- Dollar Stumbles as Equities Rally after China Rate Hold and Moody’s Fading Forecast, FOMC Up Next
- Euro Climbs Monday but ECB Purchases, BIS Debt Report and Upcoming Vote Weigh Heavily
- British Pound Traders Focused more on Housing Data than BoE Bean’s Inflation Comments
- Canadian Dollar Can’t Pick up on Risk Trends as BoC Governor Carney Offers Dovish Outlook
- Australian Dollar Borrows Direction and Conviction from Risk Trends and Banking Overhaul
- New Zealand Dollar Suffers a 100-Point Intraday Reversal against Greenback
Dollar Stumbles as Equities Rally after China Rate Hold and Moody’s Fading Forecast, FOMC Up Next
While a taste for risk may not have acted as the kindling for an explosive move; it certainly helped curb the dollar’s latent strength from the previous week. Over the weekend, the market was bracing for a potential storm in reaction to the Chinese data that was scheduled for release. The release of a vital round of data (CPI, retail sales, industrial production, fixed investment) reinforced expectations that policy officials would act to curb ballooning inflation and asset prices. However, the rate hike many were preparing for never came to pass. Last Friday’s 50 basis point reserve ratio hike seemed to be deemed sufficient. Holding back from throwing the breaks on one of the best performing economies and highest return markets is clearly a boon for speculative interests around the world. That said, the likelihood of an interest rate hike over the next few weeks is still exceptionally high. This will almost certainly weigh on traders’ minds going forward. Later in the day, Europe financial concerns would do little to further the sense of risk appetite as data showed ECB government bond purchases surged and the BIS reported a sharp reduction in US, German and UK holdings of periphery European Union members’ debt. Nonetheless, we would see the dollar really start to fall apart on this shift.
If it wasn’t euro-strength or risk aversion that was driving the dollar lower; the most logical explanation was domestic concerns. There were various reports Monday; but the most remarkable was the Moody’s warning that the proposed US tax package’s influence over debt would wipe out the positive implications of economic growth and increased the threat of a negative outlook for the top rating within the next two years. This shouldn’t surprise; but in effect, it is often ignored until a policy group threatens the status quo. Going with this theme, the Fed is scheduled to convene on policy tomorrow. It is unlikely that they will alter stimulus only a month after the second round of easing was instituted; but a sense for further support and timing could further weigh the feeling of bloated debts and unreliable financials going forward.
Related:Discuss the Dollar in the DailyFX Forum, John’s Analyst Picks: NZDUSD Hits its Target, AUDNZD Tempts
Euro Climbs Monday but ECB Purchases, BIS Debt Report and Upcoming Vote Weigh Heavily
Monday saw a notable performance from the euro across the dollar and pound; but fundamentals certainly didn’t justify the advance. The two top stories for the day were ECB purchases of regional government bonds last night and the Bank of International Settlements (BIS) report on 2Q debt holdings. From the central bank, we learned that the 2.667 billion euros in bonds were purchases – the most in 23 weeks as the market once again closes off to struggling countries and markets. A little more dated; but very interesting were the BIS figures. Through the three months through June, the bank for the banks reported holdings of Greek, Irish, Portuguese and Spanish debt dropped $107 billion to $2.28 trillion. Both readings show failing confidence in the region’s financial health. Now we await the Irish vote and EU leaders’ summit Wednesday.
British Pound Traders Focused more on Housing Data than BoE Bean’s Inflation Comments
While the menace of economic pain and stimulus expansion loom; there is a bullish argument to be made in rate expectations for the pound. Monday, BoE Deputy Governor Bean noted that the risks of inflation have notably increased. That said, a drop 3 percent drop in house prices worked against his ominous concerns. Perhaps tomorrow’s CPI figures will give his comments more weight – and rate forecasts more lift.
Canadian Dollar Can’t Pick up on Risk Trends as BoC Governor Carney Offers Dovish Outlook
Last week, Canada’s Finance Minister said that the greatest threat to Canada was not the nation’s high currency but an underperforming US economy. BoC Governor Carney would further these comments Monday with warnings that exchange rate manipulation around the world could encourage further policy loosening. At home, he warned that excessive borrowing at current low rates could spell trouble later down the line.
Australian Dollar Borrows Direction and Conviction from Risk Trends and Banking Overhaul
Between fundamental developments and risk trends, the latter will always win out for influence of the Aussie dollar. However, Monday’s swell was inconsistent as the strength in capital markets for the Asian session really didn’t carry its weight forward. An interesting development on the day was the bank overhaul suggestion. The suggested changes were far less threatening than expected and caused speculators little worry.
New Zealand Dollar Suffers a 100-Point Intraday Reversal against Greenback
The US dollar plunged against all of its counterparts Monday morning and would recovery very little of this lost ground – that is except against the Canadian and New Zealand dollars. Where the Aussie currency holds its own for yield and growth, the Kiwi is falling well behind the curve. And, later in the day we would see a remarkable 2.5 percent drop in October retail sales to add fundamental weight to the move.
**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar
ECONOMIC DATA
Next 24 Hours
| Currency | GMT | Release | Survey | Previous | Comments |
| GBP | 0:01 | RICS House Price Balance (NOV) | -50% | -49% | October reading was 18-month low. |
| AUD | 0:30 | Dwelling Starts (3Q) | -5.0% | 0.8% | Increased in the last four quarters. |
| AUD | 0:30 | NAB Business Confidence (NOV) | 8 | Business conditions fell in October to the lowest level since July 2009. | |
| AUD | 0:30 | NAB Business Conditions (NOV) | 2 | ||
| NZD | 2:00 | Non-Residential Bond Holdings (NOV) | 64.6% | October reading highest since 2009. | |
| JPY | 4:00 | Tokyo Condominium Sales (YoY) (NOV) | 9.8% | Rose YoY in the last nine months. | |
| JPY | 4:30 | Industrial Production (MoM) (OCT F) | -1.8% | Japan's industrial production fell for a fifth month in October as the global slowdown hurt exports. | |
| JPY | 4:30 | Industrial Production (YoY) (OCT F) | 4.5% | ||
| JPY | 4:30 | Capacity Utilization (MoM) (OCT F) | -1.1% | ||
| EUR | 6:30 | French Consumer Price Index (MoM) (NOV) | 0.1% | 0.1% | French consumer prices increased 1.6% annually in October, as energy prices rose 11.1% in the year and fresh produce prices rose 6.5%. |
| EUR | 6:30 | French Consumer Price Index (YoY) (NOV) | 1.7% | 1.6% | |
| GBP | 9:30 | DCLG UK House Prices (YoY) (OCT) | 6.1% | 6.1% | Rose YoY in the last 11 months. |
| GBP | 9:30 | Consumer Price Index (MoM) (NOV) | 0.3% | 0.3% | U.K. consumer prices increased at least 3% annually in the last ten months. |
| GBP | 9:30 | Consumer Price Index (YoY) (NOV) | 3.2% | 3.2% | |
| GBP | 9:30 | Core Consumer Price Index (YoY) (NOV) | 2.6% | 2.7% | |
| GBP | 9:30 | Retail Price Index (MoM) (NOV) | 0.2% | 0.2% | U.K. retail prices increased in October, as petrol & oil rose 12.0% and alcohol & tobacco prices rallied 5.1%. |
| GBP | 9:30 | Retail Price Index (YoY) (NOV) | 4.5% | 4.5% | |
| EUR | 10:00 | German ZEW Survey (Economic Sentiment) (DEC) | 3.9 | 1.8 | Euro-Zone ZEW survey rose to a three-month high in November. |
| EUR | 10:00 | German ZEW Survey (Current Situation) (DEC) | 84.5 | 81.5 | |
| EUR | 10:00 | EZ ZEW Survey (Economic Sentiment) (DEC) | 10.5 | 13.8 | |
| EUR | 10:00 | Euro-Zone Industrial Production s.a. (MoM) (OCT) | 1.3% | -0.8% | Industrial production declined in September following two-month rise. |
| EUR | 10:00 | Euro-Zone Industrial Production (YoY) (OCT) | 7.6% | 5.4% | |
| USD | 12:30 | NFIB Small Business Optimism (NOV) | 92.3 | 91.7 | Likely rose to two-year high in Nov. |
| CAD | 13:30 | Labor Productivity (QoQ) (3Q) | -0.1% | -0.8% | Likely fell for third time in 5 months. |
| CAD | 13:30 | Leading Indicators (MoM) (NOV) | 0.5% | 0.2% | Likely rose for tenth time this year. |
| USD | 13:30 | Advance Retail Sales (NOV) | 0.6% | 1.2% | Retail sales climbed in October by the most in seven months, beating the highest economist forecasts. |
| USD | 13:30 | Retail Sales Less Autos (NOV) | 0.6% | 0.4% | |
| USD | 13:30 | Retail Sales Less Auto & Gas (NOV) | 0.6% | 0.4% | |
| USD | 13:30 | Producer Price Index (MoM) (NOV) | 0.6% | 0.4% | U.S. producer prices rose less than forecast in October, reflecting lower prices for cars, trucks, and computers. |
| USD | 13:30 | Producer Price Index (YoY) (NOV) | 3.3% | 4.3% | |
| USD | 13:30 | PPI Ex Food & Energy (MoM) (NOV) | 0.2% | -0.6% | |
| USD | 13:30 | PPI Ex Food & Energy (YoY) (NOV) | 1.2% | 1.5% | |
| USD | 15:00 | Business Inventories (OCT) | 1.0% | 0.9% | Rose on holiday shelve stocking. |
| USD | 19:15 | Federal Open Market Committee Interest Rate Decision | 0.25% | 0.25% | Market implies no chance of hike. |
| Currency | GMT | Upcoming Events & Speeches |
| CHF | 6:45 | SECO 2010 Economic Forecasts (DEC) |
| EUR | 10:00 | Bank of Italy Publishes Public Finance Supplement Report |
SUPPORT AND RESISTANCE LEVELS
CLASSIC SUPPORT AND RESISTANCE - 18:00 GMT
| Currency | EUR/USD | GBP/USD | USD/JPY | USD/CHF | USD/CAD | AUD/USD | NZD/USD | EUR/JPY | GBP/JPY |
| Resist 2 | 1.3840 | 1.6420 | 89.00 | 1.0460 | 1.0922 | 1.0600 | 0.8230 | 127.60 | 146.05 |
| Resist 1 | 1.3700 | 1.5890 | 86.00 | 1.0000 | 1.0750 | 1.0200 | 0.8000 | 120.00 | 140.00 |
| Spot | 1.3396 | 1.5868 | 83.41 | 0.9678 | 1.0075 | 0.9965 | 0.7559 | 111.74 | 132.36 |
| Support 1 | 1.3000 | 1.5500 | 80.00 | 0.9500 | 0.9950 | 0.9600 | 0.6850 | 103.80 | 125.00 |
| Support 2 | 1.2925 | 1.5300 | 75.00 | 0.9000 | 0.9700 | 0.9375 | 0.6585 | 100.00 | 119.00 |
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT
| Currency | USD/MXN | USD/TRY | USD/ZAR | USD/HKD | USD/SGD | Currency | USD/SEK | USD/DKK | USD/NOK | |
| Resist 2 | 14.4500 | 1.6755 | 8.7915 | 7.8165 | 1.4945 | Resist 2 | 7.7500 | 5.7800 | 6.2750 | |
| Resist 1 | 13.8500 | 1.5125 | 8.3675 | 7.8075 | 1.4655 | Resist 1 | 7.5800 | 5.5400 | 6.1150 | |
| Spot | 12.3946 | 1.5055 | 6.8361 | 7.7782 | 1.3036 | Spot | 6.8377 | 5.5642 | 5.9201 | |
| Support 1 | 12.0500 | 1.3665 | 6.6950 | 7.7490 | 1.2750 | Support 1 | 6.4500 | 5.2625 | 5.7030 | |
| Support 2 | 11.7200 | 1.3475 | 6.4300 | 7.7450 | 1.2500 | Support 2 | 6.1250 | 5.1000 | 5.5200 |
INTRA-DAY PIVOT POINTS 18:00 GMT
| Currency | EUR/USD | GBP/USD | USD/JPY | USD/CHF | USD/CAD | AUD/USD | NZD/USD | EUR/JPY | GBP/JPY |
| Resist 2 | 1.3589 | 1.6005 | 84.86 | 0.9929 | 1.0150 | 1.0080 | 0.7650 | 112.90 | 133.65 |
| Resist 1 | 1.3492 | 1.5937 | 84.14 | 0.9804 | 1.0113 | 1.0022 | 0.7604 | 112.32 | 133.01 |
| Pivot | 1.3338 | 1.5828 | 83.62 | 0.9726 | 1.0070 | 0.9928 | 0.7531 | 111.49 | 132.41 |
| Support 1 | 1.3241 | 1.5760 | 82.90 | 0.9601 | 1.0033 | 0.9870 | 0.7485 | 110.91 | 131.77 |
| Support 2 | 1.3087 | 1.5651 | 82.38 | 0.9523 | 0.9990 | 0.9776 | 0.7412 | 110.08 | 131.17 |
INTRA-DAY PROBABILITY BANDS 18:00 GMT
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| Currency | EUR/USD | GBP/USD | USD/JPY | USD/CHF | USD/CAD | AUD/USD | NZD/USD | EUR/JPY | GBP/JPY |
| Resist. 3 | 1.3583 | 1.6041 | 84.42 | 0.9794 | 1.0183 | 1.0107 | 0.7668 | 113.40 | 134.23 |
| Resist. 2 | 1.3536 | 1.5997 | 84.17 | 0.9765 | 1.0156 | 1.0071 | 0.7641 | 112.99 | 133.76 |
| Resist. 1 | 1.3490 | 1.5954 | 83.92 | 0.9736 | 1.0129 | 1.0036 | 0.7614 | 112.57 | 133.29 |
| Spot | 1.3396 | 1.5868 | 83.41 | 0.9678 | 1.0075 | 0.9965 | 0.7559 | 111.74 | 132.36 |
| Support 1 | 1.3302 | 1.5782 | 82.90 | 0.9620 | 1.0021 | 0.9894 | 0.7504 | 110.91 | 131.43 |
| Support 2 | 1.3256 | 1.5739 | 82.65 | 0.9591 | 0.9994 | 0.9859 | 0.7477 | 110.49 | 130.96 |
| Support 3 | 1.3209 | 1.5695 | 82.40 | 0.9562 | 0.9967 | 0.9823 | 0.7450 | 110.08 | 130.49 |
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Written by: John Kicklighter, Currency Strategist for DailyFX.com
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