towards a recession. The BoE meeting minutes could hint at additional easing of UK monetary policy. EU industrial data is expected to drop and will cap out the morning which is coming off of a volatile Asian trading session.

US data later today will have weekly unemployment claims and durable goods orders before the Thanksgiving holiday.

Earlier today the release of a surprise drop in the Chinese manufacturing PMI had risky assets trading sharply lower with the EUR/USD trading as low as 1.3440 and the AUD/USD down to 0.9760. A break of 1.3440 may open the door to the September low of 1.3360 and 0.9700 from the March low.

With increasing tensions in Europe and liquidity expected to fall off due to the holiday, volatility could begin to pick up in the FX markets. This could bring oversized moves in the markets, pushing the current trends even further.

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