http://www.traderslaboratory.com/forums/blogs/dailyfx/ Traders Laboratory (TL) is the leading online trading forum for day traders, swing traders, and active traders covering forex, stocks, futures, and options. en Thu, 09 Feb 2012 16:34:57 GMT vBulletin 30 http://www.traderslaboratory.com/forums/images/styles/Traders/misc/rss.jpg http://www.traderslaboratory.com/forums/blogs/dailyfx/ http://www.traderslaboratory.com/forums/blogs/dailyfx/1268-u-s-retail-sales-tops-expectations.html Tue, 14 Dec 2010 16:13:36 GMT Advance retail sales in the world’s largest economy rose 0.8 percent in November after climbing a revised 0.8 percent the month prior, while retail... Advance retail sales in the world’s largest economy rose 0.8 percent in November after climbing a revised 0.8 percent the month prior, while retail sales less autos jumped 1.2 percent to mark the highest level since March. Subsequent to the report, the dollar rallied across most of its major counterparts, but the advance was short-lived as traders shift their focus to the FOMC rate decision.

Taking a look at the breakdown of the report, growth was led by apparel stores, gas stations, sporting goods, and non store retailers. Not to overlook, producer prices was released alongside retail sales. Annualized figures advanced 3.5 percent, topping forecasts’ of 3.3 percent. Producer prices are worth noting due to the fact that producers tend to pass on higher costs to consumers as higher retail prices. However, businesses may be reluctant to pass higher costs onto customers as the unemployment rate stands at its highest level since April.

Market participants will now shift their focus to the FOMC rate decision. As of late, traders are pricing in a zero percent chance that the Fed will raise borrowing costs 25 basis points later on today as the economy faces tight credit conditions, slow employment growth, and low consumer prices. As policy makers are likely to keep rates unchanged, comments trailing the rate decision are likely to dictate price action. The fed may adjust forecats for 2011 and 2012, while acknowledging 'improvement' in the economy. Join David Song to cover this report live!

GBPUSD Daily Chart



Source: FXCM’s Strategy Trader – Prepared by Michael Wright

The GBPUSD continues its northern journey after reversing course at November’s low of 1.5483. Price action now looks poised to test the 1.59 area in the short term as technical indicators point to additional gains. The MACD has yet to reverse after hinting at gains in early December, while the slow stochastic trends upward. So long as price action remains bounded by the ascending channel, upside risks remain. However, a break and a close 1.5750 may pave the way for a larger correction as the overall trend remains to the downside.

DailyFX provides forex news on the economic reports and political events that influence the currency market.
Learn currency trading with a free practice account and charts from FXCM. ]]> DailyFX http://www.traderslaboratory.com/forums/blogs/dailyfx/1268-u-s-retail-sales-tops-expectations.html http://www.traderslaboratory.com/forums/blogs/dailyfx/1267-euro-erases-fridays-losses-risk-appetite.html Mon, 13 Dec 2010 15:53:47 GMT *Talking Points * British Pound: Housing Troubles Weighing * Japanese Yen: Weighed By Risk Appetite * Euro: Finding Bid on Broader... Talking Points

* British Pound: Housing Troubles Weighing
* Japanese Yen: Weighed By Risk Appetite
* Euro: Finding Bid on Broader Optimism, German Support
* U.S. Dollar: At Mercy of Broader Trends as Traders Eye FOMC Meeting

The People’s Bank of China refraining from tightening rates and the expected approval of U.S. tax cuts have fostered a return of risk appetite and helped the Euro looking to erase Friday’s losses. An empty economic docket will likely leave currency markets in the hands of broader trends which is shaping up to be a positive start to the week as easing concerns over Europe and a brighter outlook for growth is fueling optimism. The French current account deficit shrinking to 2.5 billion from 4.4 billion and French wages growing 0.3% were the only releases to cross the wires and had very little impact of direction

Comments from German Finance Minister Wolfgang Schäuble that it was unlikely that any country would be ejected from the E.U. are helping ease concerns over the region. The Economic Union’s largest economy continues to show its willingness to stand with its fellow members and weather the current crisis in order to maintain their single currency. It is a stark contrast from the lack of solidarity that we saw at the onset of the debt issues when Greece first came under fire. Therefore, markets have more confidence that the region can persevere if its unquestioned leader is willing to do whatever it takes to maintain the union. The EUR/USD has broken above a four day descending trend line which has exposes the 20-Day SMA at 1.3335. However, upside potential remains limited as the issues in Europe rare far from being solved and any signs that risk appetite is waning could increases downside risks.

The British Pound is back under pressure after temporarily regaining its footing as disappointing housing data is fueling the outlook for additional asset purchases from the BoE. The Rightmove housing price index fell 3.0% in December following a 3.2% decline the month prior. The agency also revealed a dour forecast for another 5% drop in 2011 which could force policy makers to restart QE efforts despite high inflation. A strong producer price report and broader optimism provided brief support, but markets have resumed pricing in more additional measures from the central bank. Factory gate prices rose 0.9% beating estimates of 0.5% but slower than the month prior 2.2% pace. Most of the gains prices came from volatile fuels costs which is minimizing the impact from the report. We expect Cable to continue chop around today as broader optimism will be supportive which will leave the GBP/USD in its current range between 1.5700-1.5850.

The greenback was under pressure overnight on the broad based risk appetite which could lead to more losses throughout the day with a light North American economic docket. Canada’s capitalization reading for the third quarter is the only fundamental release on tap and holds very little market moving potential. Traders should take their cures from equity markets as the dollar continues to show a strong negative correlation to risk taking. Overall we may see a quiet day with the FOMC rate decision looming, as markets will look to see if Fed Chairman Ben Bernanke expands on recent comments that there is room for more QE beyond the initial $600 billion. However, signs politics is threatening the passing of the Obama-GOP accord on taxes could quickly dim optimism and fuel dollar support on safe haven flows.

DailyFX provides forex news on the economic reports and political events that influence the currency market.
Learn currency trading with a free practice account and charts from FXCM. ]]> DailyFX http://www.traderslaboratory.com/forums/blogs/dailyfx/1267-euro-erases-fridays-losses-risk-appetite.html http://www.traderslaboratory.com/forums/blogs/dailyfx/1262-british-pound-bounces-back-boe-maintains.html Thu, 09 Dec 2010 16:03:30 GMT Talking Points

* British Pound: BoE Maintains Policy
* Euro: ECB Says Rates 'Appropriate'
* Japanese Yen: Gains Ground As Risk Falters
* U.S. Dollar: Risk To Dictate Price Action


The British Pound bounced back from a low of 1.5732 during the European trade as the Bank of England maintained its current policy in December, and the GBP/USD may continue to pare the overnight decline throughout the North American session as investors scale back speculation for further easing. As expected, the BoE refrained from releasing a policy statement after holding the benchmark interest rate at 0.50% and maintaining its asset purchases at GBP 200B, and the central bank is likely to retain its wait-and-see approach throughout the beginning of the following year as it aims to balance the risks for the region. As the MPC is scheduled to release its policy meeting minutes of December 22, comments from the central bank is likely to play an increased role in driving price action for the British Pound going into the 2011, but there could be a growing split within the BoE as the economic outlook remains clouded with uncertainties.

We anticipate to see another three-way split within the MPC as board member Andrew Sentance pushes to gradually normalize monetary policy while Adam Posen sees scope to expand quantitative easing further, and the central bank is likely to maintain a cautious outlook for the region as the new coalition withdraws fiscal support. As U.K. policy makers expect the tough austerity measures to bear down on the recovery, the BoE may look to support the real economy throughout the first-half of 2011, but the ongoing stickiness in price growth could lead the MPC to hold a hawkish outlook for future policy as the central anticipates inflation to hold above the 2% target throughout the following year. As a result, if the BoE talks down speculation for future easing, the GBP/USD should continue to trend higher going into the end of the year, and the exchange rate may look to retrace the sharp decline from the previous month as interest rate expectations gather pace.

The Euro slipped to a low of 1.3194 during the overnight trade as the European Central Bank maintained a cautious outlook for the region, and fears surrounding the debt crisis may continue to drag on the exchange rate as policy makers struggle to restore investor confidence. The ECB reiterated that monetary policy remains “appropriate” in its monthly report, and said inflation expectations remain “firmly anchored” as it maintains its one and only mandate to ensure price stability. At the same time, the central bank noted that the uncertainties surrounding the economic outlook remains “elevated” as the governments operating the single-currency struggle to manage their public finances, and it seems as though the ECB is looking to push its primary mandate to the backburner as the Governing Council aims to encourage a sustainable recovery. As the central bank pledges to delay its exit strategy, policy makers may see scope to take additional steps to stimulate growth over the coming months, and the euro is likely to face increased headwinds in the following year as market participants speculate Portugal and Spain to share Ireland’s ill fate.

The greenback advanced against most of its major counterparts overnight, with the USD/JPY paring the decline to 83.65, and the U.S. dollar may continue to appreciate throughout the day as the rise in risk appetite tapers offs. As the economic docket remains fairly light for Thursday, market sentiment is likely to dictate price action going into the North American trade, but the fundamental developments from the world’s largest economy could spark increased volatility in the major currencies as investors weigh the outlook for future growth. Wholesale inventories in the U.S. are projected to increase another 0.8% in October after rising 1.5% in the month prior, but there could be little reaction to the data as risk trends continue to dictate price action in the foreign exchange market.

DailyFX provides forex news on the economic reports and political events that influence the currency market.
Learn currency trading with a free practice account and charts from FXCM. ]]> DailyFX http://www.traderslaboratory.com/forums/blogs/dailyfx/1262-british-pound-bounces-back-boe-maintains.html http://www.traderslaboratory.com/forums/blogs/dailyfx/1256-euro-advances-speculation-further-easing-relief.html Wed, 01 Dec 2010 16:11:32 GMT Talking Points * Japanese Yen: Weighed By Rebound In Risk Appetite * British Pound: Halts Longest Losing Streak Since 2008 * Euro:... Talking Points

* Japanese Yen: Weighed By Rebound In Risk Appetite
* British Pound: Halts Longest Losing Streak Since 2008
* Euro: Germany Retail Sales Jumps in October
* U.S. Dollar: ISM Manufacturing, Fed’s Beige Book on Tap

The Euro advanced to a high of 1.3135 on speculation that the European Central Bank will expand its asset purchase program in order to stem the risks for contagion, and the single-currency may continue to recoup the losses from earlier this week as risk appetite flows back into the market. With the ECB scheduled to announce its interest rate decision tomorrow at 12:45 GMT, we expect President Trichet to talk down the risks for the region as fears surrounding the European debt crisis intensifies, and the central bank head may see scope to expand monetary policy further as policy makers struggle to restore investor confidence. As a result, the EUR/USD is likely to face increased volatility over the next 24 hours of trading, but the lack of momentum to hold above the 200-Day SMA at 1.3124 could keep the exchange rate within a narrow range throughout the day as investors weigh the prospects for future policy.

However, the relief rally in the euro could be short-lived as market participants expect Portugal and Spain to share Ireland’s ill fate, and the Governing Council may look to keep its exit strategy on hold throughout the beginning of the following year as the economic outlook remains clouded with uncertainties. Nevertheless, the economic docket showed retail spending in Germany increased 2.3% in October to top expectations for a 1.2% rise, while manufacturing in Europe’s largest economy expanded at a faster pace in November, with the PMI reading advancing to 58.1 from 56.6 in the previous month. As the recovery gradually gathers pace, some members of the ECB may push to withdraw monetary support in order to contain inflation, but the ongoing slack within the real economy could spur mixed opinions within the central bank as policy makers expect to see an “uneven” recovery going forward.

The British Pound halted the longest losing streak since 2008 as the exchange rate rallied to a high of 1.5648 during the European trade, but the GBP/USD may hold below the 100-Day SMA (1.5714) throughout the day as U.K. policy makers come under scrutiny. According to a report on WikiLeaks, Bank of England Governor Mervyn King said Prime Minister David Cameron and Chancellor of the Exchequer George Osborne’s “lack of experience” will make it increasingly difficult for the new coalition to manage fiscal policy, and went onto say that the two has “not fully grasped” the challenges they face as they take unprecedented steps to balance the budget deficit. As the government plans to curb public spending and withdraw fiscal support, there could be increased pressures on the BoE to support the real economy in 2011, and the central bank may preserve its wait-and-see approach throughout the beginning of the following year in order to balance the risks for the region. However, as policy makers expect inflation to hold above the 2% throughout 2011, there could be a growing split within the MPC as the central bank maintains its dual mandate to ensure price stability while promoting full employment.

The greenback weakened against most of its major counterparts on Wednesday as investors raised their appetite for risk, and the dollar may face increased selling pressures during the North American trade as equity futures foreshadow a higher open for the U.S. market. Nevertheless, the ADP employment report is expected to show private payrolls in the U.S. increasing 70K in November after expanding 43K in the previous month, and the data would certainly bode well for Friday’s non-farm payrolls report as market participants expect the U.S. economy to add 145K jobs this month. At the same time, manufacturing in the world’s largest economy is anticipated to expand at a slower pace in November, with the markets forecasting the ISM index to fall back to 56.5 from 56.9 in the month prior, and the mixed batch of data is likely to spur increased volatility in the currency market as investors weigh the outlook for future growth. However, the biggest market mover is likely to be the Fed’s Beige Book economic report, which is due out at 19:00 GMT, and a shift in the central bank’s economic assessment could set the tone for future price action as it embarks on additional monetary easing.

DailyFX provides forex news on the economic reports and political events that influence the currency market.
Learn currency trading with a free practice account and charts from FXCM. ]]> DailyFX http://www.traderslaboratory.com/forums/blogs/dailyfx/1256-euro-advances-speculation-further-easing-relief.html http://www.traderslaboratory.com/forums/blogs/dailyfx/1253-euro-extends-decline-eu-holds-cautious.html Mon, 29 Nov 2010 16:15:33 GMT Talking Points * Japanese Yen: Mixed Across the Board * British Pound: U.K. Raises 2010 GDP, Cuts 2011 Growth Forecast * Euro: EU... Talking Points

* Japanese Yen: Mixed Across the Board
* British Pound: U.K. Raises 2010 GDP, Cuts 2011 Growth Forecast
* Euro: EU Maintains Growth Projection For 2010, 2011
* U.S. Dollar: Dallas Fed Manufacturing on Tap

The U.S. dollar advanced against its major counterparts during the overnight session, and the near-term rally in the greenback may pick up pace going into the North American trade as fears surrounding the European debt crisis continue to weigh on market sentiment. The EUR/USD tumbled to a low of 1.3136 as the European Union held a cautious outlook for the region and expects the austerity measures to bear down on the economic recovery in the following year. Although, the group maintained its growth forecast for the euro-area as it sees GDP expanding 1.7% this year and 1.5% in 2011, but went onto say that the fundamental outlook remains clouded with high uncertainty as the governments operating under the fixed-exchange rate system struggle to manage their public finances.

As a result, EU Economic and Monetary Affairs Commissioner Olli Rehn said Portugal and Italy may have to take additional steps to meet their fiscal targets as their budget-cutting proposals remain “very ambitious,’ but said that the risks to the economic outlook are broadly balanced while speaking at a news conference in Brussels. The bearish sentiment underlying the single-currency may intensify going into December as European policy makers struggle to restore investor confidence, and the ongoing turmoil in the financial markets could lead the European Central Bank to keep its exit strategy on hold throughout the coming months as it aims to balance the risks for the region. As the exchange rate falls back towards the 38.2%% Fibonacci retracement from the 2009 high to the 2010 low around 1.3100-20, the euro-dollar may continue to retrace the advance from December, but the pair may consolidate in the days ahead as price action holds above the 200-Day SMA at 1.3130.

The British Pound fell back from a high of 1.5648 as investors scaled back their appetite for risk, and the flight to safety may continue to drag on the exchange rate as risk trends dictate price action in the currency market. As the GBP/USD breaks out of the upward trend from May, the pound-dollar may trend lower in the days ahead as it searches for support, but the pair could consolidate in the days as price action holds above the April highs around 1.5500. Meanwhile, the U.K. Office for Budget Responsibility sees GDP expanding 1.8% this year versus an initial forecast for 1.6% rise in GDP, while the group expects the growth rate to rise 2.1% in 2011 amid earlier projections for a 2.3% expansion next year. As policy makers in the U.K. see a risk for a slower recovery in the following year, the Bank of England may look to maintain the expansion in monetary policy throughout the beginning of 2011, but the stickiness in price growth could spur a growing split within the MPC as the central bank expects inflation to hold above target next year. As we head into December, speculation surrounding the outlook for future policy should play an increased role in driving price action for the GBP/USD, and the pair may trend sideways over the coming weeks as we expect to see another three-way split at the December 9 interest rate decision.

The greenback rallied against most of its currency counterparts, with the USD/JPY advancing to a high of 84.25, and the dollar may appreciate further as equity futures foreshadow a lower open for the U.S. market. As the economic docket remains fairly light for Monday, we should see risk sentiment continue to dictate price action for the major currencies, but there could be a small reaction to the Dallas Fed Manufacturing Activity index due out at 15:30 GMT as investors weigh the outlook for future growth. The gauge for manufacturing is expected to increase to 4.5 in November from 2.6 in the previous month, which would be the highest reading since April, and the data could spur a shift in market sentiment as the data encourages an improved outlook for the world’s largest economy. ]]> DailyFX http://www.traderslaboratory.com/forums/blogs/dailyfx/1253-euro-extends-decline-eu-holds-cautious.html http://www.traderslaboratory.com/forums/blogs/dailyfx/1251-euro-greenback-both-hurt-but-hurts.html Wed, 24 Nov 2010 15:42:37 GMT *FUNDYS* After breaking to fresh multi-day lows below 1.3300, the Euro has bounced, with the market managing to establish back above 1.3300. The... FUNDYS


After breaking to fresh multi-day lows below 1.3300, the Euro has bounced, with the market managing to establish back above 1.3300. The initial selling in the major had been brought on by a continued wave of risk aversion and fear over the possible contagion in the Eurozone. Comments from Germany’s Merkel outlining the severity of the situation and potential threats had not done anything to help the Euro’s cause, and the market traded down to 1.3285 before bouncing. Also seen weighing on the Euro were comments from Iceland’s President who questioned the adoption of the Euro given the current crisis, and IFO’s Abberger who warned that EMU peripheral contagion was a major risk.

Relative Performance Versus USD Wednesday (As of 12:30GMT)

1. CAD+0.56%
2. AUSSIE +0.53%
3. KIWI+0.32%
4. STERLING+0.17%
5. SWISSIE+0.13%
6. EURO-0.10%
7. YEN-0.18%


However, there have been a number of officials out in recent trade attempting to downplay the severity of the Eurozone debt situation, and their reassurances seem to have been helping to inspire this latest minor bounce in the currency. While economic data has failed to materially influence price action over the past several sessions, the German IFO, which was the strongest on record and better than expectation, could also not be ignored, and this too was seen helping to keep the single currency propped for the time being.

Technically, there is some very solid support in Eur/Usd in the 1.3300’s, and while 1.3300 figure has been breached on Wednesday, we will only become convinced of a fresh downside extension in the major should we manage to close below the 1.3300 figure. The levels of support in the 1.3300-1.3400 area include; the 38.2% fib retrace off of the 2010 low-high move, some previous resistance turned support from early August, and the 100-Day SMA. As such, we would not at all be surprised to see some form of a bounce from current levels, with bulls looking to reassert.

Additionally, talk of USD diversification has once again resurfaced and this could also serve to attract fresh USD shorts. The release of Tuesday’s Fed Minutes should also not be overlooked in these hectic markets, with the Fed downgrading their outlook for the economy and continuing to sound quite dovish. Elsewhere, UK GDP data came in as expected despite earlier rumors of a weaker number, and in the end, the release failed to materially factor into price action.

A few weeks ago, there seemed to be no good reason to be owning US Dollars given the ultra accommodative Fed policy, and now it seems like there is also no good reason to be holding Euros in light of the escalation in the Eurozone debt crisis. The currency that stands to benefit going forward will therefore be the currency which is will hurt the least, rather than benefit the most. While our core bias is for longer-term USD appreciation, at current levels, we would also not rule out the potential for a bounce in the Euro.

Looking ahead, Wednesday’s economic calendar in the US is super stacked ahead of the Thanksgiving holiday, with US durable goods (0.1% expected), personal income (0.4% expected), personal spending (0.5% expected), and personal consumption all due at 13:30GMT, along with initial jobless claims (435k expected) and continuing claims (4275k expected). University of Michigan confidence (69.5 expected) is then out at 14:55GMT, followed by the house price index (0.0% expected) and new home sales (1.6% expected) at 15:00GMT. Oil and gas inventory data then caps things off at 15:30GMT. US equity futures and oil prices are marginally bid, while gold trades flat. It is worth noting that Wednesday will be the last real trading day of the week in terms of liquidity given the US holiday.

GRAPHIC REWIND




TECHS

EUR/USD: The latest drop below 1.3445 has confirmed a lower top by 1.3785 and opened a fresh downside extension, with the market accelerating below 1.3335 and the 100-Day SMA by 1.3300 before finally stalling out. Next key support now comes in by the 200-Day SMA at 1.3135 and while we would not rule out a test of this longer-term SMA over the coming days, at this point, the risks from here are for some form of a bounce before considering the possibility of bearish resumption, possibly back towards the 1.3600 area. For now we remain on the sidelines and will look for an opportunity to sell into rallies.

USD/JPY: The market has been in recovery mode over the past several days since confirming a double bottom on the break above neckline resistance at 82.00. However, the risks for additional upside should now be limited to the 100-Day SMA by 84.20, and any rallies into this longer-term SMA should be sold in anticipation of a resumption of the broader underlying downtrend. The focus is still on a retest and break of the record lows by 79.75 from 1995, and only a sustained break back above the 100-Day SMA would negate this outlook.

GBP/USD: Overall, price action has been quite choppy, with the market unwilling to commit in either direction at present. The market has been trending lower since reaching 1.6300 several days back, but at the same time has fallen back into some multi-day rising trend-line support. As such, the preferred strategy is to remain on the sidelines and look for a sustained break back above 1.6300 or below 1.5650 for clearer directional bias.

USD/CHF: We contend that the market is in the process of carving a material base by 0.9460, and any setbacks should be very well supported in favor of a sustained recovery. A fresh higher low has now been confirmed by 0.9550 following the latest break back above 0.9975, and the market should now accelerate beyond parity towards our next key topside objective at 1.0300 over the coming sessions. Any intraday setbacks are expected to be well supported ahead of 0.9700.

FLOWS


Hedge fund and real money sellers in Eur/Sek have helped push the pair out of recent ranges. Dip buying in Cable from corporate and Russian accounts. ]]> DailyFX http://www.traderslaboratory.com/forums/blogs/dailyfx/1251-euro-greenback-both-hurt-but-hurts.html http://www.traderslaboratory.com/forums/blogs/dailyfx/1250-forex-trend-monitor-us-dollar-thrive.html Tue, 23 Nov 2010 15:21:16 GMT *Major Currencies vs. US Dollar (% change) 15 Nov 2010 – 19 Nov 2010* Image:...

Major Currencies vs. US Dollar (% change)

15 Nov 2010 – 19 Nov 2010

Last week’s price action proved indecisive as global equities and the US Dollar – the benchmarks for their respective sides of the “risk on” vs. “risk off” argument – closed little changed on Friday. A tug of war between conflicting forces made for choppy price action, with supportivecues from Ireland as the debt fiasco inched toward resolution and a fierce defense of QE by Ben Bernanke being offset by news that China will step up efforts cool inflation (and thereby economic growth), raising reserve ratios by 50bps by the end of the month.

Looking past recent headlines, the balance of competing catalysts driving price action is likely to tip the scales in favor of renewed risk aversion. Indeed, risky assets have retraced less than a quarter of the rally built around Fed QE expectations since August that started to unravel after the central bank delivered just about what had already been priced in at the beginning of this month, leaving the advance without the impetus to continue. This leaves plenty of room for a deeper correction, with the proximity of the winter holiday season making it all the more likely that traders will resume taking profit on QE-linked bets in the weeks ahead.

[B]EURUSD: Euro to Resume Decline as Risk Trends Dominate[/B]

The correlation between the Euro and underlying risk appetite faded a bit from last week after the Irish debt fiasco obscured the relationship, but sentiment remains the most dominant driver of price action. To that end, we expect recent gains to prove corrective within the context of larger down move as risk aversion makes its come-back in the final weeks of the year. Preliminary Euro Zone Consumer Confidence and PMI figures for November headline the economic calendar as traders size up private demand amid a lurch toward fiscal austerity across the region. The final revision of third-quarter German Gross Domestic Product figures as well as the November’s IFO Survey of business confidence is also of note. We remain short EURUSD.



Source: Bloomberg

GBPUSD: Pound to Track Risk Sentiment Amid Profit-Taking

Risk sentiment has tightened its grip over British Pound price action, hinting the UK unit is heading lower against the US Dollar should risk aversion return as expected. On the economic calendar, the second revision of third-quarter Gross Domestic Product figures takes the spotlight, with traders most concerned to see the breakdown in contributions to overall growth as the outlook on monetary policy continues to be torn between an inflation rate stuck stubbornly above 3 percent and the need for support as the onset of an ambitious austerity plan draws ever closer.



Source: Bloomberg

USDJPY:Yen to Fall as Yields Continue Post-QE Correction

Relative borrowing costs remain in focus, with USDJPY continuing to track the spread between US and Japanese 2-year treasury yields. On balance, this likely amounts to Japanese Yen weakness as US yields – depressed over recent months on the very same QE expectations that drove risky assets higher – stage their own correction. October’s Trade Balance and Consumer Price Index figures stand out on the economic calendar. We are long USDJPY.



Source: Bloomberg

USDCAD, AUDUSD, NZDUSD:Commodity Bloc Likely to Underperform

Risk trends remain firmly in control of the commodity Dollars, keeping the spotlight on the post-QE correction likely to resume across financial markets. Indeed, the relatively higher yields offered by these currencies that made them greater beneficiaries of the pro-risk environment in recent months may also prove to see them underperform the other majors against the greenback. Canadian economic data offers the only bit of event risk, with October’s Consumer Price Index figures as well as September’s Retail Sales report on tap.


Source: Bloomberg



Source: Bloomberg



DailyFX provides forex news on the economic reports and political events that influence the currency market.
Learn currency trading with a free practice account and charts from FXCM. ]]> DailyFX http://www.traderslaboratory.com/forums/blogs/dailyfx/1250-forex-trend-monitor-us-dollar-thrive.html http://www.traderslaboratory.com/forums/blogs/dailyfx/1249-euro-british-pound-face-headwinds-risks.html Mon, 22 Nov 2010 15:04:42 GMT *Talking Points * Japanese Yen: Higher Against Most Majors * British Pound: Stands Ready To Aid Ireland * Euro: Risks For Contagion... Talking Points

* Japanese Yen: Higher Against Most Majors
* British Pound: Stands Ready To Aid Ireland
* Euro: Risks For Contagion Gathers Pace
* U.S. Dollar: Chicago Fed Index on Tap


The Euro fell back from a high of 1.3785 during the overnight trade as Ireland opted to seek a bailout from the EU, and the single-currency may face increased headwinds going into the North American trade as the risks for contagion intensify. In response to the bailout, Moody’s Investor Services said that Ireland is likely to face a “multi-notch” downgrade, while European policy makers argued that it’s still premature to speculate on the size of the rescue package. In an effort to stem the risks for contagion, the EU announced that Portugal’s banking system is healthy and resilient, but went onto say that the euro-area continues to face an uneven recovery as the governments operating under the fixed-exchange rate system struggle to manage their public finances.

At the same time, European Union Economic and Monetary Commissioner Olli Rehn said that the issues Portugal faces are “very different” than Ireland’s as the country “has taken very bold decisions concerning fiscal consolidation and continuing its structural reforms,” but the risks for contagion could lead the European Central Bank to support the economy going into 2011 as it aims to balance the risks for the region. As fears surrounding the debt crisis exacerbates, the ECB may put its primary mandate on the line as it aims to restore financial stability, and speculation surrounding the outlook for monetary policy could play an increased role in driving price action for the euro as the central bank talks of reestablishing its exit strategy in the coming months. As the EUR/USD continues to hold below the 20-Day SMA at 1.3810, the euro-dollar may pare the rebound from the 50.0% Fibonacci retracement from the 2009 high to the 2010 low around 1.3490-1.3500, which could lead to a test of the August high (1.3333) in the coming days.

The British Pound pared the overnight rally to 1.6083 as the U.K. pledged to assist Ireland, and fears surrounding the European debt crisis could drag on the exchange rate as Britain struggles to manage its own public finances. U.K. Chancellor of the Exchequer George Osborne said that he stands ready to help the “friend in need” while speaking on the BBC radio, and went onto say that the U.K. has made “a commitment for a bilateral loan” in an effort to ease the turmoil in the European financial system. As the U.K. aims to curb its budget deficit and tightens fiscal policy, there could be increased pressures on the Bank of England to support the economy in 2011, but the stickiness in price growth could spur an increased split within the MPC as policy makers expect inflation to hold above target throughout the following year. As the economic outlook remains clouded with uncertainties, the GBP/USD may work its way back towards the 50-Day SMA (1.5874) to test for near-term support, but we should see the exchange rate push higher throughout the remainder of the year as it maintains the upward trend from May.

U.S. dollar price action was mixed overnight, with the USD/JPY bouncing back to reach a high of 83.56 on Monday, and we may see a clear trend develop during the North American trade as equity futures point to a lower open for the U.S. market. As the economic docket remains fairly light for Monday, risk sentiment is likely to dictate price action in the currency market, and we may see little reaction to the Chicago Fed’s National Activity index, which is expected to increase to -0.24 in October from -0.58 in the previous month, as speculation surrounding Ireland’s bailout takes center stage.

DailyFX provides forex news on the economic reports and political events that influence the currency market.
Learn currency trading with a free practice account and charts from FXCM. ]]> DailyFX http://www.traderslaboratory.com/forums/blogs/dailyfx/1249-euro-british-pound-face-headwinds-risks.html http://www.traderslaboratory.com/forums/blogs/dailyfx/1248-euro-risk-appetite-climb-ireland-intimates.html Thu, 18 Nov 2010 15:40:30 GMT Image: http://media.dailyfx.com/illustrations/2010/11/18/Euro_Risk_Appeitte_Climb_As_Ireland_body_euro.png The euro spiked higher as Ireland’s...

The euro spiked higher as Ireland’s central bank Governor said that he expects Ireland to ask for assistance from the EU and IMF. He said that the figure could run into the tens of billions of euros and he acknowledges that banks must hold additional capital. Speculation has been rife that Ireland will ask for aid since early in the Asia session and the confirmation has seen the euro spike to fresh highs as concerns over Ireland’s ability to handle its debt alone are finally put to rest.

In recent days the euro has been under significant pressure with Irish obstinacy to requesting funds said to have made ECB President Trichet “mad” (Irish Times).Irish officials had said that funding is available through 2011 and it is fully capable of handling higher borrowing costs. In an abrupt U-turn a deal now seems to be in the offing, Ireland’s central bank Governor stressed that getting the terms and getting conditions of any assistance right is essential. Adding that if an agreement is reached it will be a loan and not a bailout, noting that he is confident a package will be agreed upon as officials would not have arrived in Dublin if there was no hope for consensus. The government initially wanted a clear distinction between an emergency bank aid and financial help for the State, there is now a reluctant acceptance that the former will have to be drawn by the government on behalf of the institutions.

DailyFX provides forex news on the economic reports and political events that influence the currency market.
Learn currency trading with a free practice account and charts from FXCM. ]]> DailyFX http://www.traderslaboratory.com/forums/blogs/dailyfx/1248-euro-risk-appetite-climb-ireland-intimates.html http://www.traderslaboratory.com/forums/blogs/dailyfx/1246-u-s-retail-sales-jump-1.html Mon, 15 Nov 2010 15:31:01 GMT Advanced retail sales in the world’s largest economy rose 1.2 percent in October after climbing 0.7 percent the month prior amid expectations of 0.7... Advanced retail sales in the world’s largest economy rose 1.2 percent in October after climbing 0.7 percent the month prior amid expectations of 0.7 percent. At the same time, empire manufacturing in November entered negative territory for the first time since July 2009. Subsequent to the reports, the U.S. dollar lost ground against most of its major counterparts.

The rise in retail sales were led by climbing auto sales. Outside of autos, non-store retailers gained 0.8 percent, while electronics and appliances pared the increase as figures slid 0.7 percent. The report is of great importance due to the fact that stronger retail sales show stronger consumer demand and economic growth. However, despite the upbeat report, the slump in empire manufacturing lead the buck to pare some of its overnight advances as the report entered negative territory for the first time since July 2009. Taking a look at the breakdown of the release, prices paid slid to 22.08 in November from 30.00 the month prior, while the number of employees slid to the lowest level since July of this year. At the same time, new orders and shipments fell at an alarming rate. The report does not bode well for the U.S. economy as it suggests that the industry that once lead the region out of the recession is now tapering off.

GBPUSD Daily Chart


Source: Intellicharts – Prepared by Michael Wright

Taking a look at the currency markets, the GBPUSD has halted its three day advance, but has pared most of its intraday losses ahead of the U.K. consumer prices report. It is worth noting that the MACD continues to point to further gains, while downside risks are capped by the 20-day moving average. At the same time, the bullish trend dating back to May of this year remains intact, thus, I do not rule out a test towards 1.6200 in the near term. All in all, I will remain long this pair ad my bias remains to the upside.

DailyFX provides forex news on the economic reports and political events that influence the currency market.
Learn currency trading with a free practice account and charts from FXCM. ]]> DailyFX http://www.traderslaboratory.com/forums/blogs/dailyfx/1246-u-s-retail-sales-jump-1.html http://www.traderslaboratory.com/forums/blogs/dailyfx/1244-euro-bounces-back-policy-makers-prepare.html Fri, 12 Nov 2010 15:27:35 GMT _*Forex: Euro Bounces Back As Policy Makers Prepare For Bailout, Shows Muted Reaction To 3Q GDP*_* Talking Points * Japanese Yen: Weakens... Forex: Euro Bounces Back As Policy Makers Prepare For Bailout, Shows Muted Reaction To 3Q GDP

Talking Points

* Japanese Yen: Weakens Across the Board
* British Pound: Maintains Upward Trend From May
* Euro: 3Q GDP Falls Short of Expectations
* U.S. Dollar: U. of Michigan Confidence Survey on Tap


The Euro showed little reaction to the weaker-than-expected 3Q GDP reading as the exchange rate rallied to a high of 1.3745, and the single-currency may continue to push higher going into the end of the week as European policy makers stand ready to bailout Ireland. During the G20 Summit in South Korea, German Chancellor Angela Merkel said “preparations are in place” to aid members of the European Union as the governments in the region struggle to manage their public finances, while a spokesman for Ms. Merkel announced that a joint statement will be issued later today as fears surrounding the European debt crisis intensifies. At the same time, the EU released a statement saying that Ireland has yet to request, but speculation for a bailout may intensify over the near-term as global investors see a risk of Ireland defaulting on its obligations.

As European policy makers try to restore investor confidence, the EUR/USD may stay afloat throughout the day as price action holds above the 50.0% Fibonacci retracement from the 2009 high to the 2010 low around 1.3500, but a shift in market sentiment could drag on the exchange rate as risk trends continue to dictate price action in the currency market. Nevertheless, economic activity in the Euro-Zone increased 0.4% in the third quarter amid forecasts for a 0.5% expansion in GDP, while the growth rate rose at an annualized pace of 1.9% for the second consecutive quarter. A separate report showed industrial outputs in the region unexpectedly slipped 0.9% in September, and the slew of dismal data could lead the European Central Bank to maintain the expansion in monetary policy throughout the beginning of 2011 as the recovery tapers off. As the ECB aims to encourage a sustainable recovery, the instability in the financial system paired with the ongoing weakness in the private sector could lead the Governing Council to keep its exit strategy on hold, and speculation surrounding the outlook for future policy is likely to play an increased role in driving price action for the euro as we head into the end of the year.

The British Pound bounced back from a low of 1.5985 during the European trade to maintain the upward trend from May, and the exchange rate may push higher going into the following week as investors expect the Bank of England to maintain its current policy throughout the remainder of the year. As the BoE is scheduled to release its policy meeting on November 17, comments from the central bank is likely to spark increased volatility in the exchange rate, but market participants may show little reaction to the statement as the BoE dropped to dovish tone during the quarterly inflation report earlier this week. Nevertheless, we expect to see a 7-1-1 vote count as MPC board member Andrew Sentance pushes for a 25bp rate hike while Adam Posen sees scope to expand monetary policy further, but there could be a growing split within the central bank as policy makers expect inflation to hold above target throughout 2011. If additional members of the MPC join Mr. Sentance and vote to start normalizing monetary policy, a rise in interest rate expectations could lead the recent rally in the GBP/USD to gather pace, which should lead the exchange rate to make another run at 1.6300.

U.S. dollar price action was mixed overnight, with the USD/JPY halting the three-day advanced, and risk developments could dictate price action throughout the North American trade as the economic docket remains fairly light for Friday. Nevertheless, the U. of Michigan consumer confidence survey due out at 14:55 GMT is expected to show a rebound in household sentiment as market participants forecast the index to increase to 69.0 in November from 67.7 in the previous month, and the data could spark a bullish reaction in the greenback as the outlook for future growth improves. However, as market sentiment continues to dictate price action in the foreign exchange market, the data could fuel a rise in risk appetite and ultimately lead to U.S. dollar weakness as investors move into higher-yielding currencies.


Learn currency trading with a free practice account and charts from FXCM. ]]> DailyFX http://www.traderslaboratory.com/forums/blogs/dailyfx/1244-euro-bounces-back-policy-makers-prepare.html http://www.traderslaboratory.com/forums/blogs/dailyfx/1243-all-eyes-turn-g20-fed-qe.html Thu, 11 Nov 2010 15:49:56 GMT *Key Overnight Developments * Australian Employment Report Yields Little More than Volatility * Moody’s Raises Chinese Debt Rating,... Key Overnight Developments

* Australian Employment Report Yields Little More than Volatility
* Moody’s Raises Chinese Debt Rating, Overshadows Rate Hike Fears
* Major Currencies Range-Bound Ahead of G20 Leaders’ Summit

The Euro and the British Pound were little changed in overnight trade, with the single currency drifting sideways 1.38 to the US Dollar while sterling probed cautiously above 1.61 to add a meager 0.1 percent against the greenback. We are flat GBPUSD and EURUSD.

Australian Employment figures offered a mixed bag of outcomes. The report showed the economy added 29,700 jobs in October, topping economists’ forecasts for a 20,000 increase. Meanwhile, the Unemployment Rate unexpectedly ticked higher to 5.4 percent, albeit likely because improving labor market conditions brought an inflow of discouraged workers back into the labor force considering the Participation Rate ticked up to 65.9 percent, the highest on record.

In a somewhat worrisome development, this inflow was channeled into part-time employment whereas full-time positions were cut, which certainly does not exude confidence firms’ confidence about future demand prospects. That said, one month of data can hardly be called conclusive and traders will need to see how these trends evolve over time to draw firm conclusions. Australian Dollar price action following the release mirrored the conflicting cues therein, with the currency initially tumbling as the higher jobless rate number crossed the wires but promptly recovering toward the middle of the range that had prevailed over the preceding 24 hours, yielding a net flat result.

Chinese Consumer Price Index figures outdid forecasts with the annualized inflation rate rising to 4.4 percent – the highest in over two years. New Yuan Loans – another closely watched metric by traders keen to forecast Beijing’s monetary policy – printed much higher than expected at 587.7 billion. Taken together, the outcomes hint that authorities may step up efforts to cool the buoyant economy amid fears of asset bubbles and runaway price growth. Markets didn’t seem too perturbed by the releases despite their apparent signaling of slower growth in the East Asian giant, with the data overshadowed by news that ratings powerhouse Moody’s raised China’s debt rating to Aa3 from A1.

Euro Session: What to Expect

The economic calendar is essentially negligible, turning the spotlight on the G20 leaders’ summit getting underway in Seoul, South Korea. As we discussed in our weekly forex trend monitor, the Federal Reserve’s reboot of its quantitative easing program has lost some of its early luster amid criticism that this amounted to a premeditated policy of US Dollar depreciation with the aim of unfairly boosting America’s exports at the expense of its competitors. Needless to say, this has rekindled fears of a “currency war”, with traders waiting with bated breath for the G20’s communiqué for some sort of strong message on the matter.

On balance, expectations of some sort of paradigm-changing “grand bargain” seem almost certainly overstated. The most likely outcome is for a final communiqué thin on specifics but packed with vague commitments not to engage in competitive devaluation, which may boost risk appetite temporarily but ought not prove lasting considering it would amount to little more than a restatement of the status quo.

Risk trends appear mixed in late Asian trade, reflecting traders’ unwillingness to commit to directional bets until the G20 meeting runs its course. FTSE 100 stock index futures are up 0.4 percent ahead of the opening bell in London but contracts tracking the S&P 500 are substantially lower, trading 0.3 percent in the red. ]]> DailyFX http://www.traderslaboratory.com/forums/blogs/dailyfx/1243-all-eyes-turn-g20-fed-qe.html http://www.traderslaboratory.com/forums/blogs/dailyfx/1241-boe-says-u-k-recovery-continue.html Wed, 10 Nov 2010 15:34:30 GMT Image:...


Fundamental Headlines

• Ireland’s Fate Tied To Doomed Banks – Wall Street Journal

• Commodity Prices Surge – Wall Street Journal

• G20 Draws Up Two-Tier Bank Plan - Financial Times

•G-20 Unity Born in Crisis Fractures as Leaders Pursue Own Ends - Bloomberg

•Recovery to Speed Up as Fed Moves Build Confidence, Survey Says - Bloomberg


GBPUSD: In its quarterly inflation report, the Bank of England was unexpectedly hawkish. The BoE said that inflation expectations indicate consumer prices around target in the medium term, and went onto add that there is a “high probability” that Governor Mervyn King will have to write an inflation letter to the Chancellor of the Exchequer. Meanwhile, the central bank said that the recovery in the region will continue, with inflation above target through 2011, and went onto add that near term consumer price forecasts are higher than in August. Not to overlook, in a speech subsequent to the inflation report, Mr. King said that there is “vigorous” debate on MPC on risks, and noted that there are sizable risks to consumer prices in both directions. In turn, the British pound rallied against all major currencies and will likely continue its northern journey during the North American trade. Of particular note, the GBPUSD halted its three day advance to reach an intraday high of 1.60978. Upside risks remain so long as price action is capped by the 20-day moving average. Though I am not long the GBPUSD, I will maintain my long GBPJPY and GBPCHF positions.

Learn currency trading with a free practice account and charts from FXCM. ]]> DailyFX http://www.traderslaboratory.com/forums/blogs/dailyfx/1241-boe-says-u-k-recovery-continue.html http://www.traderslaboratory.com/forums/blogs/dailyfx/1238-forex-trend-monitor-us-dollar-fed.html Tue, 09 Nov 2010 16:20:03 GMT *Major Currencies vs. US Dollar (% change)* Image:... Major Currencies vs. US Dollar (% change)



General Comment: US Dollar and Fed QE – The Morning After

The hangover after last week’s dizzying surge in risk appetite has descended upon the markets, with the US Dollar rallying decisively against most major currencies having reached multi-year lows after the Federal Reserve rebooted its quantitative easing (QE) program. The key question now is whether current price action represents little more than a near-term correction or something bigger and more significant. Indeed, one can’t help but wonder if the sudden parade of QE skeptics across the wires – a group notably including three Fed officials, two of whom voted for its reinstatement – is starting to breed doubts about the policy’s merits or, worse yet, rekindling fears of competitive devaluation.

Regardless, a deeper US Dollar rebound seems likely going forward considering that even in the more modest correction scenario, the move to be retraced dates back not to last week but to August when the Fed began to publicly massage the idea of renewed stimulus at the central bank summit in Jackson Hole. Having deftly managed the markets’ expectations over the subsequent months, Ben Bernanke and company delivered just about what the markets had priced in, removing a good bit of uncertainty and opening the door profit-taking ahead of the year-end.

As for the threat of “currency war”, traders will be tuned in with bated breath for the outcome of the G20 leaders’ summit in Seoul this week, although expectations of some sort of paradigm-changing “grand bargain” seem remote. The most likely outcome is for a final communiqué thin on specifics but packed with vague commitments not to engage in competitive devaluation, which may boost risk appetite temporarily but ought not prove lasting considering it would amount to little more than a restatement of the status quo.

EURUSD: Euro Threatened as Risk Trends Shift Into Reverse

The Euro continues to track broad trends in risk appetite with prices still showing a strong correlation with the MSCI World Stock Index on 20-day percent change studies. Needless to say, this directly threatens the single currency as risky assets correct lower. However, pair may find support in preliminary Euro Zone Gross Domestic Product figures expected to put the annualized growth rate at 1.9 percent in the third quarter, matching the two-year high set in the three months through June, as well as the expiry of a 6-month ECB LTRO that may put upward pressure on yields.


Source: Bloomberg

GBPUSD: Dollar Trends, Inflation Report Vie for Influence

The British Pound has re-coupled with risk appetite after last week’s Bank of England rate decision proved to be a non-event, opening the door for the Dollar’s response to the Fed’s QE reboot to take over. While this bodes ill given the corrective nature of current price action, the publication of the central bank’s Quarterly Inflation Report adds a layer of uncertainty. Indeed, the document represents the first opportunity for BOE officials to weigh in on the implications of the government’s austerity program with in-depth knowledge of where deficit reduction will come from. To that effect, traders will be eager to see if this pushes the rat-setting MPC any further into dovish territory, perhaps even to consider following the Fed down the path of additional asset purchases.


Source: Bloomberg

USDJPY: G20 Summit May Interrupt Otherwise Quiet Trade

The short-term yield spread remains the paramount driver of Yen price action. It is small wonder then that prices have tracked sideways since mid-October as both the Federal Reserve and the Bank of Japan pushed ahead of additional monetary easing. The economic calendar is lackluster for the remainder of the week but things may get choppy heading into the G20 summit on Thursday and Friday considering the topic of “currency war” threatens to resurface. Naturally, this subject is particularly touchy for USDJPY considering the US is now being internationally accused of intentionally depressing the greenback’s value with QE while Japanese officials explicitly intervened in FX markets just several months ago.



Source: Bloomberg

USDCAD, AUDUSD, NZDUSD:Weakness Likely if Risk Appetite Fades
Risk trends remain firmly in control of the commodity bloc, putting the spotlight on the correction underway since the beginning of the week. On the domestic data front, Australian Unemployment data is set to show the jobless rate fell to 5 percent – the lowest in 20 months – while Home Loans add 1 percent for the second consecutive month in September.



Source: Bloomberg


Source: Bloomberg



Source: Bloomberg

Learn currency trading with a free practice account and charts from FXCM. ]]> DailyFX http://www.traderslaboratory.com/forums/blogs/dailyfx/1238-forex-trend-monitor-us-dollar-fed.html http://www.traderslaboratory.com/forums/blogs/dailyfx/1235-euro-looks-support-u-s-dollar.html Mon, 08 Nov 2010 15:20:07 GMT *Talking Points * Japanese Yen: Rallies Across The Board * British Pound: Holds Narrow Range * Euro: Investor Confidence Advances to... Talking Points

* Japanese Yen: Rallies Across The Board
* British Pound: Holds Narrow Range
* Euro: Investor Confidence Advances to Three-Year High
* U.S. Dollar: Fed Officials on Tap

The Euro slipped to a low of 1.3890 on Monday as investors scaled back their appetite for risk, and the single-currency may depreciate throughout the North American trade as risk sentiment continues to dictate price action in the foreign exchange market. With the U.S. dollar regaining its footing, the EUR/USD looks as though it will retrace the advance from October as it appears to have carved out a near-term top ahead of 1.4300. However, as the euro-dollar bounces back from the 61.8% Fibonacci retracement from the 2009 high to the 2010 low around 1.3890-1.3900, we may see the pair hold steady throughout the day as the economic docket remains fairly light for the remainder of the day.

Nevertheless, investor confidence in the Euro-Zone rose to a three-year high in November, with the Sentix survey advancing to 14.0 from 8.8 in October to exceeded projections for a 10.0 print, while the trade surplus for Germany widened to EUR 16.8B in September from EUR 9.0B following a 3.0% in exports. At the same time, we saw industrial outputs in Europe’s largest economy unexpectedly contract 0.8% in September to mark the biggest decline in over a year, but it seems as though currency traders are showing little reaction to the mixed batch of data as fears surrounding the European debt crisis resurface. European Union Economic and Monetary Affairs Commissioner Olli Rehn has flown into Ireland today to review the government’s new budget plan, which will increases tax revenues by as nearly EUR 6B over the following year, and the uncertainties surrounding the economic outlook may continue to drag on the exchange rate as investors weigh the prospects for a sustainable recovery. As the governments operating under the single-currency tighten fiscal policy to address the budget deficit, there could be increased pressures on the European Central Bank to support the real economy as the rebound in global trade cools, and the Governing Council may uphold the expansion in monetary policy throughout the beginning of 2011 in order to balance the risks for the region.

The British Pound extended the decline from Friday, with the exchange rate slipping to a low of 1.6102 during the overnight trade, but the GBP/USD may continue to push higher over the near-term as it maintains t he upward trend from May. As the Bank of England holds the benchmark interest rate at 0.50% and maintains its asset purchase target at GBP 200B, the neutral policy stance endorsed by the central bank could spur a rise in interest rate expectations as the recovery in the U.K. slowly gathers pace, and members of the MPC may see scope to start normalizing monetary policy over the coming months as price growth continues to hold above the government’s 3% limit for inflation. However, as the BoE is scheduled to deliver its quarterly inflation report due out later this week, the GBP/USD may be confined within a narrow rate in the days ahead, but hawkish commentary from the BoE could spark another short-term rally in the exchange rate, which could lead the pound-dollar to retrace the decline from earlier this year.

The greenback advanced against most of its major counterparts, while the USD/JPY slipped to a low of 81.00 as the Japanese Yen rallied across the board, and the rise in risk aversion may dictate price action throughout the day as the economic docket remains fairly light for Monday. We have Fed policy makers scheduled to speak throughout the day, with James Bullard lined up to speak on deflation at 17:30 GMT, who will be followed by Richard Fisher at 18:00 GMT. In addition, the Fed’s Kevin Warsh is scheduled to speak on the economy at 20:30 GMT, and comments from the central bankers could spark a shift in market sentiment as central bank maintains a cautious outlook for future growth. Nevertheless, as equity futures foreshadow a lower open for the U.S. market, the drop in risk appetite may keep the U.S. dollar afloat throughout the day, and the greenback may appreciate further throughout the day as market sentiment continues to dictate price action in the currency market.

Learn currency trading with a free practice account and charts from FXCM. ]]> DailyFX http://www.traderslaboratory.com/forums/blogs/dailyfx/1235-euro-looks-support-u-s-dollar.html