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Idea of the Day

You have to go back more than 3 years to early August 2010 to find a period equalling the past two weeks on EURUSD, during which we’ve seen higher lows for 10 consecutive sessions. Technically, there is a struggle with the previous trendline support drawn from the early July lows, which is currently acting as resistance in the current uptrend. This currently sits at 1.3534, We talked about the reason why the euro would do comparatively well in last week’s blog. Technically, there is clearly a growing case for some short-term correction, but given that daily momentum indicators are pretty neutral, this should only be modest. Note that Bernanke was sounding relatively dovish overnight, whilst ECB board members were yesterday sounding cautious on the possibility of a negative deposit rate, both of which provided underlying support to the upmove on EURUSD.

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Data/Event Risks

GBP:  The minutes from the November Bank of England meeting will be watched for signs of debate around the change in forecasts seen in the latest Inflation Report. There will also be an eye on any comments on housing market developments, with more talk of bubble like conditions in some parts.

USD:  The FOMC minutes in focus, but the dovish tone from Bernanke overnight and Yellan last week have largely set the tone. Retail sales seen 0.1% in October, with headline CPI seen falling to 1.0% (from 1.2%) and the core rate seen steady at 1.7%.

Latest FX News

USD:  Comments from Fed Chairman Bernanke were pushing the dollar lower, mostly against the euro. He again reiterated that rates were set to remain near zero for a “considerable time” after asset purchase have ended. Of course, he’s stepping down in January, but being replaced by someone that is seen mirroring his views, if not taking an even more cautious approach.

AUD:  Two failed attempts to push above the 0.9450 area overnight have seen the Aussie sag towards the end of the Asia session.

EUR:  ECB Board Member Asmussen was yesterday cautious on the possibility of introducing a negative deposit rate. This has acted as a supportive factor for the single currency, after Draghi was more open on the further options available after the easing earlier this month.

Further reading:

EUR/USD trading in an uptrend parallel channel – range is narrowing

CRUDE OIL: Set To Weaken Further