We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
GBP/USD
Mixed
USD/JPY
Bearish
Gold
Mixed
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Bitcoin
Mixed
More View more
Real Time News
  • $EURUSD rises to highest level since February 13th https://t.co/GtJfVWdSXg
  • Switzerland government says coronavirus risk is moderate - BBG
  • Trader confidence continues to suffer from the spread of the #coronavirus and its possible impact on the global economy. Get your market sentiment update from @MartinSEssex here: https://t.co/4a4RXyK4Wy https://t.co/3ci3Fptn8r
  • There's always a bull market somewhere? Oct 2018 - 10y yield at 3.25% Feb 2019, a year ago, 10y at 2.7% This morning the 10y touched down for a test of the all-time-low at 1.33% Rates come at ya fast https://t.co/N7yqi0AMAM
  • Forex Update: As of 15:00, these are your best and worst performers based on the London trading schedule: 🇬🇧GBP: 0.56% 🇯🇵JPY: 0.56% 🇨🇭CHF: 0.27% 🇪🇺EUR: 0.04% 🇦🇺AUD: -0.09% 🇳🇿NZD: -0.27% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/voDtKYTgzL
  • $EURUSD threatening a deeper reversal as an ascending triangle has built, short-term. Get your EUR/USD technical analysis from @JStanleyFX here: https://t.co/qmGzD3rbOZ
  • Indices Update: As of 15:00, these are your best and worst performers based on the London trading schedule: Wall Street: -0.37% US 500: -0.42% Germany 30: -1.26% France 40: -1.36% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/zQL4nNXJsy
  • $SPX < 3,200
  • Commodities Update: As of 15:00, these are your best and worst performers based on the London trading schedule: Gold: -0.48% Oil - US Crude: -1.02% Silver: -1.49% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/fuN1JsPmS0
  • $EURUSD resistance has held thus far. But higher-lows coming in, setting up an ascending triangle this is similar to the backdrop in USD in early-Jan, just before the bullish reversal came in - discussed here at the time https://www.dailyfx.com/forex/market_alert/2020/01/07/correction-conundrum-in-the-us-dollar-eur-usd-usd-cad-aud-usd-js57.html https://t.co/uze2m6I5y7
Dollar Shrugs off NFPs, Critical Time for Risk Trends Ahead

Dollar Shrugs off NFPs, Critical Time for Risk Trends Ahead

2011-12-03 06:00:00
John Kicklighter, Chief Currency Strategist
Share:
  • Dollar Shrugs off NFPs, Critical Time for Risk Trends Ahead
  • Euro Facing a Definitive EU Decision and ECB Rate Decision
  • Australian Dollar Virtually Guaranteed Volatility Between Risk Trends and Event Risk
  • New Zealand Dollar Traders Look for Hawkish Sentiment to Come with a Time Frame
  • British Pound won’t Settle for a BoE Hold with European Financial Stability at Risk
  • Gold will Change Gears Should EU Summit Clear the Way for Speculators

Dollar Shrugs off NFPs, Critical Time for Risk Trends Ahead

The Dow Jones FXCM Dollar Index closed out its first weekly decline in three weeks as risk appetite posted an impressive climb over the same period. Just as with this past week, where the greenback heads moving forward is not a consideration of the currency’s own fundamentals. The dollar remains tapped into the underlying currents in market-wide investor sentiment and capital allocation. In other words, where goes risk appetite, the world’s reserve will move in the opposite direction.

That said, it is important to assess the quality of the impressive bull run for risk trends that prevailed last week. As my colleague Christopher Vecchio noted in the Real Time News feed, the S&P 500 enjoyed its 10th largest weekly run since 1950 following the worst Thanksgiving-week performance going back to 1932 all while the VIX Volatility Index held below the 30 percent mark that has more or less represented the floor for the activity gauge over the past three months. This is the epitome of a “melt up” scenario – a rally that is founded on speculators’ need to jump in so as not to miss the move rather than a true fundamental improvement. Feeding our skepticism should be the fact that the bulk of this performance occurred due to the coordinated effort to thaw liquidity for US dollar credit lines by the Fed and five other central banks. However, it is worth noting that while the benchmark stock index responded directly to the intervention effort; the euro (the European financial markets was arguably the target of this effort) moved little in the aftermath. The overriding fundamental bearing for the world’s economy and financial markets is bearish; so these policy efforts are essentially fighting against the current.

When the elemental changes in speculative positioning is at stake, standard economic event risk does not cut it for determining trend and momentum. The November labor stats are a good example of this reality. A sharp drop in the unemployment rate to a two-and-a-half, 8.6 percent low is quickly interpreted for the influences of temporary hires for the season as well as the 315,000-person drop in the labor pool. This tells us that next week, dollar traders should keep their sights on the bigger themes. Friday’s EU Summit is the scheduled event that presents itself as the deciding factor for whether the European sovereign and banking financial crisis will spread or not (which would inherently buy time in the lead up); but we may actually be actually be active right out of the gate. German Chancellor Merkel and French President Sarkozy are expected to offer proposals to vote on at the Summit Monday. If these proposals fall short, investors won’t wait to unwind risk.

Related: Discuss the Dollar in the DailyFX Forum, John’s Video: Euro and S&P 500 Ready to Collapse if Latest EU Rescue Attempt Fails

Euro Facing a Definitive EU Decision and ECB Rate Decision

Buying time is what European officials are best at. However, each time they have tried to push meaningful decision making back by promising a solution at a later date or generally offering lackluster policy; the market has simply returned to its effort to move capital away from the imploding EU markets. We have seen four official rescue programs setup by European leaders and countless other smaller efforts (including last week’s coordinated swap line action); and each one has failed to curb fears. In fact, with each disappointment, concern that this is an untenable situation grows. As such, the stakes are even higher this time around. What should we expect in the promised reforms expected to be discussed at Friday’s EU Summit? The German and French proposals will offer us guidance. Given comments, a common Eurobond and setting the ECB as a lender of last resort still seems impossible. Simply promising fiscal convergence over the longer-term doesn’t solve near-term issues. Using the ECB to funnel funds through the IMF for bailouts is possible; but the suggested 200 billion euro figure is simply too small to solve this issue. Traders suspiciously await guidance.

Financial stability interests will certainly carry the week; but another factor could mute or exacerbate the euro’s reaction: the ECB rate decision. Both the market and economists expect another 25 basis point rate cut to offer relief. Its yield is one of the euro’s saving graces against the dollar. If President Draghi announces a cut this time and more to come; the air will be quickly let out of the bullish argument for this currency.

Australian Dollar Virtually Guaranteed Volatility Between Risk Trends and Event Risk

Though the euro has the lock up on market-wide influence; the Australian dollar will certainly face its own wave of volatility next week. At the top of the list we have the RBA rate decision. Like the ECB, the Aussie bank is expected to cut rates – a move that would certainly exacerbate any risk-off sentiment. This move is already largely priced in; so the issue is the pace of further action. Follow up drives to watch include the 3Q GDP and November employment figures. Will Australia remain above the global fray; or is it destined to fall into the same ditch?

New Zealand Dollar Traders Look for Hawkish Sentiment to Come with a Time Frame

In contrast to its fellow high-yield currency, the New Zealand dollar is not expected to suffer a dovish central bank decision. There is virtually no expected change from the RBNZ according to overnight swaps. However, Governor Bollard is vocal. Traders will look to ensure that he maintains his hawkish lean – a move that would close the gap with the Aussie rate (watch AUDNZD) and stabilize its risk bearing (NZDUSD).

British Pound won’t Settle for a BoE Hold with European Financial Stability at Risk

There will be perhaps a latent tinge of expectation surrounding the Bank of England policy decision; but the announcement will most likely be uneventful. Another increase to the bond purchasing program is likely in the near future; but the four-month time frame to work in the 75 billion sterling increase announced just a few months ago will likely encourage the group to take a wait-and-see approach.

Gold will Change Gears Should EU Summit Clear the Way for Speculators

Gold has been frustratingly quiet despite the clear trouble for the funding and credit markets. Risk appetite and risk aversion are not the fuel for this alternative store of wealth – doubt surrounding the viability or manipulation of government-backed financial assets is. Finding a definitive market sentiment for the European financial crisis with the EU Summit could finally unleash the precious metal. Be prepared.

For Real Time Forex News, visit: http://www.dailyfx.com/real_time_news/

**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar

ECONOMIC DATA

Next 24 Hours

GMT

Currency

Release

Survey

Previous

Comments

21:45

(Sun)

NZD

Value of All Buildings SA (Q3)

-6.6%

Falling demand cutting into real estate, keeping inflation in check

22:30

(Sun)

AUD

AiG Performance of Service Index (NOV)

48.8

Services index may weaken again

23:30

(Sun)

AUD

TD Securities Inflation MoM% (NOV)

0.1%

Inflation estimate showing much lower price growth; will weigh into RBA decisions

23:30

(Sun)

AUD

TD Securities Inflation YoY% (NOV)

2.6%

23:50

(Sun)

JPY

Loans & Discounts Corp YoY (OCT)

-0.7%

Still shows low credit in Japan

0:01

GBP

Lloyds Employment Confidence (NOV)

-72

Expected to drop despite easing

0:30

AUD

Company Operating Profit QoQ% (Q3)

6.7%

Profit higher, led by trade

0:30

AUD

Inventories (Q3)

2.5%

Investment spending still robust

2:30

CNY

China HSBC Services PMI (NOV)

54.1

Index expected to follow official

8:45

EUR

Italian PMI Services (NOV)

43.9

Final services indices all showing downward pressure; may continue on debt crisis fears

8:50

EUR

French PMI Services (NOV F)

49.3

8:55

EUR

German PMI Services (NOV F)

51.4

9:00

EUR

Eurozone PMI Composite (NOV F)

47.2

9:00

EUR

Eurozone PMI Services (NOV F)

47.8

9:30

EUR

Sentix Investor Confidence (DEC)

-21.2

Continuing to drop further

9:30

GBP

PMI Services (NOV)

51.3

British service sector growing slightly

9:30

GBP

Official Reserves (Changes) (NOV)

$1387M

Reserves higher on austerity

10:00

EUR

Euro-Zone Retail Sales (MoM) (OCT)

-0.7%

Lower retail sales could be indicator of CPI in coming months

10:00

EUR

Euro-Zone Retail Sales (YoY) (OCT)

-1.3%

15:00

USD

ISM Non-Manf. Composite (NOV)

53.5

52.9

Services spending expected to gain

15:00

USD

Factory Orders (OCT)

-0.4%

0.3%

Index has been fluctuating

SUPPORT AND RESISTANCE LEVELS

To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit http://www.dailyfx.com/technical_analysis

To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table

CLASSIC SUPPORT AND RESISTANCE

EMERGING MARKETS & SCANDIES CURRENCIES 18:00 GMT

Currency

USD/MXN

USD/TRY

USD/ZAR

USD/HKD

USD/SGD

Currency

USD/SEK

USD/DKK

USD/NOK

Resist 2

16.5000

2.0000

9.2080

7.8165

1.3650

Resist 2

7.5800

5.6625

6.1150

Resist 1

14.3200

1.9000

8.5800

7.8075

1.3250

Resist 1

6.5175

5.3100

5.7075

Spot

13.6542

1.8295

8.0632

7.7675

1.2853

Spot

6.7521

5.5484

5.7878

Support 1

12.6000

1.6500

6.5575

7.7490

1.2000

Support 1

6.0800

5.1050

5.3040

Support 2

11.5200

1.5725

6.4295

7.7450

1.1800

Support 2

5.8085

4.9115

4.9410

INTRA-DAY PROBABILITY BANDS 18:00 GMT

\Currency

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

NZD/USD

EUR/JPY

GBP/JPY

Resist. 3

1.3615

1.5790

78.83

0.9370

1.0320

1.0377

0.7906

106.27

123.34

Resist. 2

1.3561

1.5744

78.63

0.9331

1.0287

1.0333

0.7872

105.84

122.95

Resist. 1

1.3507

1.5697

78.43

0.9292

1.0255

1.0288

0.7838

105.41

122.55

Spot

1.3400

1.5605

78.03

0.9215

1.0190

1.0199

0.7770

104.56

121.76

Support 1

1.3293

1.5513

77.63

0.9138

1.0125

1.0110

0.7702

103.71

120.97

Support 2

1.3239

1.5466

77.43

0.9099

1.0093

1.0065

0.7668

103.28

120.58

Support 3

1.3185

1.5420

77.23

0.9060

1.0060

1.0021

0.7634

102.85

120.18

v

Additional Content:

Money Management Video

Trading the News Video

--- Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com

To contact John, email jkicklighter@dailyfx.com. Follow me on twitter at http://www.twitter.com/JohnKicklighter

To be added to John’s email distribution list, send an email with the subject line “Distribution List” to jkicklighter@dailyfx.com.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.