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Monday, 22 Nov 2010

Ireland Approaching Deal on EU/IMF Bailout

Ireland appears closer to an acceptable agreement regarding an EU/IMF jointly sponsored bailout package to assist its financial bodies with debt. Concern over a debt contagion spreading to the other peripheral economies of Spain, Portugal, and Greece, have grown over the past few weeks, with a bearish EUR resulting from risk aversion.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupupdownnoupup
Weekly Trendnodownupupnoup
Resistance1.38451.609584.200.99951.00100.8670
1.38251.607584.000.99750.99900.8650
1.37951.604583.700.99450.99600.8620
Support1.37351.598583.100.98850.99000.8560
1.37051.595582.800.98550.98700.8530
1.36851.593582.600.98350.98500.8510

Economic News

USD - USD Losing Ground as Traders Price in EUR Gains

Forex traders appear to have taken their profits from shorting the EUR/USD last week. Speculation that a bailout for Ireland is near execution has lifted risk appetite out of the doldrums. The EUR/USD has bounced off the 1.3450 support line and risen back towards 1.3750 over the past two trading days.

The US dollar appears to also be in a bearish pattern against most of its currency rivals this morning. Against the Japanese yen, the greenback has leveled-off, losing about 25 pips in early trading. The USD/JPY looks to be trading within a flat range between 83.00 and 83.65. Versus the British pound the USD has given up more ground, moving from 1.5945 to as high as 1.6010 in late-Asian trading.

With no news expected out of the United States today, forex traders appear to have their attention focused on any news regarding the bailout of Ireland's financial institutions. As commodity prices jumped this morning, trailing behind the expectations of a falling USD, investors appear to be pricing in a downturn for the greenback in this week's trading. Forex traders should keep an eye on EUR news and commodity prices this week for an accurate gauge of sentiment towards the dollar.

EUR - EUR Bullish as Irish Debt Woes Ease

Ireland appears closer to an acceptable agreement regarding an EU/IMF jointly sponsored bailout package to assist its financial bodies with debt. Concern over a debt contagion spreading to the other peripheral economies of Spain, Portugal, and Greece, have grown over the past few weeks, with a bearish EUR resulting from risk aversion.

The euro was trading as low as 1.3447 against the US dollar; 111.03 versus the Japanese yen; and 0.8448 against its European counterpart, the British pound, by the middle of last week. However, the 16-nation single currency has pared much of those losses and currently sits between 0.4% - 0.9% higher against each of those currency rivals.

With a light news day expected, traders will be on the lookout for any further announcements regarding the acceptance by Ireland of the joint-sponsored bailout package. If no package can be agreed on then there's a chance the EUR will enter another round of free-fall. But with acceptance of a bailout appearing to be around the corner, many traders are anticipating a bullish EUR by canceling their short positions and going long on the currency.

JPY - EUR/JPY Strongly Bullish on Recent Euro Gains

Asian stocks began to climb last Friday as global markets took positively to the potential Irish bailout. If the Irish finance minister proposes an acceptance of the EU/IMF bailout this week, we could see the EUR gaining strongly against its currency counterparts, including the JPY. The EUR/JPY was up strongly in trading this morning, gaining over 40 pips to trade at 114.70 this morning.

With the US dollar taking losses from profit-taking, and a shift into higher yielding assets among speculators, the USD/JPY appears to have turned downward this morning, falling slightly from 83.54 towards 83.30 in today's early hours. With little market news being published today, these trends may hold steady for until Tuesday.

Crude Oil - Oil Prices Gaining from Resurgent EUR

The price of Crude Oil appears to have rebounded over the past few trading days as the US dollar weakens against the euro. With the possibilities for a bailout of the Irish economy in the days ahead, the EUR appears to be climbing against its principal rival - the USD - and this has driven commodity prices higher as a result.

With little news expected from the US and Europe in today's trading, most speculators will be watching for any announcements as to the situation in Ireland. If the debt contagion appears to be spreading to Portugal and Spain we could see a correction to the EUR's recent gains. However, if Ireland takes the bailout and the debt seems momentarily contained, the 16-nation single currency should continue rising, pushing commodity prices higher in the short term.

Technical News

EUR/USD

The price of this pair appears to have just entered the over-bought region on the weekly RSI, suggesting downward pressure is beginning to increase. If the pair approaches the 1.3800 resistance line today, we could see this pressure taking effect in the form of a correction back towards 1.3740. Going long with tight stops appears to be preferable at the moment.

GBP/USD

This pair appears to be consolidating at the 1.6000 price level on the daily chart. With most indicators floating in neutral territory, it seems the pair is awaiting a fundamental shift before deciding direction. Waiting for a clearer signal may be a wise move today.

USD/JPY

This pair continues to float deep within the over-bought region of the daily RSI, highlighting the significant level of bearish pressure. A recent bearish cross on the daily Stochastic (slow) supports the notion of a downward correction. Going short may turn out to be a good decision this week.

USD/CHF

With a price above the 80 line, high inside the over-bought region of the daily RSI, it appears downward resistance is mounting against this pair. A minor consolidation pattern seems to have formed on the daily chart, with a tip near 0.9915. There is a distinct possibility of a bearish turn this week with targets at 0.9800 and 0.9650.

The Wild Card

Gold

A long-term buildup looks to be mounting on the price of Gold this week. The weekly RSI has the price cascading downward and almost exiting the over-bought region. The weekly Stochastic (slow) has a similar movement. There also appears to be a head-and-shoulders candlestick formation near completion on the daily chart, suggesting an upward target of $1,380 could be within reach before forex traders have a brilliant opportunity to catch the massive impending downturn that tends to follow the formation of a head-and-shoulders. Downward targets after the formation's completion could be as low as $1,320, with further room on the downside.

Current Time: 10/23 11:39 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
10/23
14:30USD+ Unemployment Claims 264K269K-5
15:00USD+ HPI m/m0.1%0.4%-1
15:45USD+ Flash Manufacturing PMI57.557.2-3
16:00EUR+ Consumer Confidence-11-12-1
16:00USD+ CB Leading Index m/m0.2%0.8%-1
16:30USD+ Natural Gas Storage 94B97B-1
23:45NZD+ Trade Balance-472M-620M-5
10/24
01:00EUR+ EU Economic Summit---3
08:00EUR+ GfK German Consumer Climate8.38.1-3
10:00EUR+ Italian Retail Salesm/m-0.1%0.2%-1
10:30GBP+ Prelim GDP q/q0.9%0.7%-5
10:30GBP+ Index of Services 3m/3m1.0%0.9%-1
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