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Forex pairs in this Article » AUD/USD, EUR/JPY, EUR/USD, GBP/JPY, GBP/USD, NZD/USD, USD/CAD, USD/CHF, USD/JPY
  • Dollar Run Cools with EURUSD at 1.2825 Support Despite Dow Plunge
  • Euro Drop Against Franc, Pound Most Telling after Spain Downgrade
  • Australian Dollar Climbs after Questionable Jobs Data, Continues on Risk
  • British Pound: What Does BoE King's Rates and QE Remarks Mean with GBPUSD at 1.60?
  • Swiss Franc Posts Another Volatile Swing with EURCHF Below 1.2100
  • Japanese Yen: Officials Trade off Currency Responsibility, Yen Allowed to Run
  • Gold Closes First Four-Day Decline in Two Months, Is this a True Reversal Before 1800?
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Dollar Run Cools with EURUSD at 1.2825 Support Despite Dow Plunge

Risk aversion seemed to be running in high gear this past session. My favored benchmark for investor sentiment, US equities (carrying an extra level of resilience to negative flutters by heavy amounts of Fed stimulus), suffered heavy selling through the day. In fact, the Dow Jones Industrial Average closed out its worst daily decline in three months. Yet, this otherwise convincing drive didn't translate into a proportionate rally for the safe haven dollar. In fact, the Dow Jones FXCM Dollar Index (ticker = USDollar) closed Wednesday in the red. Looking across the majors, we see the proximity of significant resistance for the benchmark (1.2825 for EURUSD, 1.0150 for AUDUSD) which mirrors nicely the serious 13,325 and 1425 support levels for the DJIA and S&P 500 respectively. The slump in stocks was a low-resistance move that carried us to much more significantl levels. From here we need commitment. If not Friday's earnings, watch five-year low volatility readings.

Euro Drop Against Franc, Pound Most Telling after Spain Downgrade

Through much of the active trading session Wednesday, the fundamentals behind the euro were relatively tame. Headlines like those that reported IMF Director Lagarde didn't see a need to participate in a Spain bailout (if one was sought) and ECB's Noyer's suggestion that further rate cuts were unnecessary can set off a sensitive market, but traders seem more stolid to these low lapping waves. A little more shocking for a currency that always has a cloud over its head was the Standard & Poor's downgrade of Spain's sovereign rating (with a negative outlook). The move from 'BBB+' to 'BBB-' doesn't yet tip us over the threshold into junk bond status. What would that mean to the euro? If enough of the rating agencies label a country's debt below investment grade, it cannot use its own bonds as collateral to borrow from the ECB. Provisions have been made in the past to bend the rules (like Greece), but such a move would be a clear escalation to the region's crisis.

Australian Dollar Climbs after Questionable Jobs Data, Continues on Risk

The most active currency in the opening hours of Thursday's session is without doubt the Australian dollar. The currency has managed to overtake 1.0250 against the dollar, extend heavy rallies against the New Zealand and Canadian counterparts, while just recently threatening meaningful trend reversals with EURAUD and GBPAUD. For that extra push for breaks on pairs like AUDUSD, the spark can be tied back to the Australian employment data. The net 14,500 increase in total payrolls through September handily outpaced expectations and was based on a 32,100-person surge in full-time positions. The offset, however, was a 2.5 year high jobless rate. So what kept it moving? Latent risk appetite.

British Pound: What Does BoE King's Rates and QE Remarks Mean with GBPUSD at 1.60?

The British pound is a mixed bag. Where the sterling has stumbled against the Aussie and Kiwi dollars, it has climbed against the euro. What does this tell us about the individual currency: that it is essentially the sounding board for more active currencies. For those watching the pound, GBPUSD should be top concern as it follows what the most critical factor behind the single currency happens to be: the UK's growth/fiscal balance, Eurozone crisis spillover or risk trends. The choppy decline from this benchmark pair down to 1.6000 seems to be a mix of all three, but speculative trends are pulling more than their own weight. An interesting factor that may find its way into sterling price action moving forward are stimulus expectations (long a restrained influence). BoE Governor King remarked that rates were at 'rock bottom' but QE had no limit.

Swiss Franc Posts Another Volatile Swing with EURCHF Below 1.2100

Earlier this week, the Swiss franc suffered its biggest intraday tumble this year - not on the basis of official intervention efforts by policymakers but rather on the news that banks would charge for franc-based deposits. This was the same kind of tax on safe haven flows that the SNB had contemplated yet never pursued. This could prove a lasting and effective curb for the Swiss currency if risk trends didn't slump. In the event of a sentiment collapse or significant aggravation to the Euro-area financial crisis, the modest charge wouldn't stop the flood. Heat from the latter catalyst started to pick up this past session. Spain's downgrade generated a quick drop and clear break below 1.2100 for EURCHF. Be wary.

Japanese Yen: Officials Trade off Currency Responsibility, Yen Allowed to Run

When it comes to the yen, there is a consistent debate as to if and when the officials will once again intervene on behalf of the Japanese yen. Both the Ministry of Finance and Bank of Japan have separately vowed to arrest the surge behind the nation's currency one way or another, yet time has proven both parties ultimately incapable of having a lasting effect (so far). For those plotting out their next yen trade around policy officials' next dip into the market, it is important to understand how they will move and their level of effectiveness. Despite recent comments made by the new Japanese Finance Minister and other politicians, the BoJ does not have a mandate to directly intervene on behalf of the exchange rate. Therefore, with the exception of an explicit responsibility change, we should expect the central bank's influence to come through its stimulus programs - which are conducted almost exclusively during known policy gatherings. The Fin Min is the greater unknown with no clear times. That said, we know their track record, so the eventual fade after the yen slump carries with it its own potential. To manipulate the yen lower, we need to see an SNB-style move. Otherwise, don't turn from traditional risk trends.

Gold Closes First Four-Day Decline in Two Months, Is this a True Reversal Before 1800?

Though Wednesday's 0.1 percent drop from gold was the smallest we've seen since this most recent bear leg began, it is nevertheless the fourth consecutive decline from the commodity. This is the first series of declines of this magnitude since the run through August 2. And to provide more history, we haven't seen a five-day run through the red since January 2011. This historical relevancy doesn't speak to fundamentals, but it does coincide nicely with the Dollar Index struggling at the upper end of its downward-sloping trend channel. This precious metal is not very sensitive to traditional risk trends, but its performance is heavily dependent on the greenback (which invariably shows the greatest level of momentum when the markets are committed to wholesale risk aversion). In the meantime, the CBOE's volatility measure for gold continues to ease back (now at 15.5 percent). The balance between a 'calm' and 'extreme' reading from this measure is a fine line.

**For a full list of upcoming event risk and past releases, go towww.dailyfx.com/calendar

ECONOMIC DATA

Next 24 Hours

GMT
Currency
Release
Survey
Previous
Comments
-:-
CNY
New Yuan Loans (SEP)
680.0B
703.9B
Fall expected from tightness, though state attempting to balance
-:-
CNY
Money Supply - M0 (YoY) (SEP)
10.0%
9.7%
Supply growth expected to be seasonal, largely originating in long term deposits as government tries to slowly ease again
-:-
CNY
Money Supply - M1 (YoY) (SEP)
4.8%
4.5%
-:-
CNY
Money Supply - M2 (YoY) (SEP)
13.6%
13.5%
-:-
CNY
Foreign Exchange Reserves (SEP)
$3228.0B
$3240.0B
May grow in coming months from AU, EU, US easing
-:-
NZD
REINZ Housing Price Index (MoM) (SEP)
-
1.3%
NZ\'s recent increase in prices seem to be tapering
-:-
NZD
REINZ House Sales (YoY) (SEP)
-
16.2%
0:00
AUD
Consumer Inflation Expectation (OCT)
-
2.4%
Downside may induce easing, though space for cuts limited
1:00
NZD
ANZ Consumer Confidence Index (OCT)
-
111.9
May continue to slow as Chinese slowdown amplifying across trade partners
1:00
NZD
ANZ Consumer Confidence (MoM) (OCT)
-
-1.9%
1:30
AUD
Employment Change (SEP)
5.0K
-8.8K
Australian market expected to add jobs, though weakness still expected as mining industries hit hard
1:30
AUD
Full Time Employment Change(SEP)
-
0.6K
1:30
AUD
Part Time Employment Change (SEP)
-
-9.3K
1:30
AUD
Unemployment Rate (SEP)
5.3%
5.1%
5:00
JPY
Consumer Confidence (SEP)
40.5
Additional downside expected
6:00
EUR
German CPI (YoY) (SEP F)
2.0%
2.0%
German inflation expected to be stable; may open up more rate cut-based easing as price stability kept
6:00
EUR
German CPI - EU Harmonized (YoY) (SEP F)
2.1%
2.1%
12:30
USD
Initial Jobless Claims (OCT 6)
365K
367K
Weekly data may improve following NFPs, recovery expectations
12:30
USD
Continuing Claims (SEP 29)
-
3281K
12:30
CAD
International Merchandise Trade (AUG)
-1.80B
-2.34B
Trade balance seen improving as energy demand rises
12:30
USD
Import Price Index (MoM) (SEP)
0.7%
0.7%
US trade balance widening moderately; September price index expected stable despite dollar weakness
12:30
USD
Import Price Index (YoY) (SEP)
-
-2.2%
12:30
USD
Trade Balance (AUG)
-$44.0B
-$42.0B
12:30
CAD
New Housing Price Index (MoM) (AUG)
-
0.1%
House price indices expected to rise slower following new housing permits report
12:30
CAD
New Housing Price Index (YoY) (AUG)
-
2.3%
14:30
USD
EIA Natural Gas Storage Change (OCT 5)
-
77
Crude and gasoline inventories expected to rise as lower prices indicate reduced demand
15:00
USD
DOE U.S. Crude Oil Inventories (OCT 5)
-
-482K
18:00
USD
Monthly Budget Statement (SEP)
-$65.0B
-$62.8B
Budget deficit continues to widen
23:50
JPY
Tertiary Industry Index (MoM) (AUG)
0.4%
-0.8%
Services continues improvement
23:50
JPY
Domestic Corporate GPI (MoM) (SEP)
0.2%
0.3%
YoY decline in DCGPI indicates deflation still major problem
23:50
JPY
Domestic Corporate GPI (YoY) (SEP)
-1.4%
-1.8%
GMT
Currency
Upcoming Events & Speeches
0:00
USD
Fed\'s Kocherlakota Gives Opening Remarks at Town Hall Forum
8:00
EUR
ECB Publishes Oct. Monthly Report
16:30
USD
Fed\'s Plosser Speaks on Economy in Pennsylvania
23:25
AUD
RBA\'s Ellis Speaks at University of Technology in Sydney
SUPPORT AND RESISTANCE LEVELS

To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visitTechnical Analysis Portal

To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit ourPivot Point Table

CLASSIC SUPPORT AND RESISTANCE

EMERGING MARKETS 18:00 GMT
SCANDIES CURRENCIES 18:00 GMT
Currency
USDMXN
USDTRY
USDZAR
USDHKD
USDSGD
Currency
USDSEK
USDDKK
USDNOK
Resist 2
15.5900
2.0000
9.2080
7.8165
1.3650
Resist 2
7.5800
5.6625
6.1150
Resist 1
15.0000
1.9000
8.5800
7.8075
1.3250
Resist 1
6.5175
5.3100
5.7075
Spot
13.1731
1.7975
8.4003
7.7568
1.2506
Spot
6.6054
5.9532
5.8306
Support 1
12.5000
1.6500
6.5575
7.7490
1.2000
Support 1
6.0800
5.1050
5.3040
Support 2
11.5200
1.5725
6.4295
7.7450
1.1800
Support 2
5.8085
4.9115
4.9410
INTRA-DAY PROBABILITY BANDS 18:00 GMT

Currency
EUR/USD
GBP/USD
USD/JPY
USD/CHF
USD/CAD
AUD/USD
NZD/USD
EUR/JPY
GBP/JPY
Resist. 3
1.2637
1.5929
79.27
0.9696
0.9995
1.0516
0.8203
99.67
125.72
Resist. 2
1.2606
1.5900
79.12
0.9671
0.9977
1.0488
0.8180
99.37
125.38
Resist. 1
1.2575
1.5870
78.97
0.9646
0.9959
1.0459
0.8158
99.06
125.04
Spot
1.2512
1.5810
78.67
0.9597
0.9923
1.0403
0.8112
98.44
124.37
Support 1
1.2449
1.5750
78.37
0.9548
0.9887
1.0347
0.8066
97.82
123.70
Support 2
1.2418
1.5720
78.22
0.9523
0.9869
1.0318
0.8044
97.51
123.36
Support 3
1.2387
1.5691
78.07
0.9498
0.9851
1.0290
0.8021
97.21
123.02
v

--- Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com

To contact John, email jkicklighter@dailyfx.com. Follow me on twitter at http://www.twitter.com/JohnKicklighter

To be added to John's email distribution list, send an email with the subject line "Distribution List" to jkicklighter@dailyfx.com.

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