Trade Online Forex with Major Currencies

EUR

Christian Noyer, the European Union Central Bank Governor, made some key comments today about the EU’s economic policy and as a result, online Forex brokers and investors traded the Euro sideways most of the day on Tuesday. Governor Noyer had said that the Central Bank was mulling over “unconventional” monetary policies in order to stem a dire economic situation in much of the Eastern and some Western European countries. This declaration tempered the Euro, which had earlier posted decent gains, because traders did not seem to like the vague reference to unconventional methods. If the politicians could learn anything in this crisis, it is that the markets do not like uncertainty – and the words “maybe” and “perhaps” are as uncertain as they come.

At 5PM GMT, the Forex brokers were trading the Euro up slightly to the GBP at .8967, slightly versus the CAD to 1.6277, slightly to the Swiss Franc at 1.481.

USD

After a dismal day on Wall Street, Monday, that saw the Major Stock indexes fall to levels unseen since 1996, the US Dollar continued seeing those trading and investing in the Forex fly to the relative safety net that the greenback offers. While the Dollar had a mixed day due to good news down under, it still posted nice gains against the Yen, its key rival for safe-haven status.

As of 5:10 GMT, the USD recaptured most of its losses to the Euro and was down ¼% to 1.2639 after having fallen off the 1.2677 level, the intraday high for the Euro. The Dollar rose versus the Yen nearly ¾ of a percent to 98.07 and was down slightly to the Pound at 1.4085.

AUD

The champion of Tuesday’s trading session with Forex online traders was the Australian Dollar, which benefitted from the Reserve Bank of Australia announced they will leave interest rates untouched for this month. The unexpected move, came with a warning though, that credit default swaps were straining the Aussie economy – which raises the ultimate cost for protection against Australian debt default.

The AUD was trading up 2.5% to the USD at .6454, 3 ¼% to the Yen to 63.31, 2.4% to the Canadian Dollar to .8341 and 1% to the New Zealand Dollar at 1.2914.

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Daily FX Updates and Chart Analysis of AUD/USD

GBP

The Bank of England (BOE) released the quarterly inflation report on Wednesday which showed that the level of inflation has been receding more than anticipated. The report came with a comment from BOE governor, Mervyn King, that based on this information, further action is necessary to ease the economy’s continued decline. This news sent the Pound Sterling down against the Euro and US Dollar. At 4PM GMT, the Pound was down 1 ½% to .8996 versus the Euro and down over 1% to 1.4390 against the dollar.

USD

Investors and traders were still digesting the nearly 2 Trillion Dollar bank bailout plan announced by US treasury secretary, Timothy Geithner. Coupled with the US Congressional stimulus package that President Obama has been pushing through the legislature, this brings the total amount that the US is investing in stemming the economic decline to nearly 3 Trillion Dollars. Many applaud the US for their steadfast, all-in approach to helping the economy but question the size and scope of the plans and America’s ability to actually afford it. The Dollar fell ½ of a percent to the Yen to 90.26 and ¾ of a percent against the Euro to 1.2943.

AUD / NZD

The Australian and New Zealand dollars has been the beneficiary of the US, UK and Euorzone’s woes lately and this momentum continued on Wednesday. The Aussie currency rose over ½ of a percent against the USD to .659, ¼ of a percent against the Euro to 1.9682 and 1% to the CAD to .8217. The Kiwi currency (NZD) was up 1% to the dollar at .5273, ¼ of a percent versus the Euro to 2.4637 and a big 1 ½% to the GBP at 2.7368.

Chart AUD(Blue); NZD(orange) against USD – 5 day change.

The “Down Under Dollars” have benefitted significantly in the past five days against a host of currencies. The chart below shows a 5 day moving average for the currencies against the US Dollar. As the US’s plans continue to be revealed and traders continue ther analyses, the fundamentals and technical’s seem to favor the AUD and NZD in the near future.

Read more analysis at: http://www.finexo.com/

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EUR/USD Analysis and Forex Updates

The EUR/USD rally squeezed even higher yesterday, and is now challenging a key resistance level. Interestingly, the Dollar is weaker elsewhere, but much of this move has been about EUR strength, as EUR has also charged to impressive new highs against GBP and CHF and is even well off the lows versus the JPY. All along the curve German treasuries are yielding more than their US counterparts. The question of course is whether the EuroZone will maintain rates as high as the market expects next year. We suspect not once further signs of deflation set in, and this could hurt the EUR in the longrun. For now, we don't want to step in front of an onrushing train, but we wonder if today's FOMC meeting could provide a pivot point for at least a sharp consolidation of this rally.

There are virtually no signs out there that risk conditions are improving, and we are a bit surprised to see equities trading as high as they have recently. Most risk spreads are getting worse and worse and it feels like something must give soon. Still, it is very difficult to gauge the market's potential for movement as we are reaching the calendar year-end and all of the lousy liquidity and unpredictable action that it entails. Remember the 2004-2005 transition: EURUSD rallied strongly to record highs on the final two days of the year, only to collapse starting on the very first trading day of the year such that it was trading over 800 pips lower by the end of the month of January. We're not saying that we expect a repeat, just that the transition to a new year could provide an important pivot point across markets - especially as we have seen a year of historical market moves.

GBP and EUR can either strengthen or weaken based on the mentioned indicators. I marked for you the support and resistance levels and 1-hour time scales for the above pairs. The BOE Inflation Letter that might be released (GBP), depending on the CPI will definitely add some flavor to GBP/USD and perhaps even GBP/JPY.

• (USD) – The Building Permits will be released at 13:30 GMT, a decline of -0.3M is expected (negative)

• (USD) – The Core CPI m/m is expected to be released at 13:30GMT, a gain of +0.2% is expected (positive)

• (USD) – The Housing Starts is expected to be released at 13:30 GMT, a drop of -0.5M is expected (negative)

• Crude Oil beginning to fall after reaching $50.5 yesterday, current price at the time of this writing: $44.3

• Gold continues its march, current price at the time of this writing: $835.92

• The Nikkei 225 fell 56.50 points (-0.65%) to 8,608.16 points

• The Australian S&P/Asx slipped 50.00 points (1.39%) to 3,541.40 points.

Read more updates at: http://www.finexo.com/marketReview

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EUR/JPY ANALYSIS

MAJOR HEADLINES – PREVIOUS SESSION
* Japan Q3 Housing Loans rose 4.2% YoY
* Japan Oct. Department Sales fell -6.8% YoY vs. -4.7% in Sep.

Chart: EURJPY



This is one of the more potent trades in an environment of easing interest rates and falling equities (in other words, broad risk aversion). The pair seems to have become stuck in range lately, but it feels like we are nearing a decision point in which we either see a strong rally through the 21-day moving average that further neutralizes the chart in the short term and extends the expectations for further range trading, or a sharp sell-off through the rising line of consolidation that could set up new lows for the pair. We prefer the latter scenario, but would like to see a drop through the 120.00 area and the line first.

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