GBP/USD and EUR/USD

Yup... Market's played ZIG ZAG as Well

Love it, Bro http://ruforum.mt5.com/images/smilies/luv.gif
I hope provide Post when there is Event, please. To remind us... http://ruforum.mt5.com/images/smilies/peace.gif

Six FX Drivers

Saturday, November 5, 2012 at 5:00 AM
Marc Chandler

http://1.bp.blogspot.com/-qFrFxdHZUL...M/s320/six.jpg

This is a momentous week. The two largest economies have political transitions, three central banks meet, and Greece's parliament votes on key reforms, which if approved, will avert an immediate crisis. as the beleaguered country is now projected to run out of funds within the fortnight.

At the same time, nothing changes. The fiscal cliff in the US is still looming and it will be no clear on Wednesday, the day after the election, how the fiscal cliff will be averted.

Despite the relative calm few, if any, really think the European debt crisis has been resolved. Some frame the issue in terms of indecision. Greece has to decide once and for all if it wants to be in the monetary union. Spain has to decide whether to ask for additional assistance.

And yet every day, Greece chooses monetary union over some greater economic and social misery. Every day that has passed, Spain's Prime Minister Rajoy, the most powerful Spanish leader in a generation, given this parliamentary majority and the number of regions his party controls, has chosen not to ask for assistance. These will not change in this momentous week ahead.

1. It is ironic then that of the three G10 central banks that meet this week, the European Central Bank's meeting may prove the least interesting. It is most unlikely to cut the refi rate that stands at a record low, even though the regional economy is most likely contracting. The manufacturing PMI, we learned last week, has been below the 50 boom/bust level for nearly 1 1/2 years. The service sector PMI due out later this week is likely to confirm it.

Draghi has to wait for a formal request to trigger the Outright Market Transactions. He is likely to get queried about the weekend report in the German paper Die Welt apparently claiming that Spanish banks has been given preferential treatment (over Irish banks) regarding the discount attached to government T-bills. The report seems to suggest Spanish banks have been "over-lent" some 16.6 bln euros.

Spain itself will be engaged in a notable test just prior to the Draghi's press conference. It will seek to issue a new 5-year benchmark bond. What makes it particularly noteworthy is that it is the long maturity Spain has sought to bring to market since May 2011. A poor reception would be seen as adding more pressure on Rajoy.

2. The Reserve Bank of Australia meets. Its decision will be announced as the polls begin closing in the US. The cash rate stands at a relatively lofty 3.25%. A strong case can be made for it to cut rates as it did last month. If it hesitates, market expectations will simply shift to next month. The Australian dollar could rally quickly if the RBA stands pat, but will likely surrender those gains.

Even with a rate cut, Australia's real and nominal rates are the highest among the high income counties. Moreover, despite the talk of the Chinese yuan becoming an important reserve currency, the Australian dollar is a larger beneficiary of the diversification of reserves.

3. The Bank of England's meeting will conclude just prior the ECB's meeting. With its gilt purchase winding down, the Monetary Policy Committee can decide to do nothing or extend the program further. With the expansion in Q3 GDP ending three consecutive quarterly contractions and the funding-for-lending scheme underway, a case can be made to stand pat.

Yet it seems clear that Q3 GDP was a bit of a fluke and the UK economy remains vulnerable. This may be driven home by the September industrial output report out on Tuesday, which is expected to show the first back-to-back declines in industrial output since the end of last year. More austerity is in the pipeline and the UK's largest trading partner is in a recession (again). However, just as sterling did not seem to be impacted by the current gilt purchases, there is no compelling reason to expect to weaken if the gilt purchases are extended by another GBP50 bln.

4. The Greek parliament will debate and then vote on the package of reforms negotiated with the Troika. Although the government has 175 of the 300-seat chamber, the smallest coalition partner, the Democratic Left with 16 seats, has rejected the new (and what Prime Minister Samaras says is the last) labor concessions. It leaves room for only 9 defects from the New Democracy and Socialists. The failure to approve the measures can potentially spark a dramatic risk-off response by investors. Even though a Greek exit is not imminent that is what will be feared. It will make it difficult for the November 12 Eurogroup of finance ministers to approve tranche of aid. On November 16, Greece has an estimated 4 bln euros of bills maturing. It is not clear that it has sufficient cash to cover the redemption.

5. By expanding its asset purchase program for two consecutive months, the BOJ is now "out of play" until at least next year. The focus in Japan will shift to the private sector and the government. The corporate news last week was startling.

The corporate icons, Sharp and Panasonic reported incredible losses. Sharp previously had projected a JPY250 bln profit and now warns of a JPY450 bln loss in the full year ending March. It has apparently been hit by falling prices for liquid crystals and weak demand in domestically and in China. It admitted that it might not survive.

Panasonic, Japan's second largest television maker, warned of a JPY750 bln full-year loss. This is reportedly 30-times larger than analysts expected. Restructuring costs and falling demand prompted it to suspend its dividend for the first time since 1950.

Meanwhile reports suggest that the government has only spent about half of the (~JPY19 trillion) funds earmarked for reconstruction. Another quarter of the funds apparently were used for projects not associated with reconstruction. It is within that context that we should understand the government's new initiative to spend "an additional" JPY2.7 trillion to try to revive the economy.

Japan is approaching a fiscal cliff of its own. The opposition is blocking the government from issuing bonds finance its spending. The Noda government has claimed it will run out of money by the end of the month. This is probably a bit of an exaggeration as there may be some innovative ways to buy a bit more time (talk to Robert Rubin who did oversaw that in the US). The LDP may only be able to eek out a firm election commitment by Noda, something that has evaded them since the passage of the controversial retail sales tax hike, late this month or maybe not until next month.

6. Before some turning to the US election, let us share some observations about the US employment report. It is difficult to sufficiently stress the noisy nature of the monthly nonfarm payroll report. Take the August for example. Initially it was reported 96k net nonfarm payroll jobs were created. Now after two revisions, it turns out that 192k net new jobs were created.

The 171k increase in the October nonfarm payrolls is smack in line with the average since July (~173k). The monthly average this year is 157k and the 12-month average and the 2011 monthly average was 153k. That relative stability is noteworthy. The fiscal uncertainty is not freezing up hiring. Capital investment is a different story and there the near-term outlook signaled by the orders data is poor.

In some ways, more importantly than the net new jobs created is the length of time current employees are working. Aggregate hours rose by 0.1%in October to bring the seasonally adjustment annual rate over the past three months to 1.3%, the best in six months.

On the other hand, wages in the private sector was unchanged and at 1.6% the year-over-year rate represents a new cyclical low. American's willingness to finance consumption out of savings may not be deterred as consumer confidence (Conference Board measure) is at a 4 1/2 year high.

The performance of the economy in Q1 13 has little to do with the economic data that is being reported. It has every thing to do with what happens to fiscal policy and it will not be resolved this week.
While we have suggested argued that Romney had to tack to the right to win his party's reluctant nomination, had relatively weak ground game and failed to move back to the center in a convincing and compelling way. Yes the first debate was fortunate for Romney; he couldn't have planned Obama's milquetoast performance.

However, in recent days, Obama has caught a few breaks. The human tragedy left in the wake of super storm Sandy pushed the election off the front pages. Obama was presidential and commander-in-chief. The ability to work with and it appears, appears the straight-shooting Republican NJ governor was another unscripted piece of fortune for the incumbent.

While the Obama is most likely to be re-elected, as we have long maintained, it is not clear that his coattails are sufficient to capture control of the House of Representatives. The Democrats are likely to hold on to the Senate, but only barely.

Regardless of who is elected, Bernanke will most likely be heading up the Federal Reserve in the year ahead. The same cannot be said of Treasury Secretary Geithner, who has indicated he will be stepping down. In order to offset the President's weakness in developing a working relationship with the Republican leadership and wanting to demonstrate the intent to address the looming fiscal crisis, Erskine Bowles would be an interesting and market-friendly nomination as Treasury Secretary.

We conclude by noting under admittedly different macro economic circumstances, the dollar sold off hard in the uncertain aftermath of the 2000 election. Some pundits have warned of a potential split between the popular vote and electoral college vote.

http://www.forexfactory.com/showthre...03#post6163603

according to weekly fib target
23% reached
38% 1.27
50% 1.26
62% 1.25


today range will be 1.28-1.27

http://www.forexfactory.com/attachme...1&d=1352126886

i'm keeping the 1.2896 trade but with break even sl trigger
closed 1.3030 with 150 pips profit
new sell order at 1.2800 for next 6 hrs

good luck all and trade carefully

thanks,

G

U.S. Stocks Fall Before Elections on Greece Concern

By Rita Nazareth and Tom Stoukas - Nov 5, 2012 9:32 PM GMT+0700



U.S. stocks fell, following last week’s advance in the Standard & Poor’s 500 Index, as Americans prepared to vote in presidential elections and on concern Greece will struggle to win a bailout.

Apple Inc. (AAPL) rose 1.4 percent as it sold 3 million units of its iPad mini and fourth-generation iPad during the debut weekend, saying demand for the smaller version of its tablet outstripped supply. KBW Inc. (KBW) added 7.1 percent as Stifel Financial Corp. (SF) agreed to buy the boutique investment bank in a cash-and-stock transaction valued at $575 million. Time Warner Cable Inc. (TWC) declined 4.3 percent amid disappointing earnings.

The S&P 500 (SPX) lost 0.3 percent to 1,410.07 at 9:46 a.m. New York time. The Dow Jones Industrial Average slid 33.25 points, or 0.3 percent, to 13,059.91. Trading in S&P 500 companies was 15 percent below the 30-day average at this time of day.

“Markets are expected to remain mostly range bound today, with some more downside possible as investors tend to take money off the table, preferring to take a wait-and-see attitude until the picture is clearer,” Markus Huber, head of German sales trading at ETX Capital in London, wrote in an e-mail.

Equities followed European shares lower and the euro traded at an almost two-month low. Greek Prime Minister Antonis Samaras will this week battle to win political support for measures needed to obtain aid. U.S. voters decide tomorrow between giving President Barack Obama another four years in office or changing course with Republican challenger Mitt Romney.

Hurricane Sandy

The S&P 500 rose 0.2 percent last week as the market reopened after Hurricane Sandy caused the longest weather- related shutdown since 1888. The benchmark gauge for American equities has surged 12 percent this year as central banks around the world stepped up stimulus to boost the economy. About 70 percent of companies that released quarterly results have beaten analysts’ estimates, according to data compiled by Bloomberg.

Apple rallied 1.4 percent to $584.85, after slumping 4.5 percent last week. The shares capped a sixth weekly decline on Nov. 2 for the longest losing streak since October 2008. The company began selling the 7.9-inch tablet in the U.S. and more than 30 other countries on Nov. 2, ramping up an effort to fend off competition in the market for tablets, which NPD DisplaySearch predicts will more than double to $162 billion by 2017.
Pre-Orders

“Demand for iPad mini exceeded the initial supply and while many of the pre-orders have been shipped to customers, some are scheduled to be shipped later this month,” Cupertino, California-based Apple said today in a statement.

KBW jumped 7.1 percent to $17.46. Shareholders will receive $17.50 per share, comprised of $10 in cash and $7.50 in Stifel common stock, the companies said today in a statement. The deal values KBW 7.4 percent higher than its closing price on Nov. 2.

Time Warner Cable slumped 4.3 percent to $93.93. It lost 140,000 video subscribers, more than the 128,000 that analysts had estimated. Time Warner Cable has become “top-heavy” after shares gained more than 54 percent this year, Todd Mitchell, an analyst at Brean Capital LLC in New York, said in an interview before the results were released. Its operations also aren’t as strong as those of Comcast Corp., the largest U.S. cable company, he said.

Swings (INDU) in U.S. stocks have shrunk to the lowest level in six years, an indicator that has most often coincided with incumbent parties keeping the presidency in data going back to 1900.

112 Years

The Dow has gained or lost 0.54 percent a day on average this year, the smallest fluctuations for an election year since George W. Bush defeated John Kerry in 2004, according to data compiled by Bloomberg. Daily changes have trailed the 112-year average of 0.75 percent in 13 of 17 instances when incumbents won, compared with six of 11 times the parties lost.

While volatility doesn’t predict winners, its decline shows less concern that prices will be whipsawed by economic news, a potential benefit forObama. At the same time, the Dow’s 65 percent rally since he took office never pushed it above the record 14,164.53 reached in October 2007. No Democrat since World War II has held on to the White House with the Dow this far from its peak.

“The incumbent tends to get re-elected when the market is doing well,” James McDonald, chief investment strategist at Northern Trust Corp. in Chicago, said in a telephone interview. His firm manages $750 billion. “If the market has done well, that means the economy is doing well, that means the incumbent has a better chance.”


Source : bloomberg

Its crazy November , so many events and important decisions will be made ...

Absolutely Agree with you... http://ruforum.mt5.com/images/smilies/ok.gif

If everything come in place , i might say that 1.34 will not be far away - if Rajoy finish this ridiculous theater play and apply for the Bail out. At least we know for sure that the : Obama will win his second term, the Greeks will sign , Britian will further integrate with EU and Super Dragni will always be there

what is the time frame for all this wish list

The time frame for 1.34 is yet to be known , the wish list is about 16 days from today

if gbp ever integrate with eu it'll be when most of the eu problems disappear or when gbp is in bankruptcy...

I'm not talking about currency integration, i'm only speaking about further monetary consolidation with the EU - and Britain has been warned already , that either or .. the issue will be addressed in 21 of November !

ok my mistake....

The S&P, U.S. Dollar And The Fed

November 5, 2012 includes: SPY, UDN, UUP
Mark Vierra


There have been many questions about the relationship between the S&P and the US Dollar (USD).

In the not so distant past, having a strong currency would gain the respect and admiration of other countries, but those days are long gone. Today a weak dollar is seen as good and stock markets rally on dollar weakness.

The Federal Reserve (Fed) is "dovish", "risk" is erratically jumping between on and off and the S&P still maintains an "inverse" relationship to the USD. In this article I will explain what this means and some of the complex dynamics of the USD and the stock market. I will explain how the Fed affects these relationships in simple, easy to understand terms.

First, let's define terms as related to this subject.
Safe haven or risk off asset.

An investment made in times of world stress, conflict or turmoil. While most other investments in this market climate are considered risky, liquidity flow from these risk on assets to more historically safer areas. USD and US Treasuries are the best examples.

Inverse correlation.

An inverse correlation is any stock product, commodity or currency where the price moves directly opposite to each other. For example:

When the S&P goes up, the USD goes down.
When the USD goes up stocks go down.


http://static.cdn-seekingalpha.com/u...-marcosx3x.png



Hawkish or Dovish

Hawkish or dovish refers to statements used from central banks when describing their current sentiment on inflation and would indicate a possible change in interest rates. Hawkish for higher rates and dovish for lower rates. The entomology behind the term comes from the predatory, high flying hawk as opposed to the docile dove.
If inflation rears its ugly head the Fed becomes hawkish and counters with raising rates and enacting more restrictive credit policies. This in turn drives up the value of the dollar with higher overnight lending rates. Better interest rates makes the USD more attractive for investors to park money. The opposite of this is when the Fed doves take the position that inflationary pressures are low enough for low interest rates to be desirable.

How does this relate to the stock market?

There are two main factors behind the stock market dynamics in the USD:

 

1. The risk off or safe haven status of an asset
2. The perceived value of US currency strength against a basket of main currencies, reflected in the US Dollar Index (DXY)

For the first item and as stated before, as liquidity moves from one it often finds itself in the other (risk on/off). In other words, let's say there is "saber rattling" news from the Middle East. The US safe haven dollar moves up in value and stocks drop. Why? Some might say that oil will be more expensive and hurt corporations' bottom line. That may be true, however it is the more expensive dollar that is affecting stocks by a larger degree. Not only due to the greater demand for safety, but for the second factor of perceived dollar value, given above.

The perceived dollar value aspect is a bit more complicated with respect to how a lower USD affects a higher stock price, and a higher dollar drives stock prices down. If the value of the USD drops then goods and services will often adjust their price to compensate (i.e. it will be worth more dollars, but the intrinsic value remains the same). This continues from the largest corporations all the way down to the groceries of a common person. If the same companies in the S&P have not changed fundamentally - only the US currency has changed - then stocks adjust price to compensate for this change in value.

I do not necessarily agree with his grim outlook however I do like the way Gerald Celente put it:

 

1. Gold is not up, the dollar is down.
2. Stocks are not up the dollar is down.

For an average person this can be seen from a dramatically increasing grocery bill over the past several years. An inflation in commodities when rates are near zero and a history that will record the last 3 years as zero inflation.

To add further complication, it happens that there is a chicken or the egg scenario.

The same fundamental news changes the value of the USD and stocks simultaneously. Most of the time what is perceived as positive, and would indicate a stronger economy, is good for the USD as well as stocks. For a hypothetical example:
Better than expected gross domestic product (GDP) numbers come out and stocks rise.
But what happens to the USD? One would think that it should rise as well and sometimes it does. However in most cases it would remain flat or go down.

A dual aspect that adds yet another complication is the USD strength derived as a default safe haven currency.

GDP is good for the economy as well as the dollar, however the flow of liquidity in the markets would move away from the safe haven USD/Treasury or risk off assets. Demand would actually decrease and the USD would either remain flat or drop on the good news.

Demand for safety trumps the positive news.

Today's market environment has lost the counter effect of inflation fighting higher rates to go along with a higher GDP. Why? The biggest example of this, and the topic of many traders' minds, is the Fed. Keeping a low interest rate for an extended period, quantitative easing (QE) and the seemingly dedication to the devaluation of the USD, make the USD less attractive.

If you change the value of the dollar then the value of everything must give to the Yang of the dollar Yin.

As the Fed intervene, they have everything across the board going up in price from commodities (look at the price increase of the aforementioned grocery example) to stocks. Overnight and benchmark lending rates are kept at near zero and the recorded past 3 year history has inflation at near zero. The drop in the US Dollar value makes it no real wonder as to why groceries, commodities, stocks and gold are up in price.

The Fed affects the value of the dollar and thereby affects everything including the markets.

In basic economics we are taught that if you issue more shares in stock, this dilutes shares and drives the individual stock value down (assuming no increased demand). In this way, as the US Treasury issues more bonds and the Fed increases its balance sheet, intervention drives the value of the USD down. I do not want to digress too far on the import/export aspect of dollar value fluctuations, but on a broad scope a lower dollar means less imports, where US exports are more attractive. The trickle down from this is that when other countries suffer from exporting less, due to the lower valued USD, the chain reaction is they have less profit in turn to buy from the US.

How does understanding these things help?

I have created a spreadsheet to help me understand and track the USD value effect on the S&P. I multiply the value of the US Dollar index times the value of the S&P index (SPX), the product of which is an Adjusted, or "Normalized", version of the S&P. This removes the Dollar value fluctuation from the S&P. When analyzing this, it gives visibility to various clues in the market's risk on/off sentiment, and from the divergence away from any one-to-one, exact inverse relationship. The divergence reflects a unique view into not only risk, but the actual value sentiment of current market environment. In other words, if the normalized counterpart in the spreadsheet has higher value, I can not only say that short term sentiment is favoring more risk appetite, but more importantly, I can see how much of a degree of fluctuation between the S&P and the normalized version exists.

Although my belief is that it has promise, I take no responsibility to its validity. I think there is something here, but I am not sure that the weighting (equal in this case for each index) is valid. For example, should I have used a fraction the DYX value with the full value of S&P or vice-versa? There is no way to be sure without some sort of correlation analysis. It will take some time for the market to run through more bullish/bearish cycles to derive anything close to resembling conclusive.

docs.google.com/spreadsheet/ccc


http://static.cdn-seekingalpha.com/u...-marcosx3x.png


To conclude

The current perception behind the dollar/stocks inverse relationship seems wrong to most people, and think it should be the other way around. A stronger dollar should mean a stronger economy. Higher rates to fight inflation would mean a stronger economy and be a good thing. I think it's important not to over-emphasize the barrage of speculation (i.e. if the stock market goes up on bad news anticipating more QE stimulus or good news is bad for the stock market). In a constantly evolving market, we will see these correlations change dramatically over time. The day may soon come when the Fed becomes more hawkish, Treasury demand eases and stocks move more on their own merit, without the same influences of the US Dollar and risk on/off aspect. Many groups including the Chinese and especially the Russians have been calling for the demise of the USD default status for decades, but I don't think it'll happen. At least not in my lifetime.

The basic concepts of stock trading have not changed. The fluctuations of dollar value are just that. Fluctuations. My primary goal here is to provide some insight and answers to some perplexing questions, and break down some of the esoteric nature of common market discussions involving this subject.


Source : Seeking Alpha

'Fiscal Cliff' Deal Won’t Help US Rating: Egan-Jones

Published: Tuesday, 6 Nov 2012 | 3:06 AM ET
By: Ansuya Harjani - Assistant Producer, CNBC Asia



Even a compromise by Congress to avert a ‘fiscal cliff’ won’t change the troubled credit outlook of the U.S. economy, which continues to face a huge debt burden, says Sean Egan, managing director of Egan-Jones, the ratings firm that has cut America’s sovereign debt rating twice this year.

http://media.cnbc.com/i/CNBC/Section..._skies_200.jpg

"The key measure on sovereign credit quality is debt-to-GDP, in the case of the U.S., it’s risen rather dramatically, from four years ago at 75 percent debt-to-GDP, to currently over 104 percent,” Egan told CNBC on Tuesday.

“The problem in the U.S. is that the debt has grown whereas the GDP has not grown. (While) the U.S. has had the benefit of being the major reserve currency, that only takes it so far,” he added.

Egan-Jones first cut U.S. credit rating to AA from AA+ in April, citing concerns over a lack of progress in cutting federal debt; and again in September, to AA-, triggered by concerns the quantitative easing from the Federal Reserve would hurt the country's credit quality.

(Read more: US Credit Rating Cut by Egan-Jones ... Again)


The independent credit-research firm has assigned U.S. the lowest sovereign debt rating among the four major ratings agencies. Moody's Investors Service [MCO 46.60 http://media.cnbc.com/i/CNBC/CNBC_Im...hlist_down.gif -1.42 (-2.96%) http://media.cnbc.com/i/CNBC/CNBC_Im...ltime_icon.gif] rates the United States Aaa, while Fitch has assigned a AAA rating, and Standard & Poor's (S&P) a AA-plus.

The “fiscal cliff” is the term used to describe a series of tax hikes and spending cuts that will take place in January if Congress and the White House fail to reach deficit-reduction targets.

Concerns over this fiscal precipice have delayed investment and hiring decisions by companies, and if not avoided, could push the U.S. economy into a recession, analysts have warned.

Financial industry leaders including Goldman Sachs CEO Lloyd Blankfein believe a deal can be reached despite the bitter election battle between President Barack Obama and Republican challenger Mitt Romney.

Obama and Romney were in a tight race on the eve of the election, but the latest Reuters/Ipsos national poll of likely voters, a daily tracking poll, gave the Democratic candidate a slight edge, with 48 percent support compared to Romney's 46 percent.

When asked which presidential candidate is better positioned to tackle issues facing the U.S. economy, Egan said both Obama and Romney will be faced with the same hurdles.

“Regardless of who’s elected, either one is going to have to deal with a rather high deficit and (deal with) the pending retirement of a number of baby boomers who have been critical to the economy,” he said.


Source : CNBC

... http://ruforum.mt5.com/images/smilies/girl_knitting.gif ...

Unlikely Day for Turnaround Tuesday

Tuesday, November 6, 2012 at 10:59 AM
Marc Chandler



http://3.bp.blogspot.com/-OcnqzYTNhr...200/puzzle.jpg


The US dollar is consolidating its recent gains with a most unlikely backdrop. European data was much weaker than expected. The Greek parliament vote on reforms and the 2013 budget look like cliff hangers. With national polls pointing to a statistical dead heat, the US presidential election is thought to be coming down to the wire. Legal maneuverings are already underway. The ECB and BOE meetings are less than 48 hours away.

Perhaps it was the less dovish than expected Reserve Bank of Australia that got the ball rolling. It left its official cash rate unchanged at 3.25% and noted that the news from China was less bad. While the Australian dollar has rallied to new 5-6 week highs, the option barrier thought to be struck at $1.0450 remains intact. The recent retail sales and trade reports were somewhat better than expected, but a bigger challenge may lie with the jobs report on Thursday and the monetary policy statement on Friday, which could see the growth profile revised down.

However, one couldn't imagine a poorer set of numbers from Europe. The euro zone service PMI was weaker than the flash report suggests, German manufacturing orders collapsed and UK industrial output fell three-times more than expected.

The final euro area non-manufacturing PMI of 46.0 compares with a 46.2 flash and 46.1 September reading. Markit says this is consistent with a 0.5% contraction in GDP. Ironically, the periphery, like Ireland, Spain and Italy showed a bit of improvement. The disappointment was with Germany and France. Germany came in at 48.4 from 49.3 in the flash and 49.7 in September. France stands at 44.6 from 46.2 in the flash and 45.0 in September.

Separately Germany reported manufacturing orders in September slumped 3.3% on the month. The consensus called for a 0.5% decline on top of the 0.8% fall in August. This warns of risk to the downside when industrial output figures are released tomorrow. The consensus calls for a 0.7% decline.

Initially in Asia, the euro's recent losses were extended, but the optionality reportedly struck at $1.2750, just ahead of retracement objectives near $1.2740, remained intact and it is off this that the euro bounced. The $1.2820-40 area poses the immediate technical obstacle. A move and ideally a close above this band is needed to begin repairing the technical damage inflict to the euro in recent days.

While the poor economic news from the area is unlikely to spur the ECB into action at Thursday's meeting, the same cannot be said for the UK. The 1.7% slide in September industrial output was three times more than the market expected and brings the year-over-year rate to -2.6% from -1.0% in August. Manufacturing did eke out a small gain, 0.1%, which was a third of the rise expected and pales in comparison to the 1.2% drop in August.

The data does not necessarily mean that BOE will announce a new set of gilt purchases. Both deputies at the BOE have expressed some skepticism about the effectiveness of such purchases going forward. However, until a formal evaluation of the funding-for-lending scheme is conducted (a month off still), a modest new gilt purchase program (~GBP25 bln) is possible. As QE has hardly weighed on sterling, we do not expect much of a market reaction one way or the other on Thursday, suspecting instead, sterling's performance will be part of the larger market move after the US election and the first part of the Greek vote.

Sterling has yet to resurface above $1.60. The $1.6030-40 area poses even more formidable technical resistance. At the same time, the late-October low near $1.5915 also looks fairly safe at this juncture.

Lastly, the yen itself is largely sidelined. The dollar initially dipped below JPY80, but ever so briefly and ever so shallowly, and new dollar buying quickly was seen, lifting the greenback to the JPY80.30 area, which it continues to flirt with. The yen has been sold on the crosses. The euro held JPY102 and has staged what appears to be a reversal. A move above JPY103 may spur a move to JPY104 in quick order.

Brief Thoughts on the Price Action

Tuesday, November 6, 2012 at 08:14 PM
Marc Chandler

http://4.bp.blogspot.com/-Z1PbLaHWgz...ght%2Bbulb.jpg


Turnaround Tuesday was not all that convincing. The correction really took on more of the appearance of consolidation. Renewed dollar gains look likely, regardless of the electoral results, which are still not known at this juncture.

The lifting of the event risk posed by the election is likely to be over shortly and this is good news for investors because it brings us a day closer to an end to the uncertainty posed by the fiscal cliff.

The euro's bounce ran out of steam at the 200-day moving average on Tuesday, which is found just below $1.2830. This seems psychologically more important than technically significant. It gives the bottom pickers nothing to hang their hats on. The next target for the euro is near $1.2740 and a break could give potential for another cent decline.

The ECB meets Thursday. While the contracting economy would seem to justify a rate cut, the ECB remains focused on the transmission mechanism. Officials seem to want to believe the contraction will be brief (H2 12) and shallow. If and when evidence mounts to challenge this view, the case for a rate cut becomes stronger. It is more likely to be a Q1 13 phenomenon than Q4 12.

Sterling has held above the Oct 23 low set near $1.5914, which also corresponds to a retracement objective of the advance from the June 1 low (~$1.5270). Below there the 200-day moving average is found (~$1.5850) and then the 50% retracement objective (~$1.5790).

The Bank of England meets on Thursday. A rate cut remains highly unlikely. The real question is whether it announces a new gilt buying program. The recent string of data, including the unexpectedly large drop in September industrial output, underscores the fragility of the economy, may tilt the odds more in favor additional gilt purchases, even though the two deputy governors have expressed some reservations. In other central banks this might be more important, but recall that at the BOE, Governor King has been out-voted a handful of times.

The dollar appears stuck in a JPY80.00-JPY80.50 near-term trading range. The man who may be the next prime minister (Shinzo Abe, for the second time) has argued the BOJ should continuing easing until inflation is 3%. This is quite aggressive, but cannot be taken at face value.

However, it does play on a couple of themes that are emergent in Japan. First, the country is moving in a more nationalistic direction. Second, the BOJ was structurally among the least independent of the major central banks, but both the current DPJ-led government and a next government, likely led by the LDP, seems intent on further co-opting it. Third, with the collapse of the global brands of Sharp and Panasonic, which some attribute to the strength of the yen (but may have to do with excess capacity in a number of product lines and corporate governance issues), officials appear more intent on weakening the yen, without alienating the US. This is especially important given the high level of tension between Japan and China.

The Australian dollar bounced to new highs (since late September) after the RBA left rates on hold and issued a less than dovish statement. However, the 1.0450-75 area is key. If this is not overcome, the late longs may be vulnerable. Thursday's employment report and Friday's monetary policy statement will be more important and the door to another rate cut is more open than the price action may suggest. Support is pegged in the $1.0360-80 area.

Multi Levels for POUNDS in H1 time frime

Wednesday, November 7, 2012

GREEN Levels Colour (with Prices) is SMALL Levels move.
PUPLE Levels Colour (with Prices) is MEDIUM Levels move.
BLUE Levels Colour (with Prices) is BIG Levels move.

Broken Lines Colour (without Prices) is IMPORTANT Levels.

Multi Levels for EURO in H1 time frime

Wednesday, November 7, 2012

GREEN Levels Colour (with Prices) is SMALL Levels move.
PUPLE Levels Colour (with Prices) is MEDIUM Levels move.
BLUE Levels Colour (with Prices) is BIG Levels move.

Broken Lines Colour (without Prices) is IMPORTANT Levels.