By Mercaforex
USD:
Dubai’s sudden and rather amazing entry into the mix of bad economic news on Friday shook the broad marketplaces to its core on Friday, including the USD. Currency markets became extremely volatile immediately as the Dubai crisis began making waves. Even with the U.S. being on a pseudo-holiday Friday - with only a half day of trading, investors who were around took the major stock indexes significantly lower. With the majority of market participants only returning to their offices today in the States it will be of interest to traders internationally to see what the reaction is on Wall Street now that investors have had time to digest the initial shock of the Dubai debt problems. The USD on Friday gained strongly as the day opened but as the day wore on and the markets began to find their footing and the USD once again found itself at the weaker parts of its ranges particularly against the EUR and JPY. Today the Chicago PMI will be released from the U.S. and we will begin to hear rumblings from the retail companies and what type of sales they experienced during the first holiday shopping weekend.
The Chicago PMI has a forecasted reading of 53.4, which is slightly below last month’s outcome. There will be significant reports from the U.S. all week, tomorrow the Pending Home Sales data will be published and on Friday the Non Farm Employment Change numbers will be brought forth. Today the mix of the Dubai fallout and the murmurs that come from holiday shopping statistics could put the marketplace on a fragile path. The question for traders is if stability will seep into the markets now that some time has passed after the first glimpse into the abyss from the Emirates. What investors will be trying to figure out is what type of knock on affect the crisis could have internationally from emerging market debt among other governments that are running high deficits and the possibility of contagion due to exposure in the banking sector. The USD experienced whipsaw trading on Friday, like the whole market, and the psychology of the market which has been tentative will face a true test today and the remainder of the week.
EUR:
The EUR experienced an aggressive day of trading as it went lower at the onset of the Dubai crisis but strengthened as the day progressed. Traders of the EUR, like all market participants, faced a fast and volatile market. There was little in the way of economic data from Europe on Friday, the Consumer Confidence reading turning in a slightly better outcome. German Import Prices were published too but had little effect on the market. Today the broad CPI Flash estimate will come from Europe and investors will weigh deflationary fears against any signs of inflation. However no matter how it is cut, the crux of EUR action may find itself coming from the crosshairs of sentiment generated from the Dubai ‘spill’. Tomorrow German Retail Sales figures and Unemployment data will be brought forth. The EUR essentially bounced back after Friday’s rude awakening and its trend continues to get the attention of traders.
GBP:
The Sterling experienced a roller coaster ride during Friday’s rapid trading session. The GBP found heavy pressure in the opening hours but did manage, like the EUR, to find footing later in the day. There was little in the way of official economic data on Friday but that will change tomorrow with the publication of the Nationwide HPI, the Manufacturing PMI, and the tentatively scheduled Halifax HPI. The U.K. economy continues to be on tenuous ground and there are reports circulating that the government is considering issuing a downgrade to its GDP forecast. The financial crisis in Dubai will be watched carefully in the U.K. because of the business relationships that exists between the British banks and the financial sector in the Emirates. Coupled with a rush of important data coming in the next couple of days the GBP could find itself making rapid moves.
JPY:
The JPY is now on pushing its way toward the strongest part of its trend against the USD. In early trading today the Asian bourses showed stability and gained in many cases, but the Japanese currency did not back off and continues to show that risk adverse sentiment may be running high among investors. Gold was trading near 1170.00 USD an ounce this morning, and it must be noted that it also saw swift and reactionary trading on Friday – actually losing ground as fear began to swell.
Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst.
Technical Analysis
Where Will The Dollar Take Us Next? Is It Still A Safe Haven Bid?
SPX/USD:
The American equity market gapped lower on the back of Friday’s serious dollar strength. While it did attempt to trade higher, a selling tail formed and it seems that this market will most likely push lower. Perhaps the unsettling news from Dubai is the catalyst we need to finally see the rug pulled from under this market. While it is mixing some fundamentals with our usual stringent technical analysis, what can I say? I will let you in on a little secret of mine. I’m a strong believer in using both methodologies in order to best understand and predict market moves. In the meantime, I continue to stand aside because while the dollar did rally due to a safe haven bid, it too formed a selling tail and a relatively similar candle to the one we see on the SPX/USD. Until one of these products proves to be the victor I cannot enter such a risky trade. With volume returning to the market (hopefully) after the Thanksgiving holiday, things could be very interesting. I am still inclined to be short, but at the moment I am just biding my time until things clear up somewhat. Support 1084.9, 1076.6, 1068.9 Resistance 1099.1, 1104.8, 1113.4, 1153.8
XAU/USD:
What’s important to see here is that while the initial dollar rally sparked some panic into the gold market, coupled with what we had anticipated to be the beginning of a retracement, the moment traders understood the true implications of what was going on, they became buyers once again. The dollar rally faltered, bringing the gold bulls out in droves. Of course this only happened once the sellers came in swinging and sent the market down $40 from the close. The combined strength of short covering and those seeking opportunity at such low levels of gold was able to bring forth a rather impressive rally towards the close of the trading day. This market could be very volatile today as American traders join those trying to figure out the true direction of this precious metal. Support 1173.75, 1155.7, 1151, 1136.9, 1121.9, 1100.3, 1070.6, 1024 Resistance 1195.15
GBP/USD:
Notice how this currency also tried to trade lower but once it neared resistance it seemed that people began to collect their wits and realized that with the dollar trading as it was, gold retracing, etc, that maybe there was potential in this market. Perhaps everything that happened on Friday could mean that the dollar is in jeopardy. If the safe haven bid failed, we have to consider why did it fail? Did people over react on the news, and try and rectify their mistake towards the end of the trading day? OR, and this is a capital OR, are people surmising that the news could be worse for the Greenback in the long run, and that the safe haven bid is turning towards “safer products” in the long run, like gold, and anything else not USD. I continue to stand aside and wait for some sanity to return. While there are many trading opportunities within a given day, they are so volatile that in the end you will just end up burning cash. Support 1.6496, 1.6460, 1.6249, 1.6125, 1.5769 Resistance 1.6559, 1.6600, 1.6642 1.6741, 1.6876, 1.7042
EUR/USD:
Friday’s trading was able to keep the Euro zone currency trading in what seems to be a relatively solid trading channel, between 1.5062 and 1.48. While we have ventured both higher and lower it seems that the last couple of months the Euro has traded between these price levels and has shown difficulty when it sputtered past support and resistance. Even though we have formed many buying tails, and it looks like they should trade higher, I am not inclined to get long Gold, the GBP, or the Euro at this point, until the market shows us its true colours. There is a lot of uncertainty out there and when you look at these charts you can see how great the war between buyers and sellers really is. Be cautious as there is much risk out there, and as profitable traders we must always minimize our risk! Support 1.4800, 1.4683, 1.4613, 1.4480 Resistance 1.4999, 1.5062, 1.5144, 1.5284, 1.5343, 1.5460.
USD:
Dubai’s sudden and rather amazing entry into the mix of bad economic news on Friday shook the broad marketplaces to its core on Friday, including the USD. Currency markets became extremely volatile immediately as the Dubai crisis began making waves. Even with the U.S. being on a pseudo-holiday Friday - with only a half day of trading, investors who were around took the major stock indexes significantly lower. With the majority of market participants only returning to their offices today in the States it will be of interest to traders internationally to see what the reaction is on Wall Street now that investors have had time to digest the initial shock of the Dubai debt problems. The USD on Friday gained strongly as the day opened but as the day wore on and the markets began to find their footing and the USD once again found itself at the weaker parts of its ranges particularly against the EUR and JPY. Today the Chicago PMI will be released from the U.S. and we will begin to hear rumblings from the retail companies and what type of sales they experienced during the first holiday shopping weekend.
The Chicago PMI has a forecasted reading of 53.4, which is slightly below last month’s outcome. There will be significant reports from the U.S. all week, tomorrow the Pending Home Sales data will be published and on Friday the Non Farm Employment Change numbers will be brought forth. Today the mix of the Dubai fallout and the murmurs that come from holiday shopping statistics could put the marketplace on a fragile path. The question for traders is if stability will seep into the markets now that some time has passed after the first glimpse into the abyss from the Emirates. What investors will be trying to figure out is what type of knock on affect the crisis could have internationally from emerging market debt among other governments that are running high deficits and the possibility of contagion due to exposure in the banking sector. The USD experienced whipsaw trading on Friday, like the whole market, and the psychology of the market which has been tentative will face a true test today and the remainder of the week.
EUR:
The EUR experienced an aggressive day of trading as it went lower at the onset of the Dubai crisis but strengthened as the day progressed. Traders of the EUR, like all market participants, faced a fast and volatile market. There was little in the way of economic data from Europe on Friday, the Consumer Confidence reading turning in a slightly better outcome. German Import Prices were published too but had little effect on the market. Today the broad CPI Flash estimate will come from Europe and investors will weigh deflationary fears against any signs of inflation. However no matter how it is cut, the crux of EUR action may find itself coming from the crosshairs of sentiment generated from the Dubai ‘spill’. Tomorrow German Retail Sales figures and Unemployment data will be brought forth. The EUR essentially bounced back after Friday’s rude awakening and its trend continues to get the attention of traders.
GBP:
The Sterling experienced a roller coaster ride during Friday’s rapid trading session. The GBP found heavy pressure in the opening hours but did manage, like the EUR, to find footing later in the day. There was little in the way of official economic data on Friday but that will change tomorrow with the publication of the Nationwide HPI, the Manufacturing PMI, and the tentatively scheduled Halifax HPI. The U.K. economy continues to be on tenuous ground and there are reports circulating that the government is considering issuing a downgrade to its GDP forecast. The financial crisis in Dubai will be watched carefully in the U.K. because of the business relationships that exists between the British banks and the financial sector in the Emirates. Coupled with a rush of important data coming in the next couple of days the GBP could find itself making rapid moves.
JPY:
The JPY is now on pushing its way toward the strongest part of its trend against the USD. In early trading today the Asian bourses showed stability and gained in many cases, but the Japanese currency did not back off and continues to show that risk adverse sentiment may be running high among investors. Gold was trading near 1170.00 USD an ounce this morning, and it must be noted that it also saw swift and reactionary trading on Friday – actually losing ground as fear began to swell.
Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst.
Technical Analysis
Where Will The Dollar Take Us Next? Is It Still A Safe Haven Bid?
SPX/USD:
The American equity market gapped lower on the back of Friday’s serious dollar strength. While it did attempt to trade higher, a selling tail formed and it seems that this market will most likely push lower. Perhaps the unsettling news from Dubai is the catalyst we need to finally see the rug pulled from under this market. While it is mixing some fundamentals with our usual stringent technical analysis, what can I say? I will let you in on a little secret of mine. I’m a strong believer in using both methodologies in order to best understand and predict market moves. In the meantime, I continue to stand aside because while the dollar did rally due to a safe haven bid, it too formed a selling tail and a relatively similar candle to the one we see on the SPX/USD. Until one of these products proves to be the victor I cannot enter such a risky trade. With volume returning to the market (hopefully) after the Thanksgiving holiday, things could be very interesting. I am still inclined to be short, but at the moment I am just biding my time until things clear up somewhat. Support 1084.9, 1076.6, 1068.9 Resistance 1099.1, 1104.8, 1113.4, 1153.8
XAU/USD:
What’s important to see here is that while the initial dollar rally sparked some panic into the gold market, coupled with what we had anticipated to be the beginning of a retracement, the moment traders understood the true implications of what was going on, they became buyers once again. The dollar rally faltered, bringing the gold bulls out in droves. Of course this only happened once the sellers came in swinging and sent the market down $40 from the close. The combined strength of short covering and those seeking opportunity at such low levels of gold was able to bring forth a rather impressive rally towards the close of the trading day. This market could be very volatile today as American traders join those trying to figure out the true direction of this precious metal. Support 1173.75, 1155.7, 1151, 1136.9, 1121.9, 1100.3, 1070.6, 1024 Resistance 1195.15
GBP/USD:
Notice how this currency also tried to trade lower but once it neared resistance it seemed that people began to collect their wits and realized that with the dollar trading as it was, gold retracing, etc, that maybe there was potential in this market. Perhaps everything that happened on Friday could mean that the dollar is in jeopardy. If the safe haven bid failed, we have to consider why did it fail? Did people over react on the news, and try and rectify their mistake towards the end of the trading day? OR, and this is a capital OR, are people surmising that the news could be worse for the Greenback in the long run, and that the safe haven bid is turning towards “safer products” in the long run, like gold, and anything else not USD. I continue to stand aside and wait for some sanity to return. While there are many trading opportunities within a given day, they are so volatile that in the end you will just end up burning cash. Support 1.6496, 1.6460, 1.6249, 1.6125, 1.5769 Resistance 1.6559, 1.6600, 1.6642 1.6741, 1.6876, 1.7042
EUR/USD:
Friday’s trading was able to keep the Euro zone currency trading in what seems to be a relatively solid trading channel, between 1.5062 and 1.48. While we have ventured both higher and lower it seems that the last couple of months the Euro has traded between these price levels and has shown difficulty when it sputtered past support and resistance. Even though we have formed many buying tails, and it looks like they should trade higher, I am not inclined to get long Gold, the GBP, or the Euro at this point, until the market shows us its true colours. There is a lot of uncertainty out there and when you look at these charts you can see how great the war between buyers and sellers really is. Be cautious as there is much risk out there, and as profitable traders we must always minimize our risk! Support 1.4800, 1.4683, 1.4613, 1.4480 Resistance 1.4999, 1.5062, 1.5144, 1.5284, 1.5343, 1.5460.