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Forex: Dollar Analysis Update 18th Nov

November 18, 2012 in Forex Articles

Dollar Index Analysis Update, (Forex FX) 18th Nov

  • The US dollar index ended the week trading just under a key near term technical level comprised of the following tech elements: previous support from June, the 50% retrace of 72.69 – 84.1 and the highlighted FE 161.8 extension area.
  • Large Forex/FX futures speculators were net long the US dollar, as of last Tuesday, when referencing the latest commitment of traders report from the CFTC.  This key group held an aggregated $320 million in bearish wagers against the USD last week; by contrast the large specs are now holding a $3.1 billion net USD long FX position.

Forex FX, currency market analysis update, 18th November 2012.  

Dollar Index D1 – (figure 1)

forex fx dollar

 Dollar Index D1 – (figure 2)

forex fx 4x dollar index weekly

Aussie’s Fall – Combination Of New Leadership At People’s Bank Of China And Drop in Inflation

November 15, 2012 in Forex Analysis

Australian Dollar fell strongly against U.S. Dollar during past 15 hours after failing below 1.0500 psychological level.

AUD/USD's fall


Uncertainties About New Economic Leadership in China

Indications from China that the China’s central bank i.e. People’s Bank Of China (PBOC) will undergo a leadership change and the current Governor of PBOC Zhou Xiaochuan will be retiring.

The possible candidates of the position are considered to be:

  • Shang Fulin (Head of China’s Bank Regulator)
  • Guo Shuqing (Chief Securities Regulator)
  • Jiang Jianqing (Chairman of Industrial & Commercial Bank of China)
  • Xiao Gang (Chairman of Bank of China)

It is also indicated that Wang Qishan who is the the Vice Premier and in-charge of economic, energy and financial affairs will take up new role.

The decision about change in the leadership of the Politburo Standing Committee which is the supreme decision making body of People’s Republic of China is scheduled to come out today.

Events of China affect the Australian Dollar very much and the uncertainties because of the change in leadership are evident in the fall of AUD/USD.

Inflation And Other Reports From Australia

Consumer inflation expectation for November showed a decline to 2.2% against the October’s 2.6%. That signals that no immediate interest rate hike is expected. The new motor vehicle sales report for October which is released today showed a decline on year on year basis to 8.6% from the previous 14.4%. The month on month change was also less at -2.8% from the previous 4.6%.

The Australian Dollar fell to 1.0347 before recovering a bit to 1.0381 at GMT 03:34. Further weakness in the AUD/USD can be expected today as the pair failed to test the 1.0500 level during the recent recovery.

Austerity Measures And Strikes And Unrest in Europe

November 14, 2012 in Euro Zone

austerity measures and strikes in spainThe second general strike of the year was called in Spain, demonstrations, partial strikes across Portugal, Italy and Greece and the unions of workers across Europe falling in line for bigger coordinated protests.

Effects Of The Second General Strike

It was estimated that the number of auto workers working in the night shift who joined the strike were some where between 50 to 100%. Over 80% of the metal workers and over 70% of teachers also joined the forces. 50% of the workforce in healthcare sector is estimated to have boycotted the work.

While the drop in the electricity consumption at 12% due to the drop in the production and overall work was much less than the previous general strike  when it was approximately 22% but the growing unrest of the public against the severe austerity measures is evident.

Economic Outlook

The unemployment rate has gone up in Spain by 26%. This is slightly higher than Greece’s 25.4% in this 5th largest economy of European Union with the second highest budget deficit. The budget deficit of Spain in 2011 was slightly higher than 8.5% of the GDP against Greece’s 9.4%.

The Spanish economy has been in recession since 2008 with the GDP growth rate going down.

Spanish GDP Growth Rate

Spanish GDP growth Rate

Though the austerity plans should help government in bridging the gap between spending and revenues to bring the budget deficit in the reasonable and acceptable level as a percentage of GDP but on the other hand the growing unrest and loss of productivity is hurting the GDP.


GBP/USD Broke Below The Trend Line Support

November 14, 2012 in Forex Analysis

Since the end of May 2012 to Middle of August 2012, GBP/USD had remained in a very volatile sideways range. The price action had broken over that range strongly in August and market had witnessed a very strong upward move for the currency pair. The price had gone as high as 1.6309 which was slightly above the previous high of 1.6301. The break of 1.6301 had given the hopes for further gains but the momentum could not sustain and a strong fall took place.

During all this price action of the earlier volatile moves and then the upward jump, a support trend line had been taking place. The recent moves broke that support line. The price is even sustaining below the same and that surely indicates the built up bearish pressure and bearish outlook.

GBP/USD Weekly Chart

GBPUSD Breaks below the trend line

What is next for GBP/USD?

The 50% retracement is close to 1.5780/1.5785 range. The weekly chart below shows that level but the next chart shows the price action when a similar break of the trend line took place last time.

50% Retracement:

GBP/USD 50% retracement

Price Action After The Previous Break

GBP/USD's previous break of trend line support

The facts that the move could not sustain the previous high and the subsequent fall followed by the break of this mid-term trend line may bring some serious deeper moves. We need to wait and watch.

Today’s Economic Events And The Age Old Game of Technical Indicators

November 14, 2012 in Forex Analysis

USD/CHF has been continuously failing for past 4 days at or below 200-day Moving Average resistance. Out of these 4 days, 3 days made us witness the classical example of 200-day moving average power when the currency pair failed just after touching that level.

Similar pattern has been with EUR/USD where the pair kept on finding support at it’s 200-day moving average for past 2 days.

Today is a day of some important economic events. Before  going to what is on plate today, the current daily chart of both the currency pairs are as follows:

USD/CHF Failing At 200 Day Moving Average

USD/CHF failing at  200 day moving average resistance

EUR/USD Gaining At 200 Day Moving Average

EUR/USD gaining at  200 day moving average support

Today’s Economic Events:

European Monetary Union and Switzerland:

  • Europe: Both year on year and month on month change in the Industrial Production will be released at 10:00 GMT today.
  • Switzerland: ZEW Survey report for expectations is scheduled to come out at the same time i.e. GMT 10:00 today.


  • Producer Price Index reports will be released at 13:30 GMT.
  • At the same time i.e. at GMT 13:30 we will also have Retail Sales reports.
  • At 15:00 GMT U.S. Census Bureau will release the data for monthly percentage change in business inventories with manufacturers, wholesalers and retailers. This report does not cause major moves but in an uncertain market  every report is important.
  • The most important event for today from U.S. is the FOMC (Federal Open Market Committee) meeting’s minutes of one of the 8 meetings held annually. market will be waiting for these minutes to see the reviews of current financial and economic conditions and monetary policies for the future economic growth and stability of prices. FOMC meeting minutes are due at GMT 19:00.

What to Expect From These Currency Pairs with Strong Negative Correlation:

The way 200-day EMA has been proving to be a resistance for USD/CHF and support for EUR USD during recent days, calls for some consolidation. Overall any consolidation for USD CHF up to 0.9500/0.9410 would be natural. Similarly EUR/USD may consolidate towards 1.2790 or even 1.2835/1.2840.

For both these currency pairs such consolidations may be taken as normal with the expectation of another fall. However any decisive breaks of these levels may change the short-term outlook for some time.

Today especially FOMC meeting may cause some increased volatility.

Greece Gets 2 More Years – Clouds Of Questions Against The Ray Of Hopes

November 14, 2012 in Euro Zone

Another compromise reached in Brussels when European finance ministers met to discuss the ongoing Greece rescue issue. Options have been only two! To risk the Greece to default or compromise on the rescue terms? The latest compromise has been to grant Greece 2 more years i.e. up to 2016 for bringing down the budget deficit to the permissible level of 2% of GDP.

Greece GDP and Budget Deficit

In 2011 the nominal GDP of Greece was Euro 208.532 billion and GDP considering the purchase power parity was Euro 234.383 billion. The budget deficit as percentage of GDP in 2011 was 9.5%. During the first 10 months of 2012 the state budget deficit was estimated to be Euro 12.29 billion and was little better than the target of Euro 13.57 billion. But if we consider it on pro-rata basis then Greece may end up with a budget deficit of near close to 7% in 2012. The target for this year is 6.6% and for next year i.e. 2013 the target of budget deficit is 5.2% of the gross domestic product.

Greece Austerity Measures and Side Effects

On one side the austerity measures and spending cuts will help in reducing the budget deficit but on the other hand it leaves us with the questions about the effects of budget cuts of the contraction of economy and overall employment. The unemployment of Greece has already crossed over 25% to 25.4%.

Greece Unemployment Rate

Greece Unemployment Rate - Historical data

The chart shows that continuously increasing unemployment rate in Greece. The budget cuts are surely not going to help this growing rate of unemployment and hence the cyclic negative impacts on the economy.


Chinese Yuan At 19 Years’ High

November 13, 2012 in China

Chinese Yuan hit the 6.2262 mark today against 1 dollar in Shanghai today. This is the highest level in past 19 years and reflects the improved confidence in the economy’s growth prospects.

CNY Versus U.S. Dollar – Historical Price Action


Chinese Yuan vs US Dollar - Historical rates

The Chinese currency was pegged to U.S. Dollar till 2005. In 2005 the Yuan was allowed to float against U.S. Dollar as well as other currencies but not freely. The earlier narrow range for permitted float in Yuan’s exchange rate of 0.5% was raised to 1% during April 2012. What it means that Yuan can fall or rise by maximum 1% during a single day’s trading.

During 2011 the total appreciation of Chinese Yuan was 5% against the U.S. Dollar.

Strong Yuan and Chinese Exports and Imports

A strong Yuan shows the improved confidence in economic growth but on the other hand makes Chinese exports costlier and is not good for the Chinese industrial sector. The Chinese imports will become cheaper and that is good for major exporting nations like Australia’s mining sector.

USD/CHF Facing Resistance At 200-day Moving Average

November 13, 2012 in Forex Analysis

USD/CHF had broken the barrier of 200-day moving average support on September 11th. Before that the currency pair had been over this level since May 2nd,2012 i.e. for four and a half months. After being under this resistance the pair is testing this resistance now after a gap of approximately 2 months.

USD/CHF Daily chart

USD/CHF testing 200 day moving average resistance

USD/CHF – What to Expect:

The combined force of two resistance namely 200-day MA and the psychological 0.9500 level is present at the current level. It may keep the currency pair in some sideways mode for some time and even bring some consolidation but till the supports first near 0.9465 and then 55-day EMA, now near 0.9410, hold, the currency pair should try to test 0.9600 level.


Australian Dollar – Stuck Up With The Push and Pulls

November 13, 2012 in Forex Analysis

AUD/USD remains in the short-term pricing channel since the beginning of October and without showing the signs of any good volatility. The price generally has been finding support near the 55-day EMA and well above the 220-day moving average. On October 23rd when it fell strongly to break 55-day EMA support, the support came just below 22-day moving average.

AUD/USD - recent price action

Australian Dollar, being a commodity currency fluctuates greatly with the total global economic outlook and also from the economic outlook from China.

The Push – China Economic Data

The recent economic data from China has been generally encouraging. The Chinese exports grew in October by 11.6% which was much better than the market estimates of 10%.

Though Copper imports fell by 16%, on year on year basis, in October but the Oil and Iron Ore imports rose 14% and 13% respectively. This reflected in the consecutive 5th weekly rise in the iron ore prices which went up to US$ 122 per metric ton.

The electricity generation rose to 397.5 billion kWh which was 6.5% rise on year-on-year basis and that reflected in the rise in coking coal prices. The increase in coking coal price was  4.7% during the last week when it went up to US$ 157 per metric ton.

Australian Dollar and Chinese Data

Iron ore contributed to 20% of total Australian exports during the last year. Any increase in the demand and prices go straight in favor of the Australian Dollar. Coal contributed 15% of Australian exports in 2011 and the rise in demand and prices are again being reflected in keeping the AUD/USD well abobe 200-day moving average and also 55-day EMA.

iron ore spot prices newcastle coal prices

*Source: ANZ Research (

The Pull – Euro Zone

The ongoing Greece bailout uncertainties have been keeping the market sentiments mixed for long and the recent cut down of the growth forecast of Euro zone for 2013 added to the overall bearish side of the sentiments. European commission has cut down the growth forecast from previous 1% to 0.1% for 2013. The growth forecast fro Germany was also cut down to 0.8% from 1.7%.

What do we have today:

Yesterday’s home loans data came out poor from Australia. The change in home loans dropped to 0.9% in September from the previous 1.8%. The market estimates were for a change of 1%.

Today we have ZEW economic confidence survey reports from European Monetary Union as well as Germany. ZEW reports are scheduled to be released at GMT 10:00. We also have Monthly budget estimates from the U.S. to be released at GMT 19:00. Westpac Consumer confidence report from Australia is scheduled at GMT 23:30 today.

Any unexpected data from the above may cause a change in the volatility of AUD/USD to higher side. If that does not happen that the pair may keep the same pace under the psychological level of 1.0500.

Chinese Economic Data – Encouraging Signs

November 12, 2012 in China

With the Japanese and the Euro-zone economies in the doldrums, and the fragile economic recovery in the US in grave danger from the ‘fiscal cliff,’ the fast-developing economies out of Asia will probably do the heavy lifting as far as global growth is concerned.

The Chinese economy has been a powerhouse of growth this decade, but of late there have been troubling signs of a slowdown in growth. The economy contracted over the last seven quarters on the trot – with growth down to a low (for China) 7.4% during the September quarter. Chinese policy-makers responded by implementing growth-oriented policies over the recent months, such as the lowering of the benchmark interest rate (twice) and reduction in the reserve requirement ratios (also twice).

In this backdrop, the recent economic data out of China has been comforting, to say the least.

October Exports

China delivered a resounding beat on estimates of its export performance for the month of October. Exports grew 11.6 % whereas analysts expected only 10% year-on-year.  This was the fastest rate of growth seen in five months.

The data led analysts to jettison fears of a ‘hard landing’ for the Chinese economy, and crank up their estimates for growth during 2013.

October imports

Imports by the Chinese economy were flat at 2.4% on an annual basis, and missed economists’ expectations of 3.2%. Interestingly, higher imports of agricultural products such as corn and edible oil counterbalanced declining imports of iron ore.

October trade balance

Higher exports and unchanged imports led to the trade surplus increasing to $31.99 billion compared to the previous reading of $27.67 billion and the $27.15 billion expected. This is the highest trade surplus recorded since January of 2009.

Consumer Price Index (October 2012)

China’s main gauge of inflation, the Consumer Price Index fell in October to 1.7% on an annual basis, the lowest reading seen in 33 months. The reading was down from 2% in August and 1.9% in September. The main reason for the fall was apparently food prices, which showed a lower trend.

The declining trend in inflation is an encouraging sign for the economy, as it strengthens policymakers’ hands in the pursuit of growth by lowering the interest rate regime, or other monetary easing or incentive measures.

Controlled inflation probably led to the People’s Bank of China pumping in a record amount of cash flow during the week ended November 1. Using repo operations the bank injected 379 billion Yuan as additional liquidity, an all-time weekly high, into the economy.

Producer Price Index (October 2012)

Chinese inflation at the wholesale level is measured by the Producer Price index. For October the PPI showed a fall of 2.8% on an annual basis compared to 3.6% in September. This was the eighth consecutive month for a decline in the PPI. However, since the rate of decline appears to be slowing, analysts are of the view that the economy may now be stabilizing. A declining wholesale inflation is also positive for the economy.

Fixed Assets Investment (October 2012)

Chinese fixed asset investment climbed 20.7% year-on-year to 29.25 trillion Yuan (about US$4.6 trillion). This was better than analysts’ expectations of 20.6% and the previous reading of 20.5%. The rising investment trend is a plus point for the economy

Industrial Production (October 2012)

After printing 8.9% in August, and 9.2% in September, the Chinese economy reported a heartening industrial production reading in October of 9.6% growth, beating expectations of 9.4%. This is likely evidence that the economy may have bottomed out after the downward trend seen over the last three years.

Retail Sales (October 2012)

In another encouraging sign of strength in the domestic economy, Chinese retail sales during October increased 14.5% compared to the same period last year, to 1.89 trillion Yuan and was the highest seen since March. Interestingly, the growth was more or less even between the urban and rural sectors – urban consumption rose 14.5% whereas the ruler population consumed 14.8% higher.

China Central Bank Outlook

The Chinese central bank reviewed the economy at its third-quarter monetary policy meeting and said, “Current economic and financial operations have shown signs of stabilizing and consumer prices are basically stable.” The statement of the bank also said it would continue to use monetary means for growing credit in the economy at a reasonable pace, and in line with objectives of social financing. However, it expressed concern over the likely import of inflation due to the massive monetary easing measures in the US and European economies. In sum the bank said, “We will continue to implement the prudent monetary policy, make it more targeted, flexible and forward-looking, while fine-tuning it according to the economic situation development.”

China – What to Expect

Looking at the above data trend, it does appear that the Chinese economy may be turning around, slowly, just like a huge tanker that takes a while to change course in the other direction. Rising exports, manufacturing and retail spending in an environment of relatively flat inflation and a dovish central bank stance lead us to the hopeful conclusion that China may yet return to its normal growth levels and lend a hand supporting global growth.

Japan Gross Domestic Product Declines Further

November 12, 2012 in Japan

Keeping the trend of recent poor economic data, today’s economic releases showed that the Annualized Gross Domestic Product fell in Q3 more than the expectations. The preliminary report showed a drop of -3.5% against the 0.7% rise which took place in Q2. The expectations were for a drop of -3.4%. The quarter on quarter change in the GDP also fell in Q3 to -0.9% which was in line with the consensus but quite less than the Q2’s change of +0.2%.

Tertiary Industry Index:

Today’s reports showed that the month on month change in Tertiary Industry Index in the month of September was 0.3% and was better than the expectations that September will see no change. However this change was less than the positive change seen in the month of August which was 0.4%.

Global and Local Economic Disturbances:

Adding to the impacts which the uncertainty in the Euro zone is causing globally, Japan has been having their own local issues and somehow the cycle is not stopping. Be it last year’s tsunami or the recent tensions with China and Korea about the disputed ownership of the islands in the East China sea and Sea of japan respectively.

On one side when the issues continue, a very strong yen is adding to the damages. Last week’s economic releases showed that the machinery orders fell to an unexpectedly  low level in the month of September. The year on year change in the machinery orders was -7.8% while the expected drop was -4.9%, against the drop of -6.1% in the month of August.

Apart from the current poor data, there are undercurrent which may not be showing the negative results immediately but we may witness the impacts after some time.  China contributes to 12% sales of Toyota, 27% of Nissan and 20% of Honda. Toyota might have raised the forecast of net profit for the current Japanese financial year ending in March 2013 to 780 billion Japanese yen (approx. US$ 9.75 billion) but the real impact of already dropping sales in China due to the disputes and disturbances may show up later.

All these car makers have already cut down their forecasts for China business but gradually the impacts will become greater as they start affecting the ancillary units and automobile part makers in a bigger way.

Gold Update WC 12th November

November 11, 2012 in Trading with Other Commodities

Gold Update WC 12th November

Gold Technical Analysis – Gold finished the week close to the $1730 per oz mark on Friday, after scaling to highs around $1738.71, a two-week high for the precious metal. A risk aversion tone dominated throug the week with the SPX (S&P 500 index which is often seen as a barometer for risk) experiencing its worst weekly percentage basis drop since June. The S&P 500 printed a decline of 2.4% over the week.

gold chart november 12thBroad based dollar strength (see our latest dollar index update) has been found this past week, which would often signal a decline for gold. However, gold bullion has recorded the first weekly basis gain since early October, and increased in value by over 3%.

Inflows into Gold ETFs have come in at over 10.5 tonnes over the last three trading days alone. Interest in gold exchange-traded funds has picked up recently as the ultra-loose monetary policy from central banks, with an associated debasement of currencies, remains a key focus for the investing masses; as does the fiscal cliff and European debt crisis.

gold technical analysis
Any news, opinion, analysis, price quote or any other information should be taken as general market commentary only and not as advice to trade on. Omissions and errors may occur. Be safe.
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