Market review for 18 – 22. 10, 2010

During the beginning of the previous trading week the greenback gained some strength against the background of the euro weakening. Expectations for the release of the Euro-zone fundamentals, which were planned to be published on Tuesday, pressured the euro. According to the forecasts, the Euro-zone ZEW survey (economic sentiment) was expected to decrease in October. As a result, the EUR/USD rate decreased to its minimums of $1,3830 mark. In the meantime, the forecasts of US housing market releases, which showed decrease, reinforced the speculations that the FRS would continue to introduce the policy of the quantitative easing. Market participants were waiting for the meeting of the Ministers of Finance and the G20 heads of the central banks’, which was planned for October 22-23 in South Korea. 

On Monday the yen continued to trade around its 15-year maximum against the US dollar, as the speculations that the Japanese government would refrain from intervening in currency markets, reinforced.  The yen strengthened against its major competitors as well.As the greenback demonstrated some stabilization, the oil price decreased to the $80.78 level per barrel. Gold and silver also showed some negative movement, as the US dollar strengthened against the major currencies temporarily. The “yellow metal” dropped to $1352.80 per ounce, and the silver rate decreased to $23.77 per ounce. The expectations for the negative Euro-zone fundamentals continued to pressure the euro on Tuesday as well. The EUR/USD pair demonstrated its decrease to the level of $1,3900. The released German ZEW survey (Economic sentiment) for October dropped to -7.2, compared to the forecasted decrease to -7.0. But at the same time the current situation of the same indicator grew to 72.6, against the predicted growth to 64.0. As a result, the euro showed temporary stabilization, and the EUR/USD grew and reached maximums of $1.3960. The decrease of the Asian stock market supported the demand for the save-haven currencies. As a result, the greenback strengthened against its major competitors. The US Minister of Finance, Timothy Geithner, stated, that the US dollar would continue to be the world reserve currency, and rendered additional support to the greenback. The unexpected increase of the interest rates in China pressured the stock markets, commodity markets and high-yielding assets.  According to the released information on the same day, the Bank of Canada refrained from raising the principal interest rate this month. Therefore, the Canadian dollar was under additional pressure. On Wednesday the EUR/USD rate grew and reached the $1,3856 level. The GBP/USD pair showed maximums above the $1,5700 level, but the rate stopped growing after the release of the last Bank of England minutes.The results of the Beige book report turned out to be a little stronger than the previous one, since the national economic activity demonstrated moderate growth. The greenback did not show any reaction to the Beige book publication, and the EUR/USD pair consolidated around the $1.3970 level.  Euro-zone fundamentals, which were released on Thursday, rendered support for the euro. The German PMI manufacturing and services indicators increased above expectations for October. The statement of the US Minister of Finance, Timothy Geithner, rendered support to the greenback, which showed strengthening against the major currencies. He mentioned, that the US government was not carrying out a deliberate policy of US dollar devaluation. According to the experts’ opinion, this dollar growth was temporary. On the same day the pound dropped and the GBP/USD pair decreased to the mark of $1,5750. The UK retail sales data in September was disappointing, which unexpectedly dropped below the forecasts. As a result, the sterling was under pressure.  The Australian dollar incurred losses on Thursday, as the speculations over the possibility that Chinese government would continue to undertake measures for cooling the economy, reinforced. By the end of the week, the EUR/USD set its weekly maximum at $1.4049, but closed the week around the $1.3950 mark. The GBP/USD pair dropped to $1.5700 level at the end of the week.EURUSDThe pair may try to break Fibonacci 23.6% retracement 1.42098. Higher is a trendline resistance at 1.44835.Resistance:   1.41130, 1.44835, 1.47697Support:  1. 37441, 1.33427, 1.28004GBPUSDThe pair is under pressure of Moving Average ( 100) and trendline at 1.59962. Once this level is broken the pair will rise to 1.64274. If the pair stays below 1.59962 the pair will decline to 1.57460.Resistance:  1.59962, 1.64274, 1.68504Support:  1.52523, 1.48532, 1.43343USDCHFThe pair has reached support 0.96526. Here is a strong level and bottom of 16.03.08. If the pair stays below 0.96526 the pair will drop to 0.93770. If the pair stays above 0.96526 the pair will rise to 0.99031. Strong resistance is at 1.01369 a trend line.  Resistance:  0.99031, 1.01369, 1.04060Support:  0.96525, 0.93770, 0.91074USDJPYThe pair is aiming to 80.244.Resistance:  83.330, 86.836, 90.909Support:  80.244, 76.535, 73.126AUDUSDThe pair is aiming to test 1.00031 again. If the pair breaks this level the pair will rise to 1.02299. Resistance: 1.00031, 1.02299, 1.04441Support:  0.97889, 0.94048, 0.89581