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Thursday, 15 Dec 2011

EUR/USD Trades Below 1.30

The EUR/USD was trading below the 1.30 level for the first time since the beginning of the year. Market sentiment continues to move lower and the threat of an oncoming EU recession could drag the EUR lower into the year end.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddowndowndownupnodown
Weekly Trenddowndowndownupdowndown
Resistance1.35501.600080.201.11801.04500.8660
1.33301.578079.501.00601.03400.8620
1.32601.553078.500.97401.00500.8450
Support1.29201.542077.150.93400.97600.8400
1.28701.527076.550.90650.96600.8355
1.25901.510075.560.87600.93850.8300

Economic News

USD - Market Sleeps through FOMC Statement

The most recent FOMC statement was a non-event which is typically not the case for Fed meetings. The Fed did not adjust interest rates nor did it announce any additional asset purchases (QE3). Instead the FOMC statement was left with its standard statement, “The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.”

While the Fed did see some positive signs from the US economy global growth has begun to slow. Labor conditions are also improving but unemployment continues to drag. There was one dissent from the committee's decision and that came from Charles Evans who wanted further loosening of monetary policy. The next Fed meeting is set for January. It will also be accompanied by a press conference which may be the proper environment for Bernanke to explain a new communication policy the Fed could undertake.

EUR - EUR/USD Trades Below 1.30

The EUR/USD was trading below the 1.30 level for the first time since the beginning of the year. Market sentiment continues to move lower and the threat of an oncoming EU recession could drag the EUR lower into the year end.

Italy managed to auction 5-year bonds but the fiscally pressured nation will pay 6.47% to finance the debt, an EMU high. Yesterday's data showed European industrial production declined by -0.1% on forecasts of 0.1%. Last month EU industrial output contracted by -2.0%. Both events weighed on market sentiment which continues to turn lower as the threat of an EU recession takes hold. Today's euro zone flash PMI surveys will likely shed some light on European growth prospects but markets are already pricing in an EU recession. Thus the EUR could end the year near its lows as a combination of the debt crisis and a slowdown in growth weighs on the EUR.

The EUR/USD has support at the 2011 low of 1.2870 with resistance at the November 30th low of 1.3260.

NOK - Norges Bank Cuts Rates by 50 bps

The NOK is trading near its lowest level versus the USD since the beginning of the year after the Norges Bank cut interest rates by 50 bps. Market expectations varied though consensus forecasts were for only a 25 bp move. This takes the Norwegian interest rate down to 1.75%. The larger than expected move may be a preemptive strike by the Norges Bank as the combination of the European debt crisis and a pending EU recession may weigh on Norwegian growth. The USD/NOK has risen above the initial resistance of 5.9350 from the November high. This exposes 6.1465, the 61% Fibonacci retracement from the June 2010-July 2011 move. The November high will serve as support followed by last week's low at 5.7110.

Gold - Gold Sinks on USD Strength

The price of spot gold was down sharply for the third day in a row following another bout of USD strength. It is becoming more apparent that gold may not be the safe haven asset that it was previously hyped to be. In times of low market sentiment traders continue to pile into the known safe havens such as the USD and the JPY. With gold prices down 6% this week and it only being Thursday there could be room for additional declines in the commodity. Spot gold has support at the September low of $1,532. Resistance is located at the October 20th low of $1,607.

Technical News

EUR/USD

The 20-day moving average is now at 1.3420 and has served as a significant resistance level with the EUR/USD last closing above this line on November 3rd. While weekly stochastics are beginning to look oversold the monthly stochastics still have room to move lower. With the downtrend firmly entrenched the supports from the November low of 1.3260 and the October low of 1.3145 are within striking distance. A move higher may find willing sellers at the December high of 1.3550 and the November 18th high of 1.3610.

GBP/USD

Sterling has been caught in a range trading environment between the levels of 1.5780 and 1.5660 where the 55-day moving average is found. With daily and monthly stochastics moving lower the November and October lows of 1.5420 and 1.5270 look to be within reach. Resistance for the GBP/USD can be found at the November 18th high of 1.5890 followed by the falling trend line from the August high which comes in at 1.5925.

USD/JPY

The doji candlestick from December 8th stands out as the day's low coincides with both the 55-day and the 100-day moving average. This may be the start of a base being formed for a test of the June 2007 trend line which comes in at 78.50. A break here will expose the post-intervention high of 79.50. To the downside the November 18th low of 76.55 is the last support prior to the pair's all-time low at 75.56.

USD/CHF

The pair continues to struggle to overcome the 0.9330 resistance level despite multiple attempts to move higher. A concerted move higher may find resistance at the 20-month moving average of 0.9380 followed by this year's high of 0.9780. The downside may be capped at the support of 0.9065 which coincides with the pair's 55-day moving average. Additional support is located at the November low of 0.8760.

The Wild Card

EUR/JPY

A breach of the November 25th low of 102.50 has exposed the October low of 100.75. Forex Forex traders should note that a break here could open the door to the support at 88.90 from the October 2000 low. Resistance comes in at the 55-day moving average at 105.

Current Time: 04/19 09:44 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
04/21
15:00USD+ CB Leading Index m/m0.5%0.8%-1
04/22
01:00AUD+ CB Leading Index m/m0.2%*-3
13:30CAD+ Wholesale Sales m/m0.8%0.7%-3
14:00USD+ HPI m/m0.5%0.6%-1
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