Fed QE2 Sinks Dollar

Last week’s currency trading review

The Dollar was under broad pressure for most of the week as the FED meeting ended with an expansion of the monetary easing program by 600Bn. Adding to the Dollar weakness was strong risk appetite with global stock markets gaining over 3%. The USD did pare back some losses on Friday however with some strong October Jobs numbers at +150k.  The Euro gained by default against a very weak USD but the market gave back a lot of the gains on Friday down nearly 200 pips from month highs above 1.4200. September German Factory Orders Slumped 4% m/m and concerns about smaller European countries debt situations remain. The EUR/USD gained +0.61% closing at 1.4031, after opening the week at 1.3946.

The Japanese Yen was stable for most of the week gaining on Friday on solid US jobs numbers but struggling to break the multimonth downtrend. AUD/JPY did break higher however as the large rally in stocks prompted increased risk taking. The USD/JPY gained +1.07% closing at 81.26, after opening at 80.39. The GBP gained against the USD and most other currencies as the resurgent Pound shrugs off BOE Asset purchase increase talk. The BOE held at 0.5% and kept the asset Purchase program at 200bn. Earlier in the week, Manufacturing PMI and Services PMI both beat expectations at 54.9 and 53.2 respectively. The GBP/USD gained +0.88% closing at 1.6180 after opening at 1.6038. The AUD broke decisively above parity and pushed on nearly two cents higher after the RBA surprised the market with a rate hike on Tuesday. The Aussie had the perfect combination of strong risk appetite, commodities and weak USD to cement its move higher.  The AUD/USD gained +3.19% closing at 1.0158 after opening at 0.9834.

The Forex Trading Week Preview

In the States; On Tuesday, NFIB Small Business Optimism for October Released previously at 89. On Wednesday, September Trade Balance is forecast at -45bn vs. -46.3bn previously. On Wednesday, Weekly Jobless Claims are forecast at 450k vs. 457k previously. On Thursday, US Holiday and the start of the G20 meeting. On Friday, UoM Consumer Confidence is forecast at 69 vs. 67.7.   We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Tuesday, Oct German CPI is forecast at 1.3% y/y. On Friday, Q3 EU GDP is forecast at 0.5% q/q. September Industrial Production forecast at 0.3% vs. 1.0% previously. In the UK, On Tuesday, Industrial Production is forecast at 3.5% vs. 4.2% previously y/y. ON Wednesday, BOE Inflation Report Released. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; On Thursday, September Machine Orders forecast at -9.5% vs. 10.10%. In Australia; On Thursday, October Unemployment Change is forecast at 20k vs. 49k previously The Unemployment Rate is forecast to fall to 5.0% vs. 5.1% previously. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

Euro – 1.3955

Initial support at 1.3637 (Oct 5 low) followed by 1.3560 (Sept 30 low). Initial resistance is now located at 1.4282 (Nov 4 High) followed by 1.4373 (76.4% retrace of 1.5144-1.1877)

Yen – 81.15

Initial support is located at 80.23 (Nov 1 low) followed by 79.75 (Apr 1995 low). Initial resistance is now at 81.80 (Nov 3 high) followed by 82.01 (Oct 13 high).

Pound – 1.6130

Initial support at 1.6080 (Nov 4 Low) followed by 1.5878 (Oct 29 low). Initial resistance is now at 1.6379 (76.4% retrace of 1.7047-1.4231) followed by 1.6458 (Jan 19 high).

Australian Dollar – 1.0125

Initial support at 0.9866 (Nov 2 low) followed by the 0.9653 (Oct 27 low). Initial resistance is now at 1.0183 (Nov 5 high) followed by 1.0212 (0.9652 plus 0.618 of 0.8316-0.9222).

Gold – 1390

Initial support at 1346 (Nov 4 low) followed by 1315 (Oct 22 low). Initial resistance is now at 1398 (Nov 5 High) followed by 1400 (Round Number).

Oil – 86.90

Initial support at 85.00 (Intraday Support) followed by 84.50 (Intraday Support). Initial resistance is now at 87.500 (Intraday Resistance) followed by 88.00 (Intraday Resistance).

Written by Anthony Darvall