Showing posts with label Blogging with Forex. Show all posts
Showing posts with label Blogging with Forex. Show all posts

Currencies All Poised to Settle In As Holiday Finally Upon Us


FOREX SPECIAL :-
If you haven’t already, it’s time to go enjoy the family and friends, because absolutely nothing even close to significant should happen from here into the close on Friday, and if anything does happen, you probably won’t want to be involved. To go over developments in recent trade, the Yen has made a bit of a comeback over the past 24 hours, although with the market still holding above 82.00, it is hard to say that we have really gone anywhere at all, with the broader multi-day consolidation still intact. Meanwhile the Swiss Franc has finally relented a bit, after Usd/Chf failed to take out the 0.9460 record lows from October. There has been no confirmation of any central bank activity, but the resulting price action has set up bullish outside days in Usd/Chf and Gbp/Chf (off of record lows), and a bullish reversal day in Eur/Chf (also off of record lows).
Despite recent efforts from the European Central Bank to restore confidence in the Eurozone, with some of these beleaguered local economies’ bond yields remaining elevated, the market is still not showing too much confidence. Additionally, the move by the Fed to extend Dollar supply to Europe is also a good sign that liquidity risk has not softened. As such, we continue to risks for additional Euro weakness over the coming days, with a retest and break below the recent lows by 1.2970 very realistic. The Euro has however been somewhat supported in recent trade following S&P’s move to affirm France’s AAA rating with a stable outlook.
The Australian Dollar has given up some of its relative strength over the past day, but on the whole, remains very well bid. However, we continue to hold the opinion that this is a currency which has outdone itself and should be due for a major across the board pullback over the coming year. Our favorite trade for 2011 is Long EUR/AUD, with the cross trading by multi-year lows, technically violently oversold and screaming for a major trend reversal.
Back to the topic of the Yen, according to a recent Reuters report, Japan is expected to raise its FX intervention fund limit by an additional 5Trln to 150Trl Yen total into the next fiscal year which begins in April. While the move by no means confirms that additional action will be taken, it certainly sends some form of a message to market participants that they should be careful of buying Yen going forward.
If we take a look at the Eur/Usd monthly chart, it looks as though the market will close out the year right around levels that were seen at the start of 2009. A very significant bearish outside month in November of 2010 now likely signals a longer-term lower top by 1.4285, with a break back below the 2010 low at 1.1880 to confirm the lower top and open some fresh downside. As such, we still see plenty of downside risk for the Euro over the coming months with a move back below 1.2000 seen as a very realistic possibility. Ultimately, a break back above 1.4285 will now be required to negate the longer-term bearish structure.
There is nothing on the economic calendar for Friday and we would expect to see all currencies consolidate by their respective closing levels on Thursday. Just an additional heads up that The Australian and New Zealand markets are closed on Monday and Tuesday for Christmas break. We wish each and every one of you a very special, happy, meaningful, and healthy holiday, and very much look forward to the year ahead. Thank you all so much for your continued support.
TECHS
EUR/USD:The market has mostly been locked in a choppy consolidation over the past several days, but a lower top looks to have carved out by 1.3500, with a break back below 1.2970 over the coming sessions to confirm and open the next major downside extension towards the 1.2585 platform base from August 2010. As such, any intraday rallies towards the 1.3300 area should be used as formidable sell opportunities.
USD/JPY:Despite the latest pullbacks below 83.00, the market still remains confined to a broader consolidation, and while the price holds above the bottom of the Ichimoku cloud, the overall outlook remains constructive with dips towards 82.00 to be used as compelling buy opportunities. A break and close back above 84.50 will however be required to end what is perceived to be a bullish consolidation and accelerate gains. A close below 82.00 on the other hand, would compromise outlook and give reason for pause.
GBP/USD:The market remains under pressure and now seems poised for a retest of the platform base from early September at 1.5295. Daily studies are however looking a little stretched so we would not rule out the possibility for a bit of a bounce over the coming sessions towards the 1.5700 area from where a fresh lower top will be sought out ahead of an eventual drop to challenge and break 1.5295. In the interim, we remain sidelined and await a clearer signal.
USD/CHF: Setbacks have most recently stalled out just shy of the record lows by 0.9460 from October, and with daily studies looking a little stretched, we would expect to see any additional declines very well supported in favor of a major bullish reversal. Cyclical studies continue to warn of a major trend shift at current levels, and a bullish outside day on Thursday after failing to establish fresh record lows, could very well act as the initial catalyst for said reversal. Look for a break back above 0.9735 to confirm and accelerate gains. A break and close back below 0.9460 delays.
Written by Joel Kruger, Technical Currency Strategist
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FOREX: Currency Markets May See Knee-Jerk Volatility as Trade Volumes Shrink


FOREX SPECIAL :-
Key Overnight Developments
  • Japanese Yen Slumps on Profit-Taking After Yesterday’s Advance
  • British Pound Spikes Higher as Trade Volumes Amplify Volatility
  • NZ Dollar Gains as Money Supply Sees Smallest Drop in 13 Months
Critical Levels
CCY
SUPPORT
RESISTANCE
EURUSD
1.3071
1.3167
GBPUSD
1.5385
1.5523
Currency markets kept to narrow ranges in the overnight session as trading volumes wound down ahead of the Christmas holiday in most of the world’s top banking centers. The Euro oscillated in a narrow range above the 1.31 figure. The British Pound popped higher late into the session to add 0.3 percent against the greenback in what appeared to be a move similar to yesterday’s spike in the Japanese Yen, owing mostly to the amplifying effects of thin liquidity rather than a specific catalyst.
Asia Session Highlights
CCY
GMT
EVENT
ACT
EXP
PREV
NZD
2:00
New Zealand Money Supply M3 (YoY) (NOV)
-0.2%
-
-1.1%
The New Zealand Dollar narrowly outperformed, adding 0.2 percent on average against the major currencies after the Money Supply shrank at the slowest pace in 13 months in November. The outcome hints inflationary pressure may begin to pick up after the yearly CPI figure hit a six-year low in the third quarter, opening the door for rate hikes in 2011. The Reserve Bank of New Zealand will add 56bps to benchmark borrowing costs over the next 12 months according to traders’ priced-in expectations.
The Japanese Yen moved lower against the spectrum of its top counterparts – with the most profound losses noted against the Kiwi and the Swiss Franc – as the currency retraced some of the equally impressive and difficult-to-explain advance in yesterday’s trade. The currency had gained 0.6 percent on average, marking the largest daily advance in three weeks, on what appeared to be liquidity-driven volatility.
Euro Session: What to Expect
CCY
GMT
EVENT
EXP
PREV
IMPACT
EUR
11:00
French Total Jobseekers Change (NOV)
-
-20.3
Low
EUR
11:00
French Total Jobseekers (NOV)
-
2676.8
Low
The economic calendar is essentially negligible and the top European markets will be closed for the Christmas Eve holiday, pointing to choppy trade amid thin liquidity conditions. Indeed, using the CME EUR/USD futures contract as a proxy – trading volumes have nearly halved since just over a week ago on December 14th. We will stick with our existing exposure, keeping an eye out for knee-jerk volatility.
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Ireland under huge pressure

Forex Special :-
                            


Summary

  • Ireland under huge pressure. 
  • Introduction of senior debt burden sharing?
  • Covered bonds taking a bigger chunk of wholesale funding.
  • DONG Energy extends tender offer.

Market Comment

What a setback! In contrast to expectations, it took only a few minutes for investors to digest and ignore the announcement on Monday of the EU/IMF bail-out of Ireland before jittery markets took PIIGS spreads soaring again. In beautifully rounded numbers, currently Italy trades around 200 basis points, Spain 300bp, Portugal close to 500bp, Ireland close to a record-high of 600bp and Greece around 1,000bp. 

Now the big question is whether market participants will find the new Irish austerity measures credible, taking into consideration the fear surrounding the distressed banking sector. More dramatic measures in this respect are likely to be announced in the coming days. In context, S&P downgraded the sovereign rating of Ireland on Tuesday by two notches to ‘A’ with Negative Watch due to the troubled banking system and the need for further capital injections and supply of liquidity. `

According to www.Irishtimes.com, The EU/IMF delegation currently visiting Ireland is looking for a viable solution to include senior debt burden sharing in the rescue scheme for Ireland. The plan should be announced at the weekend, according to the newspaper. In order to avoid court objections to the proposal, the negotiators are seeking legal advice. Two different approaches are on the table: one for bank bonds to be converted to equity (bail-in) and one for bondholders to inject new capital or face haircuts. 

Whether this is feasible or not is difficult to predict, but the whole manoeuvre is having repercussions for both Irish debt and the broader financial bond markets, particularly the sub-debt markets. Anglo-Irish senior debt is down some four to seven full figures on the news and financial sub spreads have been hit hard.

Focus is now on the next peripheral in line – Portugal. Even if the current pressure on Portugal were to lead to unsustainable levels, we believe the EU would be able to cope with this. A stronger test for the eurozone would arise should Spain (due to the size of the economy) be the next PIIGS country to fall victim to heavy market turbulence, which we believe is likely. Consequently, we believe the ECB needs to reconsider its exit strategy from emergency measures, especially the withdrawal of bank liquidity support. The next ECB decision on the matter will be on December 2. Currently, the ECB provides unlimited liquidity for one week, one month and three months, at a fixed rate of 1%. 

As mentioned above, sovereign peripheral spreads continued to drift wider during the week with contagion to the broader CDS markets. The iTraxx Main and Crossover currently trade around 112bp and 497bp, which is 12bp and 42bp wider than Friday, respectively. As usual, when sovereign concerns resurface, iTraxx Senior Financials underperform and is 46bp wider at 172bp. An even more evident underperformance has been seen in the Sub Financials index which has increased 62bp since last Friday to 288bp. Today the multiple between the sub and  senior index is 1.70x – up from 1.44x just one month ago.

As always, developments in cash markets are steadier than indices but spreads are drifting wider and bid/offer spreads increasing.

The Primary Market

Primary issuance in corporate bonds has been rather subdued during the week due to market sentiment with a SEK1.5bn tap from Stora Enso and 8Y fixed maturities from ENI and Credit Mutuel the most interesting.

Increasing Covered Bond Issuance

While senior unsecured issuance has been modest recently, covered bond issuance has been more stable and the asset class is taking a relatively bigger chunk of the wholesale funding markets (see graph) below. Partly due to lower spreads for the issuer and partly spurred by new regulation. The liquidity coverage ratio and net stable funding ratio requirements in Basel III are benefitting covered bond securities in bank holdings of these instruments.

DONG Extending Tender Period

Following the announcement of DONG Energy's intention to tender its existing hybrid for either cash or a proposed new hybrid, DONG Energy this week announced that it was extending the tender period. Previously the tender offer was set to expire on November 23. On Tuesday DONG Energy announced that it had extended the tender period to today (November 26), at 17:00 CET. The extension is explained by technical issues causing DONG Energy to issue a prospectus supplement for the proposed new hybrid. 


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Forex Special :-
                          83.72 is the 61.8% retracement of the decline from the post-intervention high at 85.88 to the trend low at 80.22. The dollar has been plowing its way through some serious technical resistance today and overcoming the Fibo would be very impressive indeed.
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USD/CHF rallies toward barriers

Forex Special :-
                                     USD/CHF barriers at 1.00, 1.0020 and 1.0040... 0.9990s were already triggered.
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USD/JPY rises further to 83.77, 6-week high

Forex Special :-
                          The Dollar extended the upside against the Yen supported by risk appetite and upbeat US data. USD/JPY jumped to 83.77, reaching levels not seen since October 5. Currently trades at 83.60/65, 0.55% above today’s opening price. 

The pair is moving further away from 15-year lows at 80.25/30 and is extending weekly gains to more than a hundred pips. 

A decline in US government bonds is sending yields higher, weakening the Yen further. The Japanese currency is falling sharply and during the American session reached fresh daily lows across the board. 

USD/JPY (Nov 18 at 17:20 GMT)

83.59/61 (0.50%)

H 83.8 L 83.095

S3S2S1R1R2R3
82.425882.632982.840083.370083.578483.7868
[?]Trend Index[?]OB/OS Index
Strongly BullishNeutral
Data updated on Nov 18 at 17:15 (15-minute timeframe)

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