Daily Forex Fundamentals |  Written by CMS Forex |  Jan 30 09 22:55 GMT | 

JPN Employment Increases While Households Reduce Spending

Japan’s unemployment rate jumped to 4.4% in December as plunging demand for Japanese exports prompted companies to lay off workers. Household spending plunged in December, down 4.6% compared to the same month last year. That figure was worse than expectations and shows the extent that households are cutting back spending in the face of a serious recession.

JPN Industrial Production Falls by Record Amount, Manufacturing Sector Contracts

Preliminary data for December’s industrial production showed a monthly decline of 9.6% in output, which breaks the previous month’s record decline of 8.5%. The global slowdown is eroding demand for Japanese products, and weak output is expected for January and February as well. The manufacturing sector showed another sharp contraction according the manufacturing PMI which fell to 29.6 from 30.8

AUD/JPY - Aussie Falls as Risk Aversion Domintes Today’s Session

Risk aversion continued from yesterday’s session, which continued to boost the Yen against its rivals. The Aussie-Yen pair, a barometer of carry trade in the Asian-Pacific region, fell 160 pips extending losses started yesterday. The Aussie released data showing that bank lending decreased for the month of December, which was the first decline in lending since 1992.

UK Mortgage Lending and Approvals Beat Expectations

UK data on mortgage lending surprised forecasts on the upside, giving the Pound a boost in overnight trading. The number of mortgage approvals increased to 31K and the amount of lending secured on dwellings rose by 1.9 billion pounds, which almost tripled expectations. The data gives those watching the UK housing market a small sigh of relief as it shows some improvement following months of deteriorating figures.

EUR Consumer Prices Fall More Than Expected, Unemployment Rises

In the Euro-zone, flash consumer prices for January cooled to an annual rate of 1.1%, a bigger fall than expected. In a second release, unemployment increase to 8% in December, the 5th month it has increased. It is now at the highest level in 2 years. The data along with weaker consumer prices may put pressure on the ECB, which meets next week, but ECB President Trichet said the bank was going to hold this month and likely cut again in March. If today’s data speeds up that timetable remains to be seen.

EUR/GBP - Pound Continues its Gains vs Euro, Hits 0.8840

The Euro-Pound pair took another steep fall today in the Pound’s favor, hitting support at 0.8840. That’s a 670 pip move since the start of the week, and completely negates the Euro’s gains from last week. We now sit at an important level of support with a break here pointing to more Pound gains.

GBP/USD - Pound Climbs to 1.45 Area vs Greenback

The Pound-Dollar pair also advanced, clearing yesterday’s high and advancing to the 1.45 area in NY trading. The pair’s rally seemed to have stalled yesterday but found new strength today and climbed above the 61.8% retracement of the fall we witnessed last week.

US GDP Growth Contracts 3.8%, But Better Than Feared

The US economy shriveled to end 2008, with 4th quarter growth contracting 3.8%. Consumer and business cut back on spending, the housing slump continued, exports fell, and prices tumbled amid the deepening recession. The 3.8% contraction is the worst in 26 years and follows a decline of 0.5% in the 3rd quarter. Still the data came in better than expected which should help to alleviate some of the more pessimistic outlooks from a fundamental side.

US Chicago PMI and UMich Consumer Sentiment Both Decline

A measure of Chicago’s business activity soured again in January, falling to its lowest level in 27 years. The Chicago PMI fell to 33.3 from 35.1 in December, which undershot forecasts. Businesses are lowering earnings forecasts and are cutting jobs and production in response to the deepening recession. Price pressures did increase on the month which battles back some of the worries regarding deflation. Consumer sentiment, as measured by the University of Michigan declined further in its final release for January. The index measured 61.2 as consumers reported job losses, declining work hours and smaller income gains.

EUR/USD - Euro Down 150 Pips on Data, Risk Aversion

The US GDP data gave risk appetite a slight boost in the 30 minutes following the release, but overall it fed a sense of risk aversion that has been benefiting the US Dollar against the Euro. The Euro, pressured overnight from its weak prices and unemployment data was down 150 pips. It’s a complete turn around from the beginning of the week when the Euro climbed as high as 1.3330.

CAN Monthly GDP Declines 0.7%

In Canada, the measure of monthly GDP growth fell 0.7% in November, as all major sectors reduced production. The output declines were led by manufacturing, wholesale trade, construction and real estate.

USD/CAD - Greenback gains to Key Retracement Level

The US Dollar-Canadian Dollar rose to the 1.2420 area in the wake of the Canadian GDP release, but pared those gains to move back to the 1.2270 area. Today’s rise completed a 50% retracement of the fall we saw from last Wednesday to this Wednesday which amounted to about 700 pips. Since we had a clear bounce down off resistance, it may mean we are entering another leg of a downturn.

Next Week’s Releases

Key releases next week include manufacturing and services data from the US, interest rate decision from the Bank of England and the European Central Bank, and the January’s non-farm employment data.

Capital Market Services, L.L.C.
www.cmsfx.com

Daily Forex Technicals |  Written by TheLFB-Forex.com |  Jan 22 09 03:43 GMT | 

The euro caught a bid on the U.S. equity market rally late in the trading day on Wednesday and the pair shot up 200 pips from the low seen. The pair, seen here on the four hour chart still has not been able to break above the neutral 50 line on the RSI, which denotes that it has entered buy territory. The pair ran into fairly strong resistance in the 1.3030 which ironically acted as a strong support level late last week. If this resistance level were to go the pair would have the 50 day SMA at 1.3230 and slight resistance may again be seen at 1.3540

Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved.

 http://www.TheLFB-Forex.com

Daily Forex Technicals |  Written by DailyFX |  Jan 22 09 01:36 GMT | 

Why Would AUDCAD Hold a Range?

Levels to Watch:

Range Top: 0.8500 (Pivot, Fib)

Range Bottom: 0.8125 (Trend, Pivot, Fib)

Volatility is extremely high in the currency market and many currencies have either seen significant breaks or are on the cusp of noteworthy moves. For AUDCAD, there is certainly exposure to general risk sentiment as the combination of the high Australian benchmark lending rate and signs that the BoC is heading towards zero have imparted the pair with a clear carry influence. However, each economy is considered a leader in their respective regions.

With little serious momentum developing behind price swings, congestion is relatively stable for AUDCAD price action. Support is read around 0.8100/25 where a general bullish bias finds a clean trendline to follow. This is further backed by a 38.2% fib retracement and notable pivot that happen to all fall within the same area.

Suggested Strategy

Long: Half-sized entry orders will be set at 0.8175, aggressive considering the rising trend.

Stop: An initial stop at 0.8055 should cover a tail that develops from a horizontal range low. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (120) at 0.8295. The second target will be 0.8415

Trading Tip - Volatility is extraordinarily high for the FX market and a few key currencies have pushed for significant technical breakouts over the past 48 hours. This means range traders are a dangerous proposition; and those setups that are pursued should find a solid foundation in fundamentals, technicals and a strategy. Our AUDCAD looks to answer at least two of these contingencies. From price action, we can see that this pair is firmly set within a trading band that is wide enough to accommodate volatility with significant technical barriers. Since we are looking to keep with the medium-term bias, our only concern is for a long entry on the range. This finds both a general and concise rising trend, the 38.2 percent retracement of the October 8th to January 5th bull wave and strength as a former resistance on price action around 0.8125. To curb our exposure to potential breakouts, we have reduced position size and widened stops. The real risk to this position is fundamentals. There is significant scheduled event risk on deck, but the real concern is risk trends. Though it is dampened somewhat, this pair still has significant exposure to the ebbs and flows in risk aversion that drive the yen and dollar pairs. With this in mind, we will look to cut open orders by Thursday’s close or if spot hits 0.8420 before we are entered.

Event Risk Australia And Canada

Australia - While the Australian economy is still considered one of the strongest in the far East, its clout is nonetheless fading among disillusioned traders. This is largely a condition of speculation rather than data (the fundamentals have shown the Australian economy has been suffering for a while) which is more difficult to gauge as a market driver as such general perceptions do not have starting and ending points as they shift. Nonetheless, we will see this sentiment hang over the Aussie dollar and leverage the currency’s correlation to general risk trends. As for scheduled event risk, most of the major data crosses after the weekend. This Thursday’s import inflation gauge and next week’s producer counterpart is merely a guide to CPI. If inflation plunges towards zero, the RBA can extend its cuts.

Canada - Uncertainty hangs over the Canadian dollar’s future. Can the nation’s economy and financial markets indeed weather the global crisis better than the United States; or is this wishful think that will consistently be discounted through loonie depreciation? These concerns will be partially answered by through developments in business activity going forward - an unpredictable market dynamic. However, there will also be scheduled event risk that could have an immediate impact on volatility as well as a lasting influence on the fundamental outlook for the economy. On deck for the end of the week, we have two key market movers: retail sales and the consumer price index series. Through the most recent growth figures, Canada seems to have actually seen a boost in growth through the second half of 2008, but this is unlikely to last through fourth quarter data. With November’s retail sales report, we will receive an updated read on consumer spending, a vital component of overall growth going forward. CPI will look to confirm the BoC’s forecasts for inflation to turn negative for two quarters of 2009: but as a confirmation, its impact on the currency will be relatively limited.

DailyFX

Daily Forex Technicals |  Written by DailyFX |  Jan 22 09 01:31 GMT | 

EURJPY back to 122 over next several weeks

CHFJPY back to 82 over next several weeks

AUDJPY 62.28 defines trend

NZDJPY 50.58 defines trend

EURJPY

I wrote last week that ‘the decline from just above 131 may be the next bear leg within the drop from 170. The advance from the low is in 3 waves, confirming that the larger trend is down.’ The decline from 131.08 has traced out 5 waves as the EURJPY has made a new multi year low (dropping below the October low of 113.59). A multi-week low is most likely in place and expectations are for a return to former resistance at 122. Short term Fibonacci support is in the 114-115 zone.

GBPJPY

The GBPJPY continues to make all-time lows. Additional downside is likely over the coming weeks but an important bottom appears close at hand. The decline from 216 is clearly impulsive and the drop from 148.69 is most likely wave 5 of that decline. A close look at the structure of the drop from there reveals that wave 5 is probably unfolding as an ending diagonal (5 waves but each wave is a ‘3′). Expect a rally from current levels, potentially to 129.82, before the decline resumes

CHFJPY

Like the EURJPY, the CHFJPY drop from its late 2008 high is in 5 waves. A break below 74.66 is expected but not before a corrective rally. The pair could reach former resistance at 82.09. Short term support is at 77.

CADJPY

Staying below 73.80 in the CADJPY keeps the near term trend down. The short term target is 64.70; which is the 100% extension of both the 87.55-70.58 decline and the 80.49 70.58 decline. I am looking for equality between these waves because structure suggests that an ending diagonal is underway from 87.55. The confidence in this outlook is low given the patterns that suggest larger rallies in other Yen pairs.

AUDJPY

Since the October 2008 low, the AUDJPY has been in a contracting range (although the range does not appear to be a triangle). There are a number of possibilities with regards to the potential count. Structurally, the trend is bearish as long a price is below 62.28. A rally through there brings to the forefront the count above; which is a flat from the October low in which wave C would be underway now and end above 70.58. Until 62.28 is broken, getting bullish is dangerous.

NZDJPY

The NZDJPY dropped to a multi year low today (again). Staying below 50.58 keeps the trend down and there is potential resistance at 48.69. A bearish target, provided by Fibonacci extensions, is at 42.25 and 37.80 (100% and 161.8% extensions of 56.39-47.10 / 50.58. The all-time low, made in October 2000, is at 41.94

DailyFX

Daily Forex Fundamentals |  Written by DailyFX |  Jan 22 09 11:59 GMT | 

U.K. January CBI manufacturing orders index fell more sharply than expected, dropping to -48 from -35, far below our survey median estimate for a drop to -39. Meanwhile, export orders fell to -39 from -33. Output expectations fell only marginally from December but still hit its lowest reading since September 1980. The quarterly survey was also released today, showing order expectations for the next three months dropping sharply to its lowest reading since July 1991, while expectations for domestic prices fell sharply as well. Though notoriously volatile, CBI data highlights the very difficult situation within the manufacturing sector, underpinning concerns for a prolonged recession. So far the Sterling depreciation has shown little support for exports, as global demand is deteriorating rapidly.

DailyFX