U.S. dollar: Time to shine as a European problem go everywhere

Fundamental Outlook for US-dollar: bullish
The Dow Jones FXCM dollar index (ticker: USDOLLAR) ended the week slightly lower on a sharp late week selloff, but earlier signs of life suggest that the dollar remains comfortably within its upward trend and to win in the coming weeks.
The US dollar open market Committee of the current tariff rallied strongly after the much-anticipated release of minutes from the US Federal decision, but a sharp Friday sale leaves the greenback slightly lower next week trading launched. A relatively limited schedule of economic event risk probably signals that the USD continues to trade from larger financial market sentiment. This is true in particular for the Australian dollar / US dollar pair and other commodity-linked currencies as $correlations to S P 500 & trade close to record strength. So higher specialized works will depend whether the dollar almost certainly of stock indices and other financial market sentiment the trajectory. Two important issues on international investors heads are pretty clear: the future of the US Federal Reserve quantitative easing (QE) and the current European fiscal and financial crises.
On the home front, USD bulls reacted positively to signs that the Fed struck a cautious note over the possibility of more QE in recent FOMC minutes. Greenback weakened considerably by 2009 on the first wave of QE and markets exactly QE2 expected in 2010 decreased. Give the US currency could back some of its recent gains on the future announcement of QE3. Still, the Fed stressed the caution that the next wave is a done deal, and the dollar could remain strong, as the Fed keeps the line on the further expansion of the balance sheet. To force across the Atlantic European fiscal and financial crises continue to significant financial market turbulence and greater risk appetite could be depressed about foreseeable. Credit rating agency of Moody's was to pour the latest gasoline in the fire, as it downgraded sovereign credit rating of Italy. The move itself was not surprising, but the timing of the downs seemed to catch many traders off guard. Italian Government, that 10-year quickly traded in towards the top of their several months reach responds yields as traders on the message. (Bond yields above, if the prices go down)
Instability in the third and fourth largest economies of the eurozone (Italy and Spain, respectively) is probably the most immediate threat to the euro as a currency. We keep a watchful eye on Italian and Spanish Government - returns since Spain is a 10-year craft dangerously close to the ultimate 7 percent in Friday of close. The safe harbor U.S. dollar is accordingly flare-ups in the European market will benefit from any tensions. The last sale starts in Italian and Spanish bonds (increase in income) stress that markets tense despite the recently presented Spanish bailout and others remain growth-oriented European action. Continuing turbulence favoured remaining long 'security' and short 'risk' - long US dollar and short euro.
Our shorter-term bias is clear, and we believe that the recent outbreak of the U.S. dollar may be only the beginning of a larger rally. However, much of dollar Outlook depends on whether S & P keeps the US 500 critical support levels. A breakdown of the financial risk of market sentiment would likely produce the US dollar rally what we have expected that. -DR

US Dollar Classic Technical Report 07.19.2012

19 July 2012 12:42 GMT Prices took out support at the bottom of what appears to be a Flag formation set from the June 20 low, hinting at downward continuation from here. Sellers are now testing through interim support at 10070, with a break of that exposing the 10010-32 area marked by the early April top and the 61.8% retracement. If fully realized, the Flag setup implies a measured target at 9935. The formation’s lower boundary, now at 10089, has been recast as near-term resistance.
Dow Jones FXCM US Dollar Index - Daily Chart - Created Using FXCM Marketscope 2.0

The Canadian Dollar Outlook Hinges On BoC Rate Decision, Policy Report

The Canadian Dollar Outlook Hinges On BoC Rate Decision, Policy Report
Analyst 14. Juli 2012 00:00 GMT 

undamentale Prognose für Gold: Baisse
Der kanadische Dollar gewann an Boden gegen Gegenstück U.S. inmitten den Rebound in Gefahr Gefühl kann, doch die Loonie zu behaupten die Bank of Canada einen vorsichtigen Ausblick für die Region Streik sollte nächste Woche. Das BoC Zinssatz Entscheidung das größte Ereignisrisiko für die folgende Woche zeigt, wie Gouverneur Mark Carney sich Spekulationen für höhere Fremdkapitalkosten spricht, aber Marktteilnehmer weiter können, zurück zu skalieren Wetten für eine Zinsanhebung die Staatsschulden-Krise weiterhin eine Bedrohung für die Region darstellen.
Tatsächlich Gouverneur Carney machte zahlreiche Versuche, auf den Datensatz Anstieg der Haushaltsverschuldung zu sprechen, und vielleicht sehen wir die Zentralbank Kopf weiterhin die Idee für eine mögliche Zinserhöhung inmitten Ängste vor einer Immobilienblase zu schweben. Obwohl wir Lichtblicke in der kanadischen Wirtschaft sehen, beschränkten die BoC Gesichter Bereich um das Normalisieren Geldpolitik inmitten der anhaltenden Turbulenzen in Europa. Dadurch können wir die Zentralbank seine warten-and-See-Ansatz in 2013 tragen sehen. In einer Umfrage von Bloomberg News Übernachtung alle der 22 Ökonomen Befragten Prognose BoC Zinssatz 1,00 % halten, während den Marktteilnehmern die Zentralbank Festhalten an seiner warten-and-See-Ansatz über die nächsten 12 Monate laut Credit Suisse finden Sie unter Index Swaps.
Zur gleichen Zeit werden wir genau verfolgt werden den vierteljährlichen geldpolitischen Bericht due out am 18. Juli wie die Zentralbank ihre aktualisierten Prognose für Wachstum und Inflation sowie den Bericht mein Highlight eine geschwächte Outlook für die Region präsentieren wird wie die USA – Kanadas größter Handelspartner – eine Verlangsamung Erholung steht. Wiederum die frische Charge der Zentralbank Rhetorik kann dämpfen die Beschwerde mit dem kanadischen Dollar, aber der Verbraucherpreis-Bericht vom Fass für Freitag erneuere Spekulation für höhere Kreditkosten wie die Kern-Rate der Inflation erwartet wird, um im schnellsten Tempo für 2012 zu erweitern. Als die USDCAD weiterhin über die 78.6 % Fibonacci-Retracement aus der 2007 halten, niedrig, die 2009 um hohe 1.0100-10, wir sehen weiterhin, dass das Paar eine kurzfristige Basis um die Kennzahl aufbauen und die technische Perspektiven flößt eine Hausse Voreingenommenheit für die Dollar-Loonie als der relative Stärke Index Pausen heraus von den Abwärtstrend. Wiederum eine ganze Reihe von Leitzinssenkung Kommentare von BoC einen anderen laufen bei 1.0400 auslösen kann, und frische 2012 Höhen des Wechselkurses können wir sehen, wie er sich ein höheres tief im Juli schnitzt. -DS
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14. Juli 2012 00:00 GMT

$ Dollar falls into weekend – character of What’s come Monday?

$ Dollar falls into weekend – character of What’s come Monday?
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Having worked so hard to finally overtake resistance that had capped bullish ambitions for an entire month, you’d think the dollar would have won some respite from the sentiment-based headwinds. That said, Friday ended with a sizable decline for the Dow Jones FXCM Dollar Index (ticker = USDollar) back below that closely-watched 10,190 level. Once again, we are reminded of the critical difference between a breakout and break with follow through. The immediate reversal from the greenback is perhaps a little more surprising given the initial move was supported by a general slide in risk trends. That said, when we are confronted with technical boundaries like the midpoint of the EURUSD’s historical range and the fact that there are few fundamental catalysts to actively drive capital towards safe havens that provide no (or even negative) yield, the lack of follow through becomes a little more comprehensible. Can we jump start a trend for the dollar – whether bullish or bearish?
If you were looking for fundamental cues from the fundamental event risk from the final 24 hours of this past week as guidance for where we will go heading forward, you may be disappointed. The Chinese 2Q GDP figures (setting the tone for global growth expectations amongst investors) printed below expected with a 7.6 percent annual pace of expansion – the weakest pace in three years but not enough of a surprise to stir concern. Closer to home, JPMorgan started the ball rolling for the US earnings season with a view into the closely-monitored financial market. A massive $4.4 billion loss via the CIO debacle didn’t seem to materially hamper adjusted earnings. As dubious as corporate earnings are (as a gauge for capital gains and yields for the equities market – the favored investment of retail trader), we cannot ignore it if the market is placated by the figures. The earnings season continues next week with Bank of American, Citigroup, Goldman Sachs, Apple and Google amongst other notables. Watch it with a mind to how the masses read the numbers. Though it is difficult to see any, individual fundamental event as a potential catalyst to truly drive risk appetite forward; Fed Chairman Bernanke’s monetary policy report will always carry the possibility of an announcement of intentions for further stimulus. To what degree markets are still holding out hope (and thereby possibly be disappointed) remains to be seen.
Euro Faces Another Round of Disappointment, May Still Rebound
The euro has dropped sharply over the past two weeks, so a correction is not difficult to wrestle from overexposed bears. From a medium-to-long term fundamental perspective, uncertainty and lack of a solid safety net for another wave of Euro panic leaves the currency and region exposed. Yet, we have seen far too many instances were underwhelming or incomplete efforts have bought the euro time - whether through an easily soothed Euro market or simply an improvement in underlying sentiment is debatable. The media and analysts punched holes in the EU Summit’s vows almost immediately after they were issued, but that baton seems to have been dropped. In the upcoming week, we will nevertheless be reminded of the situation. On Wednesday, the EU will release a report on the public finances of the Euro Zone; but the bigger headline will be Friday’s Finance Ministers meeting, where they are supposed to finally agree on Spain’s rescue terms and potentially touch on Greece and the bigger terms of using the ESM to participate in the ongoing stability effort. Though it doesn’t draw much immediate market reaction, it is also worthwhile to keep an eye on important bond auctions. Spain, Greece and Portugal are all on deck to sell debt; and the rates that they draw (more than the aggregate demand, which can be national banks) reminds us of the market’s expectations.
British Pound Receives a Significant Boost from BoE Lending Details
Though it was somewhat lost in the general advance for most risk-based currencies, the sterling managed to rally against everyone of its major counterparts – safe havens, high yield carry currencies and euro alike. Clearly there was an additional fundamental factor, and that came from the Bank of England. The policy authority issued details on its lending program whereby banks can borrow T-Bills to use as collateral for loans. The program could boost credit as much as 80 billion sterling. Next week, keep an eye on the BoE minutes and jobs figures.
Australian Dollar Looks to Sentiment as its Yield Continues its Drop
Wherever risk trends head, the Australian dollar will inevitably follow (the AUDUSD’s 20-day rolling correlation to the S&P 500 is currently 0.89 percent). That said, there will be a question as to whether the Aussie shows greater sensitive to a rise or a fall in sentiment. The RBA has already delivered a string of cuts against heavy projects of easing. There would imply that there is some relief available from over-extended dovish forecasts, but the 12 month rate forecast is actually heading lower again (now calling for more than 100 bps of cuts again). Furthermore, the benchmark 10-year Australian government bond yield is at 5-week lows – very near the record low set in early June.
Canadian Dollar: BoC Rate Decision on Tap, Reminder of Loonie’s Unique Position
It seems that whenever there is a lull in serious calendar event risk, that the Canadian dollar steps in to fill the void with its own offerings. That will be the case in the coming week. On deck we have a few important readings. The Bank of Canada’s rate decision carries the most flash. Though they won’t alter policy, they will likely retain their neutral to hawkish lean that draws such a stark contrast to global counterparts (especially recently). The Monetary Policy report will follow shortly after along with an expected rebound in inflation pressures on Friday.
Swiss Franc: Bond Yields Plunge into Negative Territory, Will Investors Waver?
The yields on the short-end of the Swiss yield curve were already in negative territory, but the pressure significantly increased this past Friday. The 2-year note’s rate closed at -0.402 percent - a record low. Swiss authorities have repeatedly threatened negative interest rates as a further deterrent against an appreciating franc, but this is clearly not an option. That leaves a floor raise or capital curbs if they have to act.
Gold Rallies Against Euro, High Yield Currencies on Risk-Positive Session
A tumble for the US dollar is good enough reason for gold to find some traction, but to see the precious metal rally against higher yielding currencies is something else. For a risk-positive day, we would expect capital to move away from alternative stores of wealth and into something with higher (any) yield. Such a situation can often times be a sign that risk trends are flimsy and likely to fall apart.
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
Indicator of confidence in China’s economy
NZD Performance Services Index
CHF Industrial Production (QoQ)
Last month was the first retracement in a 3 month decline.
CHF Industrial Production (YoY)
EUR Euro-Zone Consumer Price Index - Core (YoY)
Many EU countries have already reports a decrease in inflationary pressure during June.
EUR Euro-Zone Consumer Price Index (MoM)
EUR Euro-Zone Consumer Price Index (YoY)
EUR Euro-Zone Trade Balance s.a. (euros)
Germany’s trade balanced declined during May.
EUR Euro-Zone Trade Balance (euros)
CAD International Securities Transactions (Canadian dollar)
June Vehicle sales beat expectation.
May Wholesale inventory growth rate slowed down.
USD Retail Sales Ex Auto & Gas
IMF to Release Updated Growth Forecasts
Q2 Earnings – Morgan Stanley and Citigroup
SUPPORT AND RESISTANCE LEVELS
To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal
To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT
INTRA-DAY PROBABILITY BANDS 18:00 GMT

US Dollar Breakout is Only the Beginning

12 July 2012 15: 41 GMT 
  retail forex trading crowds have aggressively sold into US dollar (ticker: USDOLLAR) rallies against the euro and British pound. Such one-sided sentiment gives contrarian signal that the EURUSD and GBPUSD may fall to fresh lows.
The Dow Jones FXCM dollar index now trades at monthly highs as the euro if to fresh multi-year lows, and our proprietary retail forex-based speculative sentiment index gives reason to expect further USD strength. Indeed, our technical forecast predicts that the USDOLLAR targets multi-year peaks on the broader greenback rally. We use our proprietary SSI data as a contrarian indicator. If crowds are aggressively long, price can and often will head lower in the opposite direction and trade. Our sentiment-based strategies have accordingly bought into USD strength against the euro, British pound, Swiss franc, Australian dollar, New Zealand dollar and Canadian dollar. We expect the US dollar may continue to strengthen through near-term trading.
How do we interpret and trade with the SSI? Watch on FXCM Expo presentation that explains the SSI.

: Stocks will fall, POPs dollar and Euro Hits 2-year low

“THE MARKET(S)” a.k.a. “RISK” – Weekly Bars


I’ve shown this chart for 3 weeks now (and similar charts since March) but it’s worth a look each week if for no other reason than to remind ourselves that decoupling is a myth; that capital markets remain USD centric and fluctuate with the expansion and contraction of USD denominated credit.
“The story being told by markets remains one of slowing global economic growth. Interest in the story is on the rise as key markets such as crude oil and copper approach multiyear support lines (head and shoulders necklines). The downward sloping neckline on crude portends an especially weak market (Some may take issue with this because these charts are of continuous futures, rather than spot. The crude spot market shows a much higher right shoulder and upward sloping trendline but does indeed show a multiyear topping pattern). Breaks of these long term supports will probably trigger the panic portion of the story in the coming weeks and months.
Of particular interest to FX traders is the emergence of topping patterns in both the Euro and Japanese Yen (Yen futures shown to correlate with EURUSD). Both currencies have been carving out topping patterns since late 2010. Viewed through this lens, it’s not out of the question that we’ll soon see a much stronger USD against both the Euro and Yen (and a more or less sideways EURJPY). Specific to the Yen, the divergence between the Yen (not a new record high) and 10 year Treasury note (new record high) remains in place and is characteristic of long term reversals.”
S&P 500 Index ETF (SPY)

Remember last Friday’s rally? The S&P traded below last Friday’s open today. Early in June, I suggested 2 topping dates based on common time relationships seen at previous tops. The dates were 6/21 and 7/3-7/4. I was confident that the top was in on 6/19 after the 6/21 drop but Ms. Market, always with a trick up her sleeve, had other plans. Once again, the information that I rely on (pattern, sentiment, momentum) suggests that a top is in place. I am more confident this time as the rally from June is 1 day removed from a 50% relationship in time with the decline from April, July’s opening range has been resolved to the downside (which was not the case in June), and daily RSI has rolled over after poking above 60. The only thing that worries me as a bear is sentiment. The mainstream media acts as if the world is ending each time the S&P falls 10 handles. Words like ‘crumble’ and ‘plunge’, usually in capital letters, populate the Twittersphere. This psychology is more consistent with bottoms than tops. By the same token, each 10 handle rally in the S&P brings out bullish prognosticators in droves. Maybe the extreme changes in sentiment over short periods of time presage drastic market moves. The thought fits the Elliott wave model in which the majority sells out at the wave 1 low (after 1-2-3-4-5 down) and gets caught turning bullish at the wave 2 high (after A-B-C up).
S&P 500 Index ETF (SPY)

The red dots indicate days when the market opens UP at least 1.8% and closes the day UP at least 2.5%. The conditions were met last Friday for the first time since December although last Friday is more similar to 10/27/11 in that both days took place one month after lows were registered. Near term focus is on the 6/25 and 6/4 lows about 40 and 85 handles lower. In general, such conditions are more likely to be met in bear markets (as the chart indicates).
US Dollar Index (ICE) Continuous Contract Weekly

I’m still following the 1995/96 USD model. IF the current market follows the 1995/96 model then expect weakness from near current levels. In the event that the current market starts to deviate significantly from the 1995/96 model, then I’ll abandon the idea.
US Dollar Index (ICE) Continuous Contract Daily

The relationship between the US Dollar Index in 1995-1996 and now was pointed out to me by ElliottWave-Forecast. The charts tell the story and it’s uncanny. Not only do the patterns show remarkable similarity in form, but also in time and amplitude. The first number denotes the number of days that the specific leg consumed. The second number in parentheses denotes the number of days since the start of the pattern. The numbers with decimal points are percentage and measure the change from low to high of each leg in the pattern with the number after the slash measuring the net change from the start of the pattern. If the pattern continues (and there is no guarantee that it will of course), then the USD would trade sideways to down throughout July and August before bottoming just above the May low. This should be interesting to follow.”
Australian Dollar (CME) Continuous Contract 240 Minute

The potential AUDUSD capitulation as indicated by elevated CME volume was mentioned yesterday. The high remains in place which increases the confidence in the top and reversal idea.
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR)
Weekly
Jamie – I wrote last week that “the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) is pressing against the April high at and 13 week moving average. The 40 level acting as support in RSI is a bull market characteristic as well on the daily. Given implications from the SPY analysis and US Dollar 1995-1996 similarity, I’d not be surprised to see a strong USD in early July followed by weakening thereafter. The implications next week are for a move back towards 10200.” The USDOLLAR reached 10187 today. Early week focus is still higher towards 10220/40, which is a zone likely to produce a reaction (at least a pullback lower). 10130/55 is support.
Euro / US Dollar
Weekly
Jamie – The EURUSD traded below the June low today. Allowing for a rally back into 12360-12400, I am still bearish for a drop to 12150 (pivot from late June 2010) and maybe even 12068. Looking out a bit, price is approaching the 2010 and 2005 lows at 11875 and 11640. These levels will eventually give way but near term focus should be on shorting strength into 12360-12400.
British Pound / US Dollar
Weekly
Jamie –On the verge of taking out 15484, GBPUSD focus is on the 100% extension of 15777-15484 / 15721 at 15429. The objective is in line with the 6/1 high at 15438. 15550-15590 is now resistance. Bigger picture, one must consider the potential for a resolution to the 3+ year bearish (previous trend was down) triangle. A drop below 15232 would shift focus to the 100% extension of 16301-15277 / 15777 at 14743.
Australian Dollar / US Dollar
Weekly
Jamie – Remember last Friday?! I wrote at the time that “I stand by previous comments and am bearish as this level is defended by the 50% retracement of the decline from the February high and 13 week average (52 week average is at 10320).” The AUDUSD reached 10329 before selling off. Structurally, another high (above 10329) and test of 10370/80 can’t be ruled out (61.8% retracement of the decline from 10855 is at 10368…the 61.8% extension of the 9580-10224 rally from 9968 is at 10366…the 12/8/11 high is just above at 10379) before a drop towards 9900. The Asian opening range should help identify short opportunities next week.
US Dollar / Japanese Yen
Weekly Bars
Jamie – “Bigger picture, the USDJPY is trying to put in a low above the February low. The RSI turn at 40 on the weekly is promising in that regard.” The market has done nothing but consolidate since the 6/25 reversal. Consolidation after a bearish reversal isn’t bullish and in fact leaves the USDJPY vulnerable towards 7912. A stronger near term tape is needed in order to act on the long term bullish potential. Stay tuned.

Dollar ready to rally to NFP disappoint, reality in the

Dollar Ready to Rally after NFPs Disappoint, Reality Setting In Euro Down Sharply Against Safe Havens and Carry Currencies this Week British Pound As Exposed as Ever, BoE Stimulus Merely Waters Currency Down Japanese Yen: JGBs Close at Recent Historical Low, Stimulus Ahead? Canadian Dollar Offers Limited Labor Data Reaction, Don’t Write Off Late Reaction Swiss Franc Fight Growing Costly for SNB According to Reserves Update Gold: In the Absence of Balance Sheet Growth, Dollar is a Better Safe Haven Dollar Ready to Rally after NFPs Disappoint, Reality Setting In
Since peaking at 21-month highs back at the beginning of June, the US Dollar has struggled to regain traction. Then again, currency has withstood a general risk appetite run that has otherwise lifted equities and other growth-linked assets to two-month highs. This resistance taps into the underlying fundamental current that has defined a tangible deterioration in growth and yield expectations to be further supplemented by a sense of hope. A rational assessment of ‘risk’ and ‘reward’ for these markets offers a very discouraging picture of the investment landscape. For potential return, the aggregate yield of the major currencies’ 10-year government notes (Treasuries are arguably the foundation for all rates of return) is just off of the record low set back in June. Furthermore, it is fully 38 percent lower than the low-point back in 2009 (in the aftermath of the worst crisis in modern history and the massive stimulus effort that follows). The only reprieve in the standard equilibrium is that volatility readings are still exceptionally low and set lower peaks when they do swell – perhaps the greatest effect stimulus has had.
Restraint on volatility (risk) does not translate into a strong position to foster risk trends. Given the exceptionally low levels of return in the market, it wouldn’t take much to scare the holdouts from their positions. So what has kept sentiment buoyant and the dollar under pressure? Hope. Hope that central bankers or lawmakers would take advantage of critical policy gatherings to expand their support of the system – or at the very least inject capital into the system to provide a temporary high. Yet, the Greek election, Fed rate decision, EU Summit and ECB rate decision have one after the other fallen short of the type of stimulus that speculators have grown addicted to. Moving forward, the docket critically lacks the kind of events that the market would typically peg as opportunities for officials to announce more support. If that is the case, enduring bulls will have to seriously evaluate the soundness of their positions. Readings like the disappointing NFPs release this past Friday will carry greater weight. In the upcoming week, we should watch specifically for the Chinese 2Q GDP reading and start of US 2Q earnings season.
Euro Down Sharply Against Safe Havens and Carry Currencies this Week
Little more than a week ago, a number of Euro Zone officials were trumpeting the success in the EU Summit’s compromise towards passing agendas that had received tremendous debate but gained little practical traction in the preceding months. The euro wasn’t immune to the exuberance as the currency won its biggest single-day rally since October 27. However, we made the technical and fundamental connection to that previous rally as a Greek restructuring that did little to solve the region’s underlying problems and the EURUSD’s subsequent, multi-week tumble immediately after the rally. The Summit’s vows (a common bank overseer, dropping seniority on Spanish bailout funds, directly funding banks using the ESM and allowing the ESM to purchase government bonds) are so far still promises without action. We’ve been here many times before with European programs that merely buy time rather than solve problems, and it has made this market skeptical. The ECB assured that stimulus hopes would be further flushed (and cut the currency’s yield to boot). That left us open to the a dose of reality Friday that banks were closing European money market funds (removing havens for liquidity in rough seas), Spanish yields climbed back up to 7 percent and Greece announced it was dropping its bid for easier conditions on its second bailout. On Monday, the ESM is expected to begin operation and Finance Ministers are expected to meet; but given the EURUSD’s two-year low, it seems the market doesn’t seem much potential.
British Pound As Exposed as Ever, BoE Stimulus Merely Waters Currency Down
Various Bank of England officials have repeatedly warned that the Euro Zone crisis poses the greatest threat to the UK’s financial and economic health. These warnings are starting to gain more traction amongst pound traders. This past week’s decision to lift the bond purchasing program by 50 billion sterling was a move directed at bolstering growth and shoring markets in the event of a crisis spread; but if EU situation did prove infectious, those efforts would matter little. To truly prevent a crisis in Great Britain, the Euro Zone must be stabilized. And that looks unlikely.
Japanese Yen: JGBs Close at Recent Historical Low, Stimulus Ahead?
The benchmark 10-year JGB (Japanese Government Bond) yield dropped Friday to close at its lowest level (0.80 percent) on record. We could label this a safe haven move by the markets (as people pull funds into the world’s second largest economy) or a natural side effect of capital repatriation by Japanese investors. However, there is also a meaningful sense of stimulus forecast in this move. Next week, we have the BoJ rate decision on Friday. Over the past weeks, central banks have eased (the ECB took deposit rates to zero), setting the stage for Japan.
Canadian Dollar Offers Limited Labor Data Reaction, Don’t Write Off Late Reaction
Though the headline employment change number wasn’t as extraordinary as some of the readings earlier this year, the June data was nevertheless solidly bullish. The 7,300 person increase in payrolls marks the fourth consecutive increase and was backed by a 29,300 net increase in full-time positions. Furthermore, wage growth accelerated to a near, three-year high. The loonie’s hold up was its relationship to the US fundamental backdrop. That said, Canada is truly standing out for its relative financial health – a boon against fellow high yielders like AUD.
Swiss Franc Fight Growing Costly for SNB According to Reserves Update
We have known that the SNB’s effort to stem the franc tie hasn’t been going very well – not difficult to interpret given the EURCHF’s refusal to rise from 1.2000. Yet, nothing puts the situation into better perspective than seeing the amount of funds put into the effort. The central bank released its May FX reserves. Is the 20 percent increase over the month to a record 365 billion francs enough to encourage a fresh policy approach? Buying an unlimited amount of euros as a regional crisis intensifies hardly seems a viable strategy.
Gold: In the Absence of Balance Sheet Growth, Dollar is a Better Safe Haven
Gold is an ideal alternative to currencies and safe haven government bonds that are otherwise manipulated by their respective monetary authorities. So then why hasn’t gold gained these past weeks with Operation Twist 2, the PBoC rate cut, ECB rate cut and EU Summit vows? These are certainly efforts to ease, but they don’t bolster balance sheets. Furthermore, there is the lingering issue of liquidity.
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
Early business activity measures.
JPY Current Account Total (Yen)
The forecasted trade deficit for May is expected to tip the third biggest shortfall on record.
JPY Adjusted Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
JPY Current Account Balance (YoY)
CNY Consumer Price Index (YoY)
Easing inflation could help guide the stimulus to austerity balance.
CNY Producer Price Index (YoY)
Hit a near, three-year high last month.
JPY Eco Watchers Survey: Current
Business activity indicators that reflect on a volatile economic situation.
JPY Eco Watchers Survey: Outlook
A slip in the jobless rate will do nothing more than make the franc a slightly better safe haven.
Trade is one of the primary reasons Germany fights so adamantly to retain the euro and EMU.
EUR German Current Account (euros)
EUR German Trade Balance (euros)
EUR Euro-Zone Sentix Investor Confidence
Critical confidence measure for a troubled region.
CAD Business Outlook Future Sales
Rarely market moving but important measures to confirm financial stability
CAD Bank of Canda Senior Loan Officer Survey
With wages and employment stagnating, consumer spending depends on credit.
Euro Area Fin Mins Meet in Brussels
Alcoa First Bluechip to Report 2Q Earnings
USD Fed's Evans Speaks in Thailand
USD Fed's Williams Speaks in Idaho
SUPPORT AND RESISTANCE LEVELS
To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal
To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT
INTRA-DAY PROBABILITY BANDS 18:00 GMT

Dollar suffers a fall most since October, where from here?

Dollar Suffers Biggest Drop Since October, Where to From Here? Euro: Are We Set for an Immediate Reversal Monday? Australian Dollar Traders Prepare for a Halt in RBA Cuts British Pound: Will the BoE Vote Finally Tip to More Bond Purchases? Canadian Dollar Climbs with Risk, Prepare for Employment Data Japanese Yen Reportedly Showing its Influence as a Reserve Gold Rallies as EU Speaks Stimulus, Looking for Action from ECB Dollar Suffers Biggest Drop Since October, Where to From Here?
Last week was a wild ride for the US dollar, but the situation will only grow more complicated for the benchmark going forward. For most of this past week, the Dow Jones FXCM Dollar index was carving out a tedious range with no definable direction. That changed suddenly early Friday morning after the EU Summit statement tapped into the Pavlovian response to any mention of mass stimulus that capital and FX traders are implicitly always expecting. As is usually the case with flashing headline with far-reaching implications, the speculative masses reacted first and saved questions about the details and scope of the development for later. Having suffered its biggest, single-day loss since October 27, the dollar is now in a good position to be reviewed. As discussed yesterday, European officials mentioned an agenda that could significantly curb financial stress for the world’s greatest source of uncertainty – if investors believe in it. Considering the dollar is a currency that depends on its acute safe haven status and thereby stressed risk trends, where we go from here depends on how much good will the EU has bought itself.
We will pick apart the actual Euro-region programs viability in the Euro section below, but it is important to understand the stake the dollar has in the situation. If fear that a financial storm is spreading across the globe retreats, the most direct leverage the currency has will disengage. If we look at the bigger picture, global yields are fading into record lows, growth is stalling and capital has been drained from the system. This is itself the foundation of a bearish market. However, speculation plays a critical role in transitional market swings. In other words, if traders are looking for a reason to rally; they will use the ambiguous support to justify the move. Moreover, judgment will not center on this past week’s developments. Building or breaking confidence further requires additional catalysts to flesh out a trend. On our docket next week: we pick up the EU debate on Monday, Wednesday faces a liquidity lull for the Independence Day holiday; the ECB meets Thursday; and Friday brings NFPs.
Euro: Are We Set for an Immediate Reversal Monday?
In the past months and years, we have seen a number of European financial programs and facilities that at first seemed impressive but ultimately failed to pass muster. However, in a world were acting late can mean missing out on a trade, there is often a quick move on the basis of headlines at the sacrifice of the details. Is that the case for the Euro currently, having posted sizable rallies against safe haven counterparts (the yen and dollar) without the proper merit to sustain its advance? Given the scope of the recommended programs from the EU Summit and the level of contention at the policy official level for pushing them through, this is the kind of news that can overwhelm the senses of even a well-prepared market of skeptics.
Breaking down the Summit promises to its core components, we start to see the hallmark of the traditional ‘buy time’ effort the Euro officials have become known for. Overlooking the EIB contribution and Growth Pact as long-term efforts that don’t answer immediate financial concerns, we move right into the recapitalization and bailout territory. Dropping seniority status on Spanish bailout funds and tapping the EFSF is promising, but details on how much they receive are still fuzzy. The big ticket item of ESM buying sovereign bonds requires a ‘Memorandum of Understanding’ and carries unspecified conditions. Then there is the ESM direct bank funding that requires a common bank supervisor, which should be established sometime before the end of the year. Perhaps the lead into the ECB decision can keep hopes up. Rate cuts won’t help.
Australian Dollar Traders Prepare for a Halt in RBA Cuts
Over the past two RBA rate decisions, the central bank has carved 75 basis points off of its overnight cash rate (OCR). From October, the benchmark rate is down 125bps and is now at its lowest level since November 2009. Aggressive rate cuts are the product of a slowing economy and financial strain. That means risk aversion encourages easing which leverages the negative pressure on the investment-favored Aussie dollar. We’ve already seen a rebound from overstretched risk trends and rate expectations. Is there enough relief there for an RBA hold?
British Pound: Will the BoE Vote Finally Tip to More Bond Purchases?
According to the minutes of the last BoE rate decision, the policy group barely missed the majority needed to increase its bond purchases. Warnings that a Euro Zone crisis is spilling over to the UK and pressure from politicians to supplement austerity measures with central bank austerity have elevated the pressure for policy easing. Even if asset purchases rise 50 billion sterling as expected, it isn’t clear what impact it would have. For the economy, it is a pittance compared to global pressures; but for the currency it raises the stimulus competition.
Canadian Dollar Climbs with Risk, Prepare for Employment Data
USDCAD plunged Friday, but was there a representation of the Canadian dollar’s own influence in this move? Certainly the loonie extended its move after the release of a better-than-expected April GDP reading; but then again, EURUSD was offer a more aggressive anti-dollar push. Next week, we will have the Canadian jobs data for a more directed blast. That said, the NFPs could easily overwhelm the local data.
Japanese Yen Reportedly Showing its Influence as a Reserve
We know that the Japanese yen is a preferred safe haven for the FX market, but the evidence isn’t always immediately evident. A report from the BoJ showed that foreign holdings of yen assets jumped to a record (records began in 2002) 44 trillion yen. That said, another report from the IMF showed that the yen’s share of global reserves rose in the first quarter to 3.55 percent from 3.53 percent. For comparison, the dollar accounts for 62.2 percent while the euro is 25 percent. Safe haven seems a disputable term.
Gold Rallies as EU Speaks Stimulus, Looking for Action from ECB
With the dollar suffering its largest hit in 8 months and the global market murmuring about European stimulus, gold was bound to find lift Friday. That said, when it comes to this alternative to currencies and fiat debt, we need an active booster to carry the market higher. Yet, there was no immediate implementation from the EU Summit. Will the ECB supplement with an LTRO? Unlikely. If this is the case, gold’s rally may fall apart.
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ECONOMIC DATA
Next 24 Hours
Hometrack Housing Survey (MoM) (JUN)
Housing princes less during the month of June.
Hometrack Housing Survey (YoY) (JUN)
AiG Performance of Manufacturing Index (JUN)
Tankan Large Manufacturers Index (2Q)
Manufacturing activity outlook expected to print third consecutive quarterly contraction.
Tankan Non-Manufacturing Index (2Q)
Tankan Large Manufacturers Outlook (2Q)
Tankan Non-Manufacturing Outlook (2Q)
Tankan Large All Industry Capex (2Q)
TD Securities Inflation (MoM) (JUN)
A last minute inflation read ahead of the RBA.
TD Securities Inflation (YoY) (JUN)
HSBC Purchasing Manager Index Manufacturing (JUN)
The mark will have already been made with Sunday’s official read.
RBA Commodity Price Index (JUN)
Notable for gauging the resilience of the balance of trade in Australia among week global economy outlook.
RBA Commodity Index SDR (YoY) (JUN)
Retail Sales (Real) (YoY) (MAY)
May reading was weakest since Sep ‘11.
SVME-Purchasing Managers Index (JUN)
Will provide a reading of how the euro-Zone crisis is affecting the manufacturing sector.
Italian Purchasing Manager Index Manufacturing (JUN)
French Purchasing Manager Index Manufacturing (JUN F)
German Purchasing Manager Index Manufacturing (JUN F)
Euro-Zone Purchasing Manager Index Manufacturing (JUN F)
Italian Unemployment Rate s.a. (MAY P)
Hasn’t ticked lower since Feb ’11.
Purchasing Manager Index Manufacturing (JUN)
An improvement from the May 2009 low would be welcome, but still point to contraction.
Euro-Zone Unemployment Rate (MAY)
Unemployment rose in most major EU countries in May.
Is the US falling victim to a global slowdown?
Construction Spending (MoM) (MAY)
Strong new home sales for May.
Italian Budget Balance (euros) (JUN)
Historically higher deficits in 2H of year.
Italian Budget Balance (euros) (YTD) (JUN)
BoJ Deputy Governor Yamaguchi To Attend Panel Discussion
ECB's Joerg Asmussen Speaks on Euro Economy
ECB's Ewald Nowotny Speaks on Euro Economy
Fed's John Williams Speaks on Monetary Policy
SUPPORT AND RESISTANCE LEVELS
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CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT
INTRA-DAY PROBABILITY BANDS 18:00 GMT

Australian dollar to fall on fading EU optimism, RBA rate reduce the risk

30 June 2012 strategist 02: 36 GMT fundamental forecasts for Australian Dollar: Rally
The Australian Dollar has been better than last week, sent higher by an impressive 1.7 per cent against its U.S. namesake in a swell in risk appetite after EU leaders delivered an unexpectedly energetic response to the debt and the banking crisis in the region. Makers have agreed to create a joint Bank, monitoring scheme by the end of the year. Both operational, funding rescue EFSF/MSE will have authority to recapitalize banks directly without diminishing the funds through the Governments of the Member States (which also increases levels of sovereign debt). The rescue of the Bank of Spain conditions will be also changed as the EFSF/ESM funds will get not seniority condition. This would have given priority to be paid before creditors of the other country the default and restructuring (which would discourage purchases private Spanish bonds, higher borrowing costs of driving).
The next week is likely to be much more difficult. The expectations of investors, for the EU Summit were exceptionally low to overcome was not a particularly difficult business. In addition, the agreed measures does not change short-term reality that prevailed before the Summit. Indeed, Spain will still have its bank rescue package passed by the sovereign, which will increase the size of the obligations of the Government. The empowerment of funds EFSF/ESM to directly fund the banks are not available before the end of the year and only if the banking union negotiations proceed as planned. That left the region with more than a firewall against further sovereign fears more than six months.
Finally, the firepower available to the EFSF did not increase, which means that should borrow on markets, should be called upon to respond to its expanded mandate. The Fund can now borrow from 2.75% for 10 years, a vast improvement on the Spain 6.33 and 5.82% the Italy during the same period. Markets are certainly not blind for new credit risk faced by the Fund in its however increased responsibilities and will no doubt be demand a higher return before long. If the EFSF himself faced an increase in borrowing costs, Governments will have to pony to a lot more cash or the entire arrangement will unravel once more. Overall, this opens the door to financial markets reversed course as the details of the release of the leaders of the EU are digested, reverse the thrust of risk appetite and the Australian Dollar anchored to a lower feeling and actions.
Pressure drop can be amplified if the Reserve Bank of Australia chooses to offer interest rates another cut at the political meeting next week. Expectations of economists suggest Glenn Stevens and company will maintain the rate of reference ready for 3.5% this time. Prices - in the expectations of investors are in agreement with this assessment, revealing a simple probability of 16%, another 25 BPS cut (according to the data compiled by Credit Switzerland). Which leaves the door open for the strong selling pressure in the case of a surprise Dove. A deep crisis in the economic prospects of the Australia by way of export of erosion suggests that the RBA has brought to act. Economic data, followed by the performance of China - the Australia top export market - and in the Asia-Pacific region as a time released since the June meeting of the Central Bank underlined continuing weakness. Data from the euro area were clouded in the same way, which means that the Outlook for commodity prices Australia in Asia will remain dull as exporters in the region faced with the collapse of demand in a foreign market critical.

Canadian dollar could threaten the range on higher employment

Fundamental forecasts for gold: neutral
The Canadian dollar ended the month pleased against its American counterpart, in the sense of risk rise and loons can appreciate more in the week ahead as the economic record is expected to encourage improved prospects for the region. Indeed, the employment report highlights the greater risk of event for the following week, and development may support the Canadian currency as the labour market is expected to add another K 5 jobs in June.
The economic recovery gradually gathers pace, there is one more argument for the Bank of the Canada to raise the interest rate of 1.00% reference, and we see Governor Mark Carney continue to talk of speculation for higher borrowing costs to combat the record increase in domestic debt. However, we will be convinced that a possible rate hike would be a single agreement, as the sovereign debt crisis continues to drag on global growth, and it appears that investors see a case for more facilities as the BoC is designed to encourage a sustainable recovery. According to Credit Switzerland night index swap, market participants requested that costs more at the beginning of June, but start at a reduced rate for the following 12 months the price, and the change in the prospect of an interest rate can gather pace over the short term in the slowdown of growth and inflation. In turn, we could attend the Central Bank to maintain its approach of wait and see throughout 2012, and the USDCAD may face range-bound prices in July that the market participants weigh prospects for monetary policy.
As the USDCAD continues to find support provisional on 1.0160 figure, the pair seems ready for a rebound in the short term in the next few days, and we see the action side price in July in the uncertainty surrounding the fundamental Outlook for the Canada. However, we will be either to keep a close eye on the index relative of strength as the trend in the oscillator continues to take form, and we see the exchange rate back to the tracing of Fibonacci from 78.6% of 2007 low in 2009 high around 1.0100-10 should developments on tap for the speculation of fuel next week for a BoC rate hike. -DS

History of the Dollar of United States shows a high risk of inversion on post-Summit Plunge

30 June 2012 02: 54 GMT fundamental forecasts for the Dollar: Howser
An end very volatile week of trading of foreign currency has left the Dollar (ticker: USDOLLAR) lower through the Council and a critic of us given market work and decisions of global interest rates Central Bank set for big moves through the first week of the month and quarter.
Dollar in a potentially stretch heads pivot with weakness as index Dow Jones FXCM posted Dollar daily decline like important since the European Union announced its previous in October 2011 Grand Rescue Agreement. FITTING - the recent American dollar liquidation began on the announcement of the agreement of most recent rescue of the European Summit of highly anticipated.
What has happened in the past is never a guarantee of what will happen in the future, but it is very interesting to note that the huge EURUSD rally on the Summit of the 27/10/2011 marked the exact Euro Summit. Similarly, the USDOLLAR collapsed and bottom this day, going on to surge in the next week and the rest of the year.
Might be repeated history? It is certainly possible; the beginning of the week, month, quarter means that the time has come for a shift in the trend. Yet even the purest of market technicians agree that week next risk of fundamental event could make or break the USDOLLAR price action in the foreseeable future.
We cannot underestimate the importance of seasonality in the forex markets, and the coming days could easily set the tone for the month of July and the third quarter of the year. In this spirit, we will pay particularly attention to non-farm of the Friday payroll data. The usual mixture of data economic pre - NFP and similarly important reserve of Australia Bank, Bank of England and European Central Bank rate decisions will keep traders on their toes in the earlier action of the award.
Expectations point to another week of mostly disappointing us figures for economic growth, and the non-farm payroll report will likely show that the national unemployment rate is stubbornly remained high on dull jobs growth. Yet the reactions of markets for the recent announcements of the European Summit point out that defining a low bar is not necessarily a bad thing. Indeed, forecasts little leave ample room for positive surprises and, potentially, a reaction distributed on the rise of the Dollar to the NFP data.
Otherwise, we will keep an eye on the decisions of primary rate of Central Bank from the Reserve Bank of Australia and finishing the Bank of England and the European Central Bank. Each decision is controversial, and each of the RBA, BOE and the ECB could rattle markets. Overnight Index Swaps, the RBA is unlikely move rates. Even the Aussie Dollar traders will want to see how the Central Bank responds to the turbulence of the financial markets and implications for national yields. Surprises delivered could carry in other currencies high performance and risk relatively high against the US Dollar of refuge.
The same night Index Swaps show a non-trivial probability that the Bank of England and the European Central Bank will also facilitate monetary policy. The BOE can expand its balance sheet and buy the debt of the Government of the United Kingdom as a method of quantitative easing - increase in the money supply and probably the value of the pound sterling weakened. Interest rate traders predicted a 40% chance that the ECB will reduce the interest rate on clear European constraints. These two events could really forcing European currencies pairs main kicking - especially against the U.S. currency.
Must be another eventful week of forex trading, and it is little exaggeration to say that the coming days could set the tone for the US Dollar price action in the next month and the rest of the quarter. -DR
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30 June 2012 02: 54 GMT

Dollar climbs in the Canadian economy grew in April at the fastest pace this year

The Takeaway: [the faster growth of Canadian GDP this year in April] > [Pickup in mining and oil and gas activity] > [CAD strengthens]
The Canadian economy grew at a faster pace than expected in April, led by increased activity in the mining and oil and gas extraction sector. The gross domestic product (GDP) of the Canada increased by 0.3% in April, the fastest on the months rate this year, after cutting of 0.1% in March. On an annual basis, GDP expanded 2.0% in April, after growth of 1.7% in each three months previously. Forecasts of the consensus of economists surveyed by Bloomberg News had called for growth of 0.2 per cent on a month and an annualized 1.8 percent growth rate.
According to a report published by Statistics Canada, mining and oil and gas extraction has rebounded in April after that of temporary stops the difficulties of mining production and led to a slowdown in February and March. Mining and oil and gas extraction increased by 2.7% in April after decline of 2.0% in February and 1.1% in March. Trade in large trade rose 1.2% in April, climbing for the fifth month running. During this time, production decreased by 0.3% and construction decreased by 0.1% in April.
Chart 1-minute USDCAD: 29 June 2012
Graph created with the scope of the market - prepared by Chen Wen - Tzu
Immediately after the output, the stronger Canadian dollar against the U.S. dollar as the strongest GDP increases support for a rate hike by the Bank of Canada in the coming months. At the time of this report, the pair USDCAD was trading at C$ 1.0167.

$ Dollar, Major Currencies Look to US Economic Calendar for Direction

Talking Points
Quiet European Economic Calendar Puts Focus on US Richmond Fed Gauge Traders Watching Bond Yield Levels as Italy and Spain Hold Debt Auctions US Dollar Corrects Lower in Asian Trade, Commodity Bloc Outperforming The US Dollar corrected lower in overnight trade after advancing against most of its top counterparts as risk aversion stocked haven demand for the benchmark currency in the preceding 24 hours. The sentiment-linked Canadian, Australian and New Zealand Dollars outperformed. Although Asian stock exchanges sold off, the move appeared to be a catching-up to weakness seen in yesterday’s European and US sessions by regional investors that was already reflected in exchange rates.
A relatively quiet European economic calendar shifts the focus to US docket, where the Richmond Fed Manufacturing gauge takes top billing. The release is one of a series of surveys due this week that traders will use for a timely measure of where the world’s top economy stands in June. The final balance of outcomes is likely to be particularly significant given hopes that a recovery in North America can help offset malaise in Europe and Asia.
An analogous release from the Dallas Fed surprised higher yesterday. A similar result this time around may boost risk appetite but likewise reinforce the case against additional Fed stimulus. This may weigh on the US Dollar against its higher-yielding counterparts but drive the benchmark currency against the Japanese Yen, where prices remain sensitive to US Treasury yields. June’s Consumer Confidence reading is also on tap.
S&P 500 stock index futures are pointing higher in late Asian trade, suggesting risk appetite is relatively well-supported heading into the European trading day. Italy and Spain are due to hold bond auctions. Rome will sell 2014 zero-coupon paper as well as 2016 and 2026 inflation-linked bonds. Madrid will auction off 84- and 168-day bills. As usual, traders will look to average yields and bid-to-cover readings for signs of sovereign stress in the region.
Asia Session: What Happened
Corporate Service Price (YoY) (MAY)
Conference Board Leading Index (MAY)
Small Business Confidence (JUN)
Euro Session: What to Expect
German GfK Consumer Confidence Survey (JUL)
UBS Consumption Indicator (MAY)
French Consumer Confidence Indicator (JUN)
Italian Retail Sales (YoY) (APR)
Italian Retail Sales s.a. (MoM) (APR)
Public Finances (PSNCR) (£) (MAY)
Public Sector Net Borrowing (£) (MAY)
Spain to Sell 84-168 Day Bills
Italy to Sell 2014 0-Coupon and 2016-26 I/L Bonds
Italian Hourly Wages (YoY) (MAY)
Italian Hourly Wages (MoM) MAY)
Critical Levels

$$$ US Dollar Correlation to Dow Provides Safe Haven amidst Euro Crises

26 June 2012 15: 00 GMT Ongoing European fiscal crisis continues to affect the Euro and the safe-haven US Dollar (ticker: USDOLLAR) could benefit if the weekend's European summit produces further tensions. The correlation between the Dow Jones Industrial Average and the Dow Jones FXCM Dollar Index underlines said point. Stock markets tend to fall on financial market uncertainty, and that same confusion most often leads to strength in the safe-haven US Dollar.
Forex correlation to broader financial markets continue to trade near record-strength, and we expect any major moves in the Dow Jones to force similarly wide swings in the Dollar Index and key USD-denominated currency pairs.
Forex Correlations SummaryView forex correlations to the American Gold ETF Trust (GLD), United States Oil Fund ETF (USO), American Dow Jones Industrial Average ETF Trust (DIA), UK FTSE 100 Index, and IShares Silver Trust ETF (SLV) prices.
Correlation between Dow Jones FXCM Dollar Index and Dow Jones Industrial Average
Dow Jones FXCM Dollar Index (lhs)
Reverse of Dow Jones Industrial Average (HHR)
The correlation between the Dow Jones Industrial Average and the Dow Jones FXCM Dollar Index (ticker: USDOLLAR) now trades near year-to-date highs, underlining the US Dollar's sensitivity to movements in broader financial markets.
Sharp sell-offs in the Dow Jones Industrial Average and similarly risky assets have coincided with sharp jumps in the US Dollar. Price action emphasizes that the US currency remains an important source of safety in times of market turmoil pronounced. Given clear market indecision ahead of a key European summit at the weekend and ongoing European financial crisis, we believe that the USDOLLAR stands to benefit on any ensuing financial market stress.
We'll continue to watch for any important moves in the Dow Jones Industrial Average and broader markets. Indeed, earlier correlation studies emphasize that cross-market links remain as strong as ever on clear European market stresses.

$ Dollar: Heed the BIS’ Warning but Act When the Markets Move

Dollar: Heed the BIS’ Warning but Act When the Markets Move Euro Traders Put Their Confidence on the EU’s Hands as Conditions Deteriorate British Pound Hearing Calls for Stimulus, Government Lending Numbers Ahead Japanese Yen Best Performing Currency on the Day on Carry Unwind New Zealand Dollar Proving More Stubborn with Giving Up its Strength US Oil Following Risk But Syria and Turkey Stand Off a Concern Gold Rebounds as European Stimulus Expectations Override Stalled Dollar Dollar: Heed the BIS’ Warning but Act When the Markets Move
There is a critical difference between having your convictions and trading your convictions. A prevailing fundamental view may look wrong or even be irrefutably incorrect, but it is the common expectations of the masses (wrong or right) that determines where we move and how quickly we get there. It is our charge as traders to assess whether the markets are following the lines of reason and how engrained momentum is relative to that belief. When underlying sentiment is aligned to the fundamental current that carries the greatest influence moving forward, we have the best mix for developing a lasting, market-wide trend. Therein lies our current predicament. The outlook for growth, financial stability, yield and dividends, the European crisis and a list of other concerns is material. Yet hope continues to distract from a troublesome outlook.
Last week, sentiment disengaged from the tenuous belief that capital markets would be supported by another round of stimulus from two of the world’s most active market patrons. The Federal Reserve’s snub calls for another round of asset purchases (QE3) undermined one of the most effective, short-term stimulus trades for the opportunistic investor. Similarly, the conclusion of multiple Euro-area leader meetings (the EU Finance Minister meeting and a meeting between the German, French, Italian and Spanish Prime Ministers) signaled that the threshold for supporting the markets and thereby investors had been set far higher than originally expected. With aspirations for an easy trade checked, it would seem that storm clouds would bring on the next wave of deleveraging, but there is yet another diversion ahead of us: the EU Summit.
The Summit over scheduled for Thursday and Friday isn’t just a concern for the Euro itself. Considering the region’s crisis represents the most immediate threat to global, financial stability; a temporary stay could relieve significant pressure from the entire system. That said, it important to look at the core issues that threaten the broader system. The Bank of International Settlements (BIS) made mention of big-ticket concerns in its meeting Saturday. The central banks’ bank said require a “healthy push” by governments to fix their problems. Further, the group warned that banks are still highly leveraged as they expect bailouts, and the pool of safe havens is shrinking quickly as need rises (a big dollar support).
Euro Traders Put Their Confidence on the EU’s Hands as Conditions Deteriorate
The Euro-area headlines were particularly discouraging Monday, but it seems the market is curbing its reaction to negative developments perhaps under the assumption that a meaningful rescue attempt will be made towards the end of the week. Unfulfilled expectations for last week’s Fed decision can easily lead hold out market-bulls to transfer their assumptions to the next, most critical policy gathering. The EU Summit faces possible backlash from fears that the region’s crisis can go critical and spread to the global system if they do not step in to offer a ‘Shock and Awe’ policy. That concern alone seems to bolster expectations that relief will be offered. In the meantime, the BIS made sure to make special mention of the Euro-region’s financial situation. Perhaps optimistic traders should take head of German Chancellor Merkel’s ardent stand against common bonds and joint liability guarantees – which she reiterated Monday. In other news, Greece’s Finance Minister resigned after four days on the job, Cyprus became the fifth EZ country to seek a bailout and Moody’s downgraded 28 Spanish banks.
British Pound Hearing Calls for Stimulus, Government Lending Numbers Ahead
In an FT interview, the man competing with Adam Posen for the title of most bearish Bank of England member (David Miles) remarked that a ‘substantial’ amount of support was needed to support the UK economy. This aligns to his vote for 50 billion sterling in additional bond purchases at the last central bank gathering. Interestingly enough, the policymaker went on to suggest that there was no evidence that the government’s austerity path has dampened the country’s growth and thereby left it exposed to the Euro Zone’s troubles. That is an interesting position to take. That specific argument should be kept in mind when we read the public financing numbers due in the upcoming session.
Japanese Yen Best Performing Currency on the Day on Carry Unwind
The Japanese yen was far and away the best performing currency this past session. In fact, the funding currency’s rally was so strong that it managed a near 1 percent rally against the next, best performing major – the fellow safe haven US dollar. The general performance can find its roots in carry trade unwind which is often the direct result of risk aversion. We felt the shift in sentiment through the capital markets this past session but the unwinding of a risky position (carry) is going to be far more reactive than taking a new short-risk position (long dollars).
New Zealand Dollar Proving More Stubborn with Giving Up its Strength
In the hierarchy of the investment currencies amongst the majors (Canadian, Australian and New Zealand dollars), we have seen more prominently that the kiwi is holding its value in unfavorable winds better than its counterparts. With a market rate (as opposed to benchmark yield) higher than its counterparts and limited scope for rate cuts over the coming 12 months, the currency has proven stubborn when it comes to risk aversion and carry deleveraging. That said, if a market-wide tumble takes; the kiwi won’t be able to resist.
US Oil Following Risk But Syria and Turkey Stand Off a Concern
Oil made a critical move this past Thursday when it dropped below $80 / barrel for the first time since October of 2010. Technical traders will note that this broke a critical trendline that extends all the way back to the third quarter of 2009. Given a recent risk aversion push to amplify a demand issue as global activity levels cool, this isn’t too great a surprise. However, we should also be cognizant of supply shocks (even if the demand gap is wide). The growing row between Syria and Turkey over a shot down plane over disputed territories can create trouble quickly.
Gold Rebounds as European Stimulus Expectations Override Stalled Dollar
The downdraft from goldthat followed the Fed’s decision to reject fresh quantitative easing couldn’t hold over to this week. If the world’s largest central bank isn’t willing to actively devalue its currency and all global fiat, others could take its place – or so the thinking goes. That said, other groups’ efforts will not be as effective for a gold bid as the dollar will be a first and potentially better alternative to fellow currencies.
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ECONOMIC DATA
Next 24 Hours
Conference Board China May Leading Economic Index
Important data for countries that export raw material to China.
Public Finances (PSNCR) (Pounds)
Net Borrowing deficit is at an all time high, the long term deficit will affect its sovereign credit rating.
Public Sector Net Borrowing (Pounds)
S&P/CS 20 City s.a. (MoM) (MAY)
Shiller Home Price Index at an all time low since the housing bubble. Home Sales for May highest since April 2010.
S&P/Case-Shiller Composite-20 (YoY) (MAY)
S&P/Case-Shiller Home Price Index (MAY)
Richmond Fed Manufacturing Index (JUN)
SUPPORT AND RESISTANCE LEVELS
To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visitTechnical Analysis Portal
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CLASSIC SUPPORT AND RESISTANCE
INTRA-DAY PROBABILITY BANDS 18:00 GMT

The United States dollar clears Fed threat, ready to run if fear broke out

Dollar Recovers More than Half of its June Losses, Ready for Risk Euro: Can the had Summit Curb Speculative Interests Like the Fed Decision? British Pound Traders Need to Weigh the Potential Of Crisis Spread Against QE Australian Dollar Sees a Sharp Drop in Speculative Positioning with COT Data Canadian Dollar Seeing its Buffer to Risk Trends Fading Swiss Franc Keeps a Wary Eye on the EU's Stimulus Decisions Gold Back at its Critical Support as Central Bank Balance Sheets Lose Momentum Dollar Recovers More than Half of its June Losses, Ready for Risk
Through the opening 14 days of June, the Dow Jones FXCM Dollar Index dropped nearly 285 points despite a deteriorating global fundamental backdrop that would normally bolster safe havens. Yet, it is a testament to where feeling truly lies that the greenback regained half of the ground lost over that near three-week period with a single rally. There was a break on risk appetite trends these past few weeks that helped skew the markets to be more reactive to positive risk-based and discount the negative developments: the possibility that the Fed would another mass stimulus infusion delivery. With the concern that the central bank was going to devalue the currency and indulge short-term speculative appetite passed, the dollar is now free to move.
That said, removing a fundamental restraint is not the same thing as applying an active catalyst. There have been plenty of negative developments over the past two weeks that were overlooked under the belief that the central bank would neutralize their ill-effects. It would stand to reason then that the market has some adjustment to do to match price with fundamental value. Unfortunately, a speculatively-directed market does not fit into such a tidy picture. There will be a natural bias is bearish on risk trends and nudging the greenback forward because of the events of the past few weeks as well as the general course of growth and yield expectations. However, the markets are still dazed and sluggish in the wake of such a dramatic shift in the outlook. What we need is an active catalyst to decide our next trend.
Moving forward, there is plenty of data on the economic docket; but few of these releases will truly exploit the underlying concerns of global investors. Perhaps one of the few things on the tape ahead that can alter the current of feeling is the EU Summit. As reality that the Greek election and open-ended promised of a Spanish bank rescue doesn't proactively curb the region's crisis sets in, traders will be expecting something sweeping from struggling policy group to finally change the course of the world's largest collective economy. This may end up have the same influence as the Fed rate decision - dampening efforts to take large trades on the chance that something substantial is offered.
Euro: Can the EU Summit Curb Speculative Interests Like the Fed Decision?
This past week was a tremendous disappointment for the Euro's fundamental health. Weak data and painful bond auctions were punctuated by continued infighting about how to resolve the region's deteriorating financial health. The risks were clearly defined by officials policy actions (and lack thereof) this past week. The EU finance ministers' two - day meeting came to the same impasse on Greece's plea for more accommodation and Spain's rescue fund as the meeting between German, French, Italian and Spanish leaders Friday. It used to be that a lack of agreement wouldn't deter policy officials from their optimistic interpretations of the future, but now even the region's cheerleaders are starting to spout threats. Italian Prime Minister Monti warned that there was only a week to stabilize the Euro-area while the IMF released a report that said the group was at a 'critical stage' where questions about the viability of the common currency were being raised. This speaks to high risk and a lack of progress amongst policy makes moving into next week's critical EU Summit. The market will look to see whether Greece can renegotiate its bailout terms and Spain receive a bigger stimulus program than the lowball estimates suggest is needed. That is the bare minimum for what is needed to stabilize. To genuine encourages recovery speculation, we need something along the line of common bonds or regional guarantees.
British Pound Traders Need to Weigh the Potential Of Crisis Spread Against EQ
Rate forecasts and the 10-year Gilt yield haven't really reflected the impact of the renewed wave monetary policy easing this past week. With rates already exceptionally low and the distraction of whether the Euro Zone crisis will spread to the UK as so many policy officials have taken to warning, sterling traders have been distracted. That said, as the BoE balance sheet grows, the negative implications to its long-term carry currency position will weigh in. The 5-4 vote at the BoE decision and the last active liquidity program are very real weights on the pound.
Australian Dollar Sees a Sharp Drop in Speculative Positioning with COT Data
Between the rebound in risk appetite in trends and easing expectations for aggressive rate cuts, the Australian dollar has stepped up as one of the strongest currencies amongst the majors. That particular move is further reflected in speculative positioning, with the COT's net speculative positioning amongst Aussie dollar future traders showing the biggest jump on record (42,000 contracts) - though this comes just after the market was the most net short on the currency contract on record. That said, do we expect carry appetite or rate hikes to return soon?
Canadian Dollar Seeing its Buffer to Risk Trends Fading
The Canadian dollar has been able to curb its sensitivity to risk appetite trends - in contrast to its Australian and New Zealand counterparts. It has been able to accomplish this by its direct connection to the US dollar but also as the only investment currency to maintain a positive bearing on interest rate expectations. That said, Friday delivers a considerable blow to this unusually divergent bearing as May CPI dropped more sharply than expected to a 1.2 percent annual pace. Will next week's April GDP reading further blur the picture?
Swiss Franc Keeps a Wary Eye on the EU's Stimulus Decisions
The Swiss franc continues to trade just off the radar. Against most crosses, the currency resembles the euro rather than a traditional safe haven. This is a nuance that comes thanks to the SNB's efforts to hold the line on EURCHF. This remains one of the most contentious issues in the FX market. Should the EU Summit not offer relief, fear could I redouble the pressure on the 1.2000 EURCHF floor - forcing action from the SNB.
Gold Back at its Critical Support as Central Bank Balance Sheets Lose Momentum
Gold didn't make much progress in the risk-positive lean of the opening weeks of June - not surprising given the commodities position as a general safe haven. That said, with the subsequent risk aversion drive that leveraged the dollar after the Fed rate decision ended without fresh balance sheet measures, the metal certainly did dive. Once again, we are within arm's reach of a floor that goes back to July.
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ECONOMIC DATA
Next 24 Hours
EUR German GfK Consumer Confidence Survey
Likely down on
Euro-Zone Crisis.
USD Chicago Fed Activity Index Nat
The weak June MBA Mortgage Applications data may indicate weaker sales.
USD Dallas Fed Manufacturing Activity

New Zealand stalled after rising credit card spending in dollars...

THE TAKE: the credit card spending by 0.4% in May, 3.9% per year> New Zealand Dollar little changed after he met in the last 24 hours.
The New Zealand dollar was little changed after the credit card spending rose by 0.4 percent in May and 3.9 life years gained per cent over the previous year. Positive spending fell in line with the better-than-expected growth of GDP over the same period.
Risk-sensitive assets, including high-NZD were sold off in the last 24-hour operation, in part probably a German version of Purchasing Managers' Index smooth and discounts from Moody fifteen banks internationally. The room was a small correction to the great movement on another occasion before the release and seems to have continued in the same direction.

:: The Euro Strength Most Likely as US Dollar Corrects Lower

June 21, 2012 11: 18 GMT

Retail forex traders net-short the Euro against the U.S. Dollar remain (ticker: USDOLLAR) as the pair of senior multi-week fresh presses. Use us most often as a denier indicator trade; If the commercial crowds are short EURUSD, we prefer to be long.
In view of the same unilateral manner professional trade sense, we believe that the Euro may continue to correct higher against the refuge currencies. Major traders have been placed at the worst of the results of the elections to the Greek criticism, and the victory of the pro-bailout party meant the clear dangers failed to materialize.
Currencies tend to have their ups and downs at the beginning and end of the month. These trends seasonal forex suggest the EURUSD can trade higher until June and may resume its broader tendency from the beginning in July.
How to interpret and exchange with the SSI? Watch a FXCM Expo presentation which explains the SSI.

Dollar Breaks Support as S&P 500 Builds on Bullish Reversal Setup

THE TAKEAWAY: The US Dollar broke below a significant support level, opening the door for further weakness, as the S&P 500 built upon a bullish reversal chart formation. S&P 500 – Prices are testing initial resistance at 1357.40 after completing a bullish inverse Head and Shoulders (H&S) pattern with a break above neckline resistance in the 1334.40-41.90 area. A break above this level exposes 1392.10. Broadly speaking, the H&S setup implies a measured objective at 1419.90, conveniently at the year-to-date closing high. The 1334.40-41.90 region has been recast as support.

 Daily Chart - Created Using FXCM Marketscope 2.0
CRUDE OIL – Prices continue to tread water between the 23.6% Fibonacci expansionat 81.07 and the June 7 high at the 87.00 figure. A break higher initially exposes 90.14. Alternatively, a push through support targets the 38.2% expansion at 77.34.
Daily Chart - Created Using FXCM Marketscope 2.0
GOLD – Prices pulled back to retest the 61.8%Fibonacci retracementat 1616.23, a barrier reinforced by former resistance at a falling trend line set from early March. A break below here exposes the 1600/oz figure. Near-term resistance remains at 1637.35, the 76.4%Fibonacci retracement, with a break above that exposing the May 1 high at 1671.49.
Daily Chart - Created Using FXCM Marketscope 2.0
US DOLLAR – Prices broke support in the 10066-70 area marked by a confluence of the 50% Fibonacci retracement and the 38.2% expansion to expose the 61.8% level at 10010. A push through this level targets the 76.4% retracement at 9936. The 10066-70 region has been recast as near-term resistance.
 
Daily Chart - Created Using FXCM Marketscope 2.0

$$US Dollar Index Classical Technical Report 06.13

13 June 2012 06:29 GMT   US DOLLAR INDEX:The market has now taken out some major resistance by 10,100 to open the door for fresh upside and a bullish continuation over the coming weeks. Next key resistance comes in by the 10,500 area, although, with daily studies now overbought, look for opportunities to buy on dips back towards 10,000 where a fresh higher low is now sought out.