Recession in Europe, Weak US Retail Figures
17/11/08
last week’s currency trading review
The Dollar had a volatile week but gained against most currencies as the world economic picture continued to deteriorate. The sharp fall in October Retail Sales by 2.8% was worse than the market was expecting and confirmed that the US is heading into a recession. Also in the news Treasury Secretary Paulson modified the TARP $700 Billion program away from toxic assets and more towards freeing up consumer credit. The G20 met over the weekend and released a statement that endorsed further domestic stimulus plans but was very little on actually substance. The Euro tracked stocks lower while also being weighed by weak economic data. German GDP slipped 0.5% in the Q3 dragging the Euro zone into a recession. The German Economic Sentiment Survey did bounce though to -54 from -63 as rate cuts improved consumer sentiment. The EUR/USD lost 0.9% closing at 1.2602, after opening the week at 1.2719. The Japanese Yen strengthened as stock losses mounted before the dramatic 900 point Dow rally on Thursday sent the USD/JPY and crosses significantly higher. The USD/JPY lost -1.18% closing at 97.08 after opening at 98.23. The GBP was the weakest currency last week as testimony from Governor King stated that the BoE is prepared to cut if is necessary. Inflation is expected to drop significantly and may fall into deflationary territory next year. GDP forecasts were also slashed but are not expected to turn negative. The GBP/USD lost -6.14% closing at 1.4734 after opening at 1.5638. The AUD was hurt by falling Oil and a rise in risk aversion. The RBA released its quarterly Monetary Policy Statement and expected Inflation to fall back to its target range of 2-3% by mid 2011. Also weighing the record drop in the Business Survey to -29 its lowest level on record. The AUD/USD closed down -4.01% at 0.6476 after opening at 0.6736.
The forex trading week preview
In the States; Inflation data will be in the spotlight this week. On Tuesday we have October PPI expected at -1.8%m/m vs. -0.4% previously. On Wednesday we have October CPI seen at 4.1% y/y vs. 4.9% previously. Also on Wednesday we have October Housing starts expected to fall to 780K vs. 817K previously. Finally the FOMC delivers it Minutes form the Oct meeting. On Thursday we have weekly Jobless claims seen at 508K vs. 516K last week. Treasury’s Paulson is scheduled to speak on the economy. On Friday we have Fed’s Bullard, Lacker, Plosser and Evans expected to speak. We will provide our previews and reviews of these data releases in the daily summary.
In the Eurozone; light data week with the PMI surveys the most important. On Friday we have November German Services PMI expected at 42 vs. 42.9 previously. Also released the German Manufacturing PMI expected at 47.8 vs. 48.3 previously. Also released later on Firday the Eurozone PMI’s for services and manufacturing expected at 45.2 and 40.5 respectively. During the week there are multiple officials speaking. On Tuesday Trichet is speaking and on Friday Weber and Gonzalez are scheduled to speak. In the UK; On Tuesday the October CPI is released expected to drop to 4.9% vs. 5.2% previously. On Wednesday the Bank of England releases the minutes from there last meeting were they cut rates by 1.5%. Finally on Thursday we have October Retail Sales expected at -0.8% vs. -0.4% last month. We will provide our previews and reviews of these data releases in the daily summary.
In Japan; On Monday Q3 Preliminary GDP is seen at 0.0 vs. -0.7% previously. On Friday the BoJ meets to discuss rates and are widely expected to hold at 0.3%. We will provide our previews and reviews of these data releases in the daily summary.
In Australia; On Monday Real Retail Sales for Q3 are expected at 0.5% vs. -0.6% previously. On Tuesday the RBA minutes from November meeting were they cut 0.75%. On Wednesday RBA Governor Stevens is scheduled to speak. We will provide our previews and reviews of these data releases in the daily summary.
TECHNICAL COMMENTARY
| Currency |
Sup 2 |
Sup 1 |
Spot |
Res 1 |
Res 2 |
| EUR/USD |
1.2330 |
1.2389 |
1.2540 |
1.2855 |
1.2930 |
| USD/JPY |
93.20 |
94.48 |
95.95 |
98.19 |
99.48 |
| GBP/USD |
1.4393 |
1.4558 |
1.4660 |
1.4992 |
1.5481 |
| AUD/USD |
0.6246 |
0.6339 |
0.6375 |
0.6484 |
0.6696 |
| XAU/USD |
682.41 |
700.00 |
743.00 |
753.00 |
768.21 |
· Euro – 1.2540
Initial support at 1.2389 (Nov 13 low) followed by 1.2333 (Oct 28 low). Initial resistance is now located at 1.2855 (Nov 13 low) at followed by 1.2930 (Nov 10 high)
· Yen – 95.95
Initial support is located at 94.48 (Nov 12 low) followed by 93.20 (76.4% retracement of 90.92-100.57 rally). Initial resistance is now at 98.19 (Nov 13 high) followed by 99.48 (Nov 10 high).
· Pound – 1.4660
Initial support at 1.4558 (Nov 13 low) followed by 1.4393 (Range protection). Initial resistance is now at 1.4992 (Nov 14 high) followed by 1.5481 (Nov 12 high).
· Australian Dollar – 0.6375
Initial support at 0.6339 (Oct 29 low) followed by the 0.6246 (76.4% retracement of 0.6009-0.7015 rally). Initial resistance is now at 0.6484 (Nov 14 low) followed by 0.6696 (Nov 14 high).
· Gold – 743
Initial support at 700 (Nov 13 low) followed by 682 (Oct 24 low). Initial resistance is now at 753 (Nov 12 high) followed by 768.21 (Nov 10 high).
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