Pound Falls As U.K. GDP Confirms Recession, Will Thanksgiving Holiday Bring Volatility?

The second reading of U.K. GDP confirmed that the economy is in a recession as the initial print of a 0.5% decline was confirmed. Yet, the personal consumption component was revised lower to 0.2% from 0.1% which was the biggest decline since 1995. The Pound would weaken on the news dropping over 80 bps from its session high of 1.5444. The Sterling before the release was starting to pare its losses from the Asian session which saw it fall to as low as 1.5305. The continuation of declining domestic growth for the U.K. may lead to a prolonged recession as it also saw demand for its goods decline. Indeed, exports fell 0.3% for the third quarter as the credit crisis has weighed on global demand. There was hope that the weakening Sterling would bolster foreign demand. The BoE is expected continue their aggressive easing policy in order to soften the landing of the economy which will remain a weighing factor for the Cable. However, recent price action has seen some technical support and according to our Senior Currency Strategist Jamie Saettele “significant resistance does not begin until 1.60”

After a brief breakout yesterday the Euro has returned back below the 1.300 price level which may signal that the 1.2400 – 1.300 range is still intact. This may present an opportunity to for trades to employ range strategies in their trading as the single currency may continue to trade sideways for some time. President Trichet acknowledged in an interview today that it appears the region will contract in 2009 and signaled that further easing is ahead from the central bank. However, the MPC leader would also make the case the growth would return in 2010 which was the same outlook that the OECD put forth in its forecasts yesterday. The prospect of growth on the horizon may limit the scope of the ECB’s easing which may become a supportive factor following the expected rate cut in December. Indeed, German import prices falling 3.6% in October provided further evidence that inflation is no longer a concern for the central bank which has acknowledged that prices will drop below its 2% target by next year. Yet, rhetoric ECB member Nowotny that the central bank should remain cautious and keep the powder dry demonstrates that the MPC will remain measured in its approach.

John Rivera,

Currency Analyst

Gold down 1 pct on firmer dollar, profit taking

Gold fell 1 percent on Wednesday after the U.S. dollar bounced against the euro and prompted selling from investors, whose appetite for safe-haven assets was somewhat restored after bullion regained $800 an ounce. Gold rallied to a six-week high around $830 on Tuesday after the Federal Reserve announced a new program to support consumer debt securities, but profit taking erased some of the gains.
The price has rebounded more than 19 percent since hitting a 13-month low of $680.80 in October but it is still below a record of $1,030.80 hit in March. The dollar edged up against the euro as skepticism lingered over whether the latest U.S. measures to boost consumer lending would ease concerns about the financial crisis. Weaker equities also prompted some investors to cash in gold to cover losses. But some analysts said gold could find support around the current levels on demand from investors.

Finotec Analysis Team

26 November 2008

U.S. crude ends down nearly 7 pct on weak economy

U.S. crude oil futures fell almost 7 percent on Tuesday on worries about declining demand after a government report showed the U.S. economy shrank by more than estimated during the third quarter. Oil prices also felt pressure as U.S. stock prices fell after the weak economic data, following a two-day rally on Wall Street. The focus in the oil markets is again on softening demand in the wake of a weak GDP. Profit-taking also cut down energy futures' values, ahead of weekly inventory data due out on Wednesday, in which analysts forecast a build in crude supplies.

Rodian Rahnayev

26 November 2008

Upside seen capped for euro/dollar

Liran Kapeluto (22 August 2008)

EUR/USD: "$1.4981 caps the topside, heavy below initial resistance $1.4949.

" USD/JPY: "Bull trend violated momentarily, but only a break of 108.03 yen Fibonacci retracement would open the door toward the 107.27/21 to 106.55/39 support zone. Resistance now at 109.53."
GBP/USD: "Momentum failed to sustain above $1.8787, likely to test $1.8606, pressure on $1.8513 is still high.

EUR/USD: "The euro surprised us and closed above its key 9-day moving average yesterday (this is currently located at $1.4817 today). However with longer term momentum still negative and the market still indicated to be in a downtrend, we continue to view gains are corrective and vulnerable to fail on the upside (maximum upside risk $1.4932/downtrend location)".

EUR/JPY: "Prices should hold above 160.00 today, although a weekly close below 161.40 yen might add to bearish pressure next week, as it should if we hold below 162.65 today. Late this month we continue to expect a drop to 158.00, and further out a slide to 152.00. Below here and the long term picture gets seriously interesting."

UK Economy Freezes Sending the Sterling Lower

Sagiv Perez (22 August 2008)

The prices are about to break the upper band of the standard error challenge since mid April.

The prices broke the MA 20 and 50 lines and are continuing higher.

The MACD is after a bullish cross when the fast line broke the zero line upward and histogram is signaling a rising buying ratio.

The momentum broke the zero line upward.

The RSI is in a bullish trend pointing upward

The Bollinger band are widening signaling for a continuation of the trend

This Week Uncertain for the Dollar after Strong Gains

Last week saw the Dollar make large gains against the majors. It achieved a near 6 month high against the Euro on speculation U.S. consumer spending would keep the world's biggest economy out of recession. Data last week revealed that Euro zone growth slowed in Q2 making future rate hikes unlikely. Tuesday’s economic statement in Germany will give helpful indicators regarding the Euro economy.
Meanwhile Sterling traded near a two year low against the Dollar on the back of weak employment figures and tumbling property prices. Negative UK economic data fuelled speculation that there would be an imminent interest rate cut.The pound fell almost 3 percent against the dollar last week, after Bank of England Governor Marvin King said the housing market faced ``a significant adjustment'' and banks limited loans for homebuyers.
The strong dollar also pushed commodities lower. Last week Gold traded at the lowest level since Oct.26th at $772.98 an ounce. Crude, as high as $147.27 on July 11 has declined 22% as the slowing world economy has curbed demand.
This week the Dollar is showing initial signs of weakness. With US inflation and Government housing results out this week, speculation is growing that the Fed will refrain from raising rates. If these results are confirmed we could well see more downside for the Dollar. Gold, typically an alternative investment against the falling dollar could go higher. In addition, Storm Fay in the Gulf of Mexico is causing a recovery of Crude prices after last week’s dismal showing.

Euro Risk For Short Term Bulls at 1.5611

Written by Jamie Saettele, Technical Currency Strategist

Risk on EURUSD longs can be moved to 1.5611 (for short term traders) and 1.9648 on GBPUSD. The AUDUSD has rallied as expected and risk there can be moved to .9475 (roughly breakeven).

USD dollar recovering due to better then expected data

The euro fell to the lowest level in more than a week against the dollar before a central bank report that may show German industrial production slowed in May.

US Dollar Under Pressure

Written by Jamie Saettele, Technical Currency Strategist
(Wednesday, 02 July 2008 13:49:44 GMT)

The EURUSD triangle count is eliminated with the push through 1.5843. Still, a small second wave should unfold in the EURUSD next week and bring the pair back near 1.5700. Near term, 1.5900 is resistance.

The EURUSD is expected to exceed 1.6018 and continue on to all-time highs in the next few weeks. We can eliminate the triangle count since the EURUSD exceeded 1.5843. This leaves us with 2 counts going forward. The preferred count treats the advance from 1.5283 as a series of 1st and 2nd waves (1 and 2 of V). The rally from 1.5303 is wav i of 3. While wave i of 3 may extend a bit more, expect a wave ii drop to begin soon and bring price back below 1.5720.

Bigger picture, the NZDUSD is expected to advance to the 50% of .7921-.7445 at .7683 and perhaps even the 61.8%-78.6% at .7740-.7920. A rally to there would fill the 6/4 gap. The up-down sequence from .7445 is probably waves A and B. Wave C is considered underway as long as price is above .7530.

STRATEGY: Bullish, against .7530, target TBD

Dollar to Remain Range-Bound Against the Franc

Written by Ilya Spivak, Currency Analyst with Luis Gil,
(Tuesday, 01 July 2008 04:15:31 GMT)

A failure of follow-through on the rumors of a surprise SNB rate increase coupled with uncertainty over the fate of the US economy as the Fed shifts to neutral amid record-setting weakness in the US labor market has seen USDCHF settle into a range.

Trading Tip – Labor market statistics have gained particular prominence as last month’s US unemployment rate saw its largest gain in 22 years. Consumer price gains for Switzerland may also increase volatility as the SNB has been rumored to issue a one-off rate increase. Traders may want to exert particular caution around these releases, with the most conservative opting to remove pending entries until the event risk has passed. In addition to a stop loss, we will look to control risk further by removing any unfilled orders by the end of the week or should spot close above 1.0453.

Traders Push Back Speculation Of A Fed Hike As Growth, Markets Sour

Written by John Kicklighter, Currency Analyst
(Wednesday, 02 July 2008 10:11:03 GMT)

The FOMC rate decision passed as expected with the policy group bringing the most aggressive interest rate easing cycle in decades to an end by leaving the benchmark rate unchanged at 2.00 percent. Adding a hawkish tinge to the event, the Fed further raised its concern about inflation pressures. However, market participants were still clearly disappointed by the outcome as expectations for a quarter point hike by September dropped from nearly 90 percent to 65 percent according to futures. Downgrades to the outlook for economic growth and the health of the financial markets no doubt contributed to the dampened speculation.

The Dollar may decline further this week

The dollar fell broadly on Friday as fears of further write-downs in the U.S. financial sector raised speculation the Federal Reserve would not signal a shift toward tighter monetary policy when it meets next week. Rising oil prices, more inflation-busting talk from a European Central Bank official and an unexpected surge in German producer prices in May to a near two-year high added to selling pressures on the greenback. These developments were seen as confirmation that the European Central Bank would deliver an interest rate hike next month, flagged at the bank's last policy meeting. A hike would further enhance the euro's yield appeal against the dollar.
The dollar may fall to 105.72 yen, based on charts traders use to predict price movements, according to Tomoko Fujii, head of economics and strategy for Japan at Bank of America Corp. The currency has stayed below its 200-day moving average after rising above it from June 13 to June 18 for the first time since August, signaling further losses. The dollar may now fall to the next level of so-called support around 105.72 yen, where an ascending trend-line, connecting a low of 95.76 yen on March 17 and a low of 102.74 on May 22, extends to, she said.
The pound snapped a three-day gain against the dollar after a report showed U.K. house prices fell in June by the most this year. The pound also dropped against 12 of the 16 most-active currencies as traders reduced bets the Bank of England will raise interest rates to curb inflation. The U.K. currency declined against the euro last week after central bank Deputy Governor John Gieve said property values ``have further to fall'' and the ``shock to expectations appears to be having a wider impact on confidence.'' The U.K. currency fell to $1.9643 by 9:19 a.m. in London, from $1.9761 on June 20. It was little changed at 78.94 pence per euro, after earlier dropping to 79.10 pence.

Johan Ditz Lemche

Johan Ditz Lemche - Market Strategist, Saxo Bank

Johan Lemche focuses primarily on Forex trading using both fundamental and technical analysis to back up the strategies. He is also active in developing and maintaining models both for intra-day trading and for the longer term, the latter by decomposing the macroeconomic structure. Mr Lemche is a native Danish speaker and is fluent in English.

Christian Svendsen

Christian Svendsen - Market Strategist, Saxo Bank

Christian Svendsen is primarily focused on equities traded on the major indices in Europe, US and Asia. Mr Svendsen has a background with financial analysis and works with fundamental techniques when gauging possible equity positions. He is anchor person on Saxo Bank's technical mean reversion model, a model that gives buy signals on the major equity indices. Mr Svendsen is a native Danish speaker and is fluent in English.

John J. Hardy

John J. HardyAsset Management, Saxo Bank

John Hardy publishes daily comments on the Forex market. Mr Hardy's analysis attempts to overlay short term technical developments and fundamental event risks with longer term themes and trends in the G-10 currencies. Mr Hardy considers inter-market correlations as paramount in understanding moves in the Forex space, so the analysis draws on a number of models based on other markets and gauges their correlation with Forex markets in an attempt to detect inefficiencies that may provide trading opportunities.

David Karsbøl

David Karsbøl - Manager/Market Strategist, Saxo Bank

David Karsbøl holds a Master of Science degree (Economics) from the University of Copenhagen and has previously been employed as an insurance analyst. Mr Karsbøl works with fundamental analysis and research and contributes to Saxo Bank's strategy products. He also develops and maintains macroeconomic models and a number of trading models, which are designed to profit from co-variations between the Forex and fixed income markets. Mr Karsbøl is regularly appears on major financial news networks and comments several days a week on the financial markets via Saxo Bank's live Market Call webcast. He is a native Danish speaker and is fluent in English.