Overnight Asia/Europe
• Equities firmer overnight; underpin EURO
• China announces stimulus plan, USD falls
• Commodities higher also helping the Majors
Today’s Economic Reports
All times EASTERN (-5 GMT)
• Tentative USD Assist Treasury Sec Kashkari Speaks
Light day for US news—expect two-way action.
Looking Ahead to Tuesday
All times EASTERN (-5 GMT)
• 10:00am USD IBD/TIPP Economic Optimism
• All Day USD Bank Holiday—Veterans Day
US data continues light tomorrow.
Summary
The USD opens New York mixed after a quiet two-way overnight session aided by non-USD cross spreading; minor economic news helped to underpin the majors as the week gets underway. Overnight China announced a large economic stimulus plan and “appropriate measures” to be taken in order to continue China’s record expansion; traders note that most of the Asian currencies were slightly weaker against the Yen and USD on the news. Equities rallied in Asia as well taking their cue from the news despite ongoing concerns of global recession; Wall Street is expected to open firmer today as well likely due to spillover effects from European bourses which are mostly higher as well. USD/JPY is the only pair holding gains this morning as demand for Yen continues; high prints at 99.49 are still below major topside pressure around the 100.00 area but traders note solid offers are likely waiting. Low prints in the rate at 98.65 so far unchallenged in early New York leaving a narrow range to start the week. Traders note reserve-manager buying of EURO/GBP today helping to lift the EURO today; higher oil and gold pricing also underpinning the rate today; high prints so far at 1.2928 with the rate firm at 1.2900 area to start New York. Traders note that EURO has stops likely building above the 1.2950 area with resistance around 1.3000 making for a potential top to start the week. GBP is solidly two-way but holding some lift from spillover in EURO; high prints at 1.5886 before sellers emerged putting the pair into the 1.5780 area in early New York. Traders note solid sales by Russians at the highs helping to cap the rate on the rally. In my view, the majors are continuing to consolidate their recent dip lower as the flight to quality USD buying appears to be mitigating. Although world credit conditions are still very tight it is beginning to show signs of loosening enough for traders to begin seeing reasons to let loose of extra USD perhaps. The majors are likely to remain in two-way trade until the end of the year as traders digest both the economic conditions as they are as well as what the new US President will bring to the table initially. In my view, the USD is setting up to decline as the US economy is likely in recession with little to do to help without a significant new stimulus. What has been done will take time to filter into the system and new plans will take time as well. Until then, the Greenback is likely to remain range bound to lower as traders attempt to make sense of the potential speed of the recovery.
GBP/USD Daily
Resistance 3: 1.6320/30
Resistance 2: 1.6250
Resistance 1: 1.6100/10
Latest New York: 1.5795
Support 1: 1.5520/30
Support 2: 1.5500
Support 3: 1.5420
Comments
Cross-spreaders on the sell side of the sterling pairs kept the rate under pressure overnight; rate firm against USD in two-way action. Stops noted on the move back through the 1.5800 area on the way higher with offers mixed in; resistance at 1.6000 likely to cap near-term. UK PPI data was weaker but not as bad as expected; likely more bad news also due this week which will pressure calls for another BOE rate cut next month. Traders note unwinding of Yen cross-spreads driving a lot of trade after the open. Traders note liquidity is only moderate and still on the lower side. Aggressive traders can look to buy the next dip. Expect more whippy action. Two-way action likely to continue.
Data due Tuesday: All times EASTERN (-5 GMT)
4:30am GBP Trade Balance
4:30am GBP DCLG HPI y/y
EURO/USD Daily
Resistance 3: 1.3200/10
Resistance 2: 1.3150
Resistance 1: 1.3030
Latest New York: 1.2900
Support 1: 1.2520/30
Support 2: 1.2500
Support 3: 1.2480
Comments
Short squeeze likely over if the rate can trade 1.3000 handle this week. Expect a rotation lower as the rate continues to consolidate in two-way action. Traders note large stops at the 1.2950 area with more over 1.3000 but offers likely to cap on first try. Russians buying EURO around the 1.2860 area last week traders say; offers from same likely were seen in GBP this morning. Bids on dips from profit-taking shorts some desks report. Rate possibly getting spillover effect from GBP and vice-versa suggesting both pairs may track each other near-term. Support also from cross-spreaders as they unwind Yen. Official interest noted traders say. Rate is an absolute screaming buy in my view—I can’t see further weakness being ignored by the buyers. Additional Oil rally likely will take EURO with it. Expect more two-way action with upside bias; traders note the rate is finding profit-taking bids on dips so far despite the uncertainty in the market.
Data due Tuesday: All times EASTERN (-5 GMT)
All Day EUR French Bank Holiday
2:00am EUR German WPI m/m
5:00am EUR German ZEW Economic Sentiment
5:00am EUR ZEW Economic Sentiment
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Analysis by: Forexpros.com – Written by Jason Alan Jankovsky
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