Major Market Movers

The Week's Closure…

Another week has come to an end in the Forex market, new data were revealed, and the truth we used to hold has changed, no more doubts about a rate cut in the next FOMC meeting; no more looking for a bottom in the housing market yet, no more carry trades with all the risks in the markets.
We all saw very frustrating housing data this week and even in the week before, hinting for nothing but even more dark future for the U.S. economy driven by the housing slump, and now even those who stood for the dollar before are now definitely against it. Both the fed's chairman and the vice chairman clearly hinted for investors for further policy easing in their next meeting on December 11, stating that the economical imbalances are just increasing with all the turbulence we see, and they are willing to mitigate those problems in the financial markets which affected consumer spending and the banking sector massively.Today, we are having the week closure with fed's favorite inflation gauge, the core yearly PCE is expected to remain well below the fed's comfortable range, 1.8% is the expected reading for the month of October on the year on year basis, the same levels we saw in September, still making the feds comfortable with any rate cuts they are making.Later today, we will be waiting for the Chicago Purchasing Mangers' index for the month of November, another measure for the manufacturing status in the United States, how badly it got affected by the market turbulence and the housing slump. Chicago PMI is expected to climb to 50.5 from 49.7 in October.Dear reader, more dollar weakness is still on the run as we can see, maybe investors are a little bit shy to sell more dollars now at those currencies levels, but trust me, when the wave starts again, new levels will be achieved, unless something major happens to prevent it, the dollar ship is sinking badly, and it's taking everyone on board down with it...

Crosses Technical Analysis

GBP/JPY

The Pound declined against the Yen after reaching the strong resistance around the 229.20s, the pair needs some momentum to reach the next target at 227.95s then if breached the 229.50s level , the general trend is to the upside, and the point at 226.50 seems to offer good demand for the pair.

EUR/JPY

The Euro also dropped against the Yen as the pair couldn't breach the resistance level at 163.62, yet the general trend remains well to the upside, and targets are set at the 163.65 then 166.35, and the point at 161.83 seems to offer good demand for the pair.

EUR/GBP

The Euro gained slightly against the Pound to continue the pair's upside general trend, the next target is set at the 0.7186, yet the pair lacks some momentum to reach the upside targets, and the point at 0.7123 seems to offer good demand for the pair.

Major Technical Analysis

euro

The European currency started yesterday with a bearish pattern as it lacked enough bullish momentum to breach the key resistance level at 1.4840s. This move confirmed the correctional wave to show some tendency to reach the levels of 1.4600 support in the short term period. The trading range for today might be between the key resistance level at 1.4850 and the key support level at 1.4650. The general trend is up as far as 1. 4270 remains intact targets now at 1.5000 and 1.5370.
We expect selling Euro below 1.4775 with a target at 1.4675, stop loss above 1.4845.

gbp

The British pound yesterday dropped massively due to the sell-off of the currency as the investors lacked trust in the upside wave which resulted in the pound giving the opportunity to the bears to take the pound down until the upside trend line levels at 2.0540s in the upcoming period. The trading range for today might be between the key resistance level at 2.0800 and the key support level at 2.0500.The general trend is up as far as 1.9950 remains intact targets now at 2.1150 and 2.1400.
We expect selling sterling below 2.0660 with a target at 2.0550 stop loss above 2.0720

jpy

The dollar against the Japanese yen moved in a balanced movement yesterday failing to break through neither the key resistance at 110.40 nor the support at 109.40. Nevertheless, the expected move for the pair today could be to the upside direction as the upside technical signals confirmed yesterday. The trading range for today will be between the key resistance at 111.50 and the key support at 108.20The general trend is down as far as 121.30 remains intact, targets at 106.45 and 104.80.
We expect buying USD/JPY above 109.70 with a target at 110.70, stop loss below 109.30.

Major Market Movers

Behind The Scenes

Fundamentals today reveal the shocking state of minds consumers are in as durable goods readings came out surprisingly low indicating that consumers and businesses lost their trust in the US economy.
Such declines alerts all analysts and economists as the expected or let's say normal reaction is for the Fed's to consider cutting rates as fewer investments will indeed decrease spending in the economy hence slows down or lowers growth despite booming exports.Some of the details of the data indicate that the durables report is notoriously volatile and it wouldn't be likely that the Feds will overreact to such news. However with the weakness of capital spending and the expectations of a cover up of the growth losses caused by the housing slumps which unfortunately didn’t happen, strategies will have to be changed to overcome the problem.Orders for computers and other electronics excluding semiconductors dropped 8.4%, shipments which feed directly into the gross domestic product fell 1.2%. With demand for high technology goods weakening, orders for US made durable goods fell for the third straight month in October, falling 0.4%October's sales of previously owned homes plunged 1.2% to 4.97 million units from downwardly revised previous of 5.03 million units as the previously given was of 5.04 million, sales came lower than median estimates of 5.00 million marking the lowest since 1999 though more homes came on the marketThe fundamentals in the market don’t indicate a further decline in sales as analysts expect that low mortgage rates and job growth should keep sales from falling. However if sales continue to decline, that would be a major concern as it would raise the risk of an economic recession. Sales were lowest in the west region as sales plunged 4.4%. Viewing all the data above, we could only conclude that the final call will be for the Feds and their decision upon the upcoming December rate decision in which it is likely that we witness a further cut in rates but tomorrow is a new a day and a new day is sure full of surprises.

Crosses Technical Analysis

GBP/JPY

The Pound declined against the Yen with the start of today's trading as investors reduced their carry trades, yet the general trend remains to the upside, the pair reached both targets we talked about before yet couldn't hold above those levels, the first target now is set at the 225.50s level, and the point at 223.32 seems to offer good demand for the pair.

EUR/JPY

The Euro also declined against the Yen as investors reduced their carry trades, the general trend for the pair is still to the upside, and targets now are set at 161.70s then 162.30s, the pair lacks some momentum to reach the previous mentioned levels, and the point at 159.90 seems to offer good demand for the pair.

EUR/GBP

The Euro seems to be consolidating against the Pound, as the pair is yet to gather some momentum to progress the upside general trend, though we witnessed a slight correction but the pair is expected to incline again as the long term indicators are favoring the Euro, and the point at 0.7144 seems to offer good demand for the pair.

Major Technical Analysis

euro

The European currency declined yesterday after it jumped to the key resistance at the levels of 1.4920s to reach as low as the key support level at 1.4800s. This move affected the technical oscillators indicators to reflect some bearish movements in the upcoming period. The trading range for today might be between the key resistance level at 1.4950 and the key support level at 1.4720. The general trend is up as far as 1. 4270 remains intact targets now at 1.5000 and 1.5370
We expect selling Euro below 1.4850 with a target at 1.4775, stop loss above 1.4900

gbp

The British pound yesterday fluctuated with a neutral pattern as it couldn't pass the tough resistance level at 2.0750s despite it dropping to reach the key support level at 2.0640s without being able to break it. Therefore, we expect bearish movements towards the downside today as the pound lacks bullish momentum. The trading range for today might be between the key resistance level at 2.0820 and the key support level at 2.0500.The general trend is up as far as 1.9950 remains intact targets now at 2.1150 and 2.1400
We expect selling sterling below 2.0720 with a target at 2.0600 stop loss above 2.0770

jpy

The dollar against the Japanese yen replaced the bearish movements two days ago with a strong bullish pattern with high levels of volume to take the pair up near the significant resistance level at 109.15. Meanwhile, the technical directional studies showed the upside potential for the short term. The trading range for today will be between the key resistance at 110.70 and the key support at 107.20The general trend is down as far as 121.30 remains intact, targets at 106.45 and 104.80.

Major Technical Analysis

euro

The European currency rallied last week to the upside target at 1.4970s after it penetrated the major resistance level at 1.4920s. However, the euro fell massively to replace the bullish move with a bearish one to close below the opening level at 1.4830s forming a bearish pattern. Therefore as a result, we expect downside movements for today. The trading range for today might be between the key resistance level at 1.4920 and the key support level at 1.4700. The general trend is up as far as 1. 4270 remains intact targets now at 1.5000 and 1.5370
We expect selling Euro below 1.4870 with a target at 1.4720 stop loss above 1.4920.

gbp

The British pound last Friday fluctuated in wide ranges due to the high levels of volatility allowing the pound to hit the upside resistance as high as 2.0760s to reverse back to the downside until the major support level at 2.0515. Yet the pound indicated the neutral trend with minor tendency to the downside. The trading range for today might be between the key resistance level at 2.0770 and the key support level at 2.0480.The general trend is up as far as 1.9950 remains intact targets now at 2.1170 and 2.1420
We expect selling sterling below 2.0660 with a target at 2.0520 stop loss above 2.0700.

jpy

The dollar against the Japanese yen tended to the downside last week hitting a new low at key support level at 107.40s extending the downside channel. Despite it reversing back to the upside in the last trading sessions, the technical directional studies still give the continuation pattern to the downside. The trading range for today will be between the key resistance at 109.00 and the key support at 107.00.The general trend is down as far as 118.00 remains intact, targets at 106.45 and 104.80.
We expect selling USD/JPY below 108.50 with a target at 107.40, stop loss above 109.00.

Crosses technical analysis

GBP/JPY

A huge selling wave took place on majors yesterday, including the Pound which dropped heavily against the Yen, the general trend is still to the upside, yet the short term indicators haven't shown any reversal from its downside trend, and the point at 225.38 seems to offer good demand for the pair.

EUR/JPY

The Euro was also affected by the selling wave, dropping against the Yen as well, the pair now completed the 50.0% correction on the Febuancci retaracement, yet the general trend remains well to the upside, and the point at 159.51 seems to offer good demand for the pair.

EUR/GBP

The Euro continued to gain against the Pound, as the pair reached the target at 0.7080s, and now the next target for the pair will be the 0.7090s level and then might try the 0.7100, the technical indicators are still showing an upside potential, and the point at 0.7050 seems to offer good demand for the pair.

Major technical analysis

euro

The European currency depreciated in a very strong move from the key resistance at the top of 1.4670s to hit the downside support as low as 1.4520s. The technical studies still show the downside correction for today until the levels of 1.4480s support.
The trading range for today might be between the key resistance level at 1.4600 and the key support level at 1.4450.
The general trend is up as far as 1.4060 remains intact targets now at 1.4965 and 1.5000.
We expect selling euro below 1.4570 with a target at 1.4490, stop loss above 1.4610.

gbp

The British pound yesterday opened with a bearish gap indicating the downside direction in terms of correctional movements in the upcoming days. The short term technical signals showed that the pound just reached the first retirements level as low as 2.0580s; therefore, the pound might reverse back to the upside today.
The trading range for today might be between the key resistance level at 2.0700 and the key support level at 2.0480.
The general trend is up as far as 2.0000 remains intact targets now at 2.1160 and 2.1400

jpy

The dollar against the Japanese yen fell in an irregular move towards the major support level at 110.50s breaching the consolidation area that it formed two months ago creating a new downside channel. The technical patterns indicated that the pair is expected to continue in the downside trend today.
The trading range for today will be between the key resistance at 111.00 and the key support at 107.80.
The general trend is down as far as 121.30 remains intact, targets at 108.30 and 106.20.
We expect selling USD/JPY below 110.30 with a target at 109.00, stop loss above 110.80

U.S. Forex Market Commentary

EURO

The euro strengthened vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4730 level and was supported around the $1.4555 level. The common currency rocketed to a new lifetime high following negative remarks about the U.S. dollar from a Chinese official. Notably, French President Sarkozy said currency “disarray” could lead to an “economic war.” Many traders are wondering if unilateral or multilateral intervention may be implemented to smooth out some of the move in the U.S. dollar. The Bush administration seems to have a hands-off policy regarding the greenback and does not seem to want to stray far beyond its “strong dollar” mantra. Data released in the U.S. today saw Q3 productivity print at 4.9%, much stronger than the 3.3% rise that was expected and the largest gain in four years. Also, Q3 unit labour costs fell 0.2%, the first decline since Q3 2006 and unit labour costs have risen 4.3% over the past year, down from 5.1% y/y in Q2. The pullback in unit labour costs will please Federal Reserve officials. Traders are generally unsure if the FOMC will ease monetary policy further in December or if they will remain on hold. The Fed’s decision will largely be data-dependent and if a further erosion is seen in the U.S. housing sector, the Fed may be forced to reduce borrowing costs further. Richmond Fed President Lacker reported the Fed “did the right thing” by cutting rates in response to the recent credit market turmoil. Other data released in the U.S. today saw September wholesale inventories up 0.8% with wholesale sales up 1.3%. In eurozone news, German September industrial output was up 0.3% m/m and Germany’s Five Wise Men reported 2008 GDP should slow to 1.9% from an expected 2.6% gain this year. Most traders do not expect the European Central Bank will change interest rates tomorrow. Euro bids are cited around the US$ 1.4560 level.

JPY / CNY

The yen appreciated sharply vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥112.75 level and was capped around the ¥114.80 level. Today’s intraday low represents the pair’s weakest showing since 10 September and was just above the 76.4% retracement of the move from ¥109.00 to ¥124.15. There was little in the way of new Japanese news that moved the market and traders instead reacted to market-moving comments from a Chinese official about foreign reserves diversification. Most traders believe Bank of Japan’s Policy Board will remain on hold through the end of the year but the unwinding of short yen carry trades en masse represents the yen’s largest upside risk. The Nikkei 225 stock index lost 0.94% to close at ¥16,096.68. Dollar bids are cited around the ¥112.55 level. The euro came off vis-à-vis the yen as the single currency tested bids around the ¥165.55 level and was capped around the ¥167.65 level. The British pound and Swiss franc lost ground vis-à-vis the yen as the crosses tested bids around the ¥237.00 and ¥99.70 levels, respectively. The Chinese yuan appreciated sharply vis-à-vis the U.S. dollar as the greenback closed at CNY 7.4421 in the over-the-counter market, down from CNY 7.4530. Today’s closing low represents the pair’s weakest showing since the yuan revaluation of July 2005. Chinese official Cheng Siwei moved the markets today when he said China should diversify its foreign reserves holdings by “buying more strong currencies (such as the euro).”

STERLING

The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 2.1070 level and was supported around the $2.0860 level. The pair established a new multi-decade high as U.S. dollar sentiment worsened further. Most traders believe Bank of England’s Monetary Policy Committee will not change monetary policy tomorrow but are cognizant of the fact that this MPC has not been afraid to surprise the markets with unexpected rate actions. Data released in the U.K. today saw BRC October annual shop price inflation accelerate to its strongest level this year while Nationwide reported October U.K. consumer confidence weakened but remains resilient. Cable bids are cited around the US$ 2.0950 level. The euro came off marginally vis-à-vis the British pound as the single currency tested bids around the ₤0.6965 level and was capped around the ₤0.7000 figure.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1255 level and was capped around the CHF 1.1450 level. The pair reached its weakest level since May 1995. KOF reported Swiss economic growth is expected to decelerate in Q4 and further in Q1 2008. U.S. dollar offers are cited around the CHF 1.1465 level. The euro and British pound depreciated vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6580 and CHF 2.3695 levels, respectively.