Today marks the end of an era as the ECB press conference will not be led by Mr. Euro, Jean-Claude Trichet. In steps the Italian Mario Draghi who begins his terms as ECB President. Draghi has a full plate of issues to sort out. While the most pressing issue may be the European debt crisis, new economic data shows a decline in euro zone growth prospects and the possibility of an EU recession.
Forex Market Trends
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
| Daily Trend |  |
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| Weekly Trend | |
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| Resistance | 1.4250 | 1.6615 | 80.20 | 0.9160 | 1.1010 | 0.8880 |
| 1.3960 | 1.6450 | 79.90 | 0.9080 | 1.0760 | 0.8830 | |
| 1.3830 | 1.6180 | 79.70 | 0.8960 | 1.0500 | 0.8670 | |
| Support | 1.3600 | 1.5875 | 77.85 | 0.8550 | 1.0200 | 0.8530 |
| 1.3525 | 1.5630 | 77.50 | 0.8450 | 1.0120 | 0.8350 | |
| 1.3145 | 1.5270 | 75.56 | 0.8240 | 0.9920 | 0.8285 |
Economic News
USD – USD Weakens as Market Sentiment Shifts
Markets have generally stabilized from the panic selling of risky assets following the announcement of a Greek referendum. A Bloomberg survey showed 69% of economists surveyed expect the Fed to enact another round of quantitative easing (QE3). With yesterday’s Fed meeting and today’s ECB meeting expectations for central bankers to support the global economy may have helped to support risky assets yesterday.
Tomorrow will bring US data releases in the US with weekly unemployment claims and the ISM Non-Manufacturing PMI survey. The risk is for the data to disappoint and show continued weakness in the US economy. This outcome would likely be USD positive.
It is difficult to ignore the price action over the recent month. The EUR/USD rallied back to 1.4250 where its previously broken trend line from May 2010 comes in and made a retracement of exactly the 61.8% Fibonacci level from the July to October move. The price action hints to the downside. The EUR/USD has support at this week’s low of 1.3607 followed by 1.3145. Resistance is found at yesterday’s high of 1.3820 and last Thursday’s high of 1.4245.
EUR – Mario Draghi Steps into Trichet’s Shoes
Today marks the end of an era as the ECB press conference will not be led by Mr. Euro, Jean-Claude Trichet. In steps the Italian Mario Draghi who begins his terms as ECB President with a full plate of issues to sort out. The sovereign debt crisis takes the headlines with the referendum in Greece threatening to derail last week’s agreement to write down 50% of Greece’s debt, a recapitalization of European banks, continued ECB bond purchases of peripheral debt, and a scheme to increase the leverage of the EFSF to EUR 1 trn.
Recent economic data hints at a continued slowdown in European growth. Germany reported an increase in unemployment during the month of October, the first rise since February 2010. The German unemployment rate climbed to 7.0% from 6.9%. Forward looking data such as the German October manufacturing PMI survey fell to 49.1 from 50.3, below the boom/bust level. With an economic slowdown occurring in Europe’s largest economy, one must wonder how long it will be before Draghi unwinds this year’s 0.50% interest rate increases?
A key level to eye for the EUR/GBP going into the ECB press conference is 0.8550 where the rising trend line from June 2010 comes in. Below this level there is a lack of significant supports until the yearly low at 0.8285.
GBP – Events Outside the UK are Driving the GBP
Sterling continues to perform well and a weakening USD has helped. Tuesday’s release of manufacturing PMI below the 50 level was offset today with the release of a stronger construction PMI survey which came in at 53.9 vs. forecasts of 50.0. The significantly higher than expected result has helped the GBP/USD climb above 1.6000 but the pair failed to hold the gains.
Today UK services PMI will be released with expectations of a 1 point decrease from the previous month’s survey to 51.9. Stronger data may help the GBP stay afloat as it has done this week, at least more so than the EUR. Keep in mind that the GBP is trading at higher level from when BOE announced additional quantitative easing. This fact hints that external factors are driving the movements of the GBP/USD. The GBP may be caught in the crossfire of larger issues at hand such as the Greek drama and central bank policies from the Fed and ECB. The GBP/USD has support at 1.5890 where the rising support line from the October 12th low is found. Resistance is this week’s high at 1.6165.
Silver – Silver Prices Bounce at Short-Term Trend Line
Spot silver prices received a bit of support after falling as low as $32 where the commodity received a bounce at the rising trend line from the September and October lows. Support for the commodity may begin to pick up in-line with demand for gold as expectations rise for additional quantitative easing from the Fed. Resistance for spot silver will likely be found at the October high of 35.65 with support back at the rising trend from the October low which now comes in at $32.15.
Technical News
EUR/USD
An impressive run higher over the month of October took the EUR/USD as high as 1.4250, the 61% retracement from the May to October move. However, a failure of the pair to overcome this key technical mark does not bode well for the EUR in the near term. Also worth noting is the failure of the pair to move above its previously broken trend line from the June 2010 and the January 2011 lows. Falling stochastics on the daily and weekly chart also point to declines in the value EUR/USD. Support is located at 1.3915 from the October 17th high followed by 1.3650 off of the October 18th low and the October low at 1.3145. The 61% retracement level will serve as initial resistance with additional selling perhaps at 1.4450 from the trend line off of the May and July highs.
GBP/USD
Cable has failed to climb above both its 200-day moving average and stopped short of its 61% Fibonacci retracement target from the April to October move which at 1.6150 should serve as initial resistance. A move higher could go on to test the 1.6450 resistance off of the August high though daily stochastics have crossed and the weekly stochastics are beginning to roll lower as well. As such, a move lower could find support at 1.5890 from the October 26th low as well as the October 18th low of 1.5630.
USD/JPY
Another round of intervention has lifted the USD/JPY 400 pips for a 5.29% gain. However, the pair’s sharp move higher was unable to break a key falling trend line from the 2007 high which comes in this week at 79.70. With the long term downtrend still intact a move lower may once again test the all-time lows the pair will first encounter support at 77.85 from the September high as well as 77.50 from the mid-October high. Should the intervention continue the Japanese Ministry of Finance may find willing offers waiting at 80.20 which was the peak of the last round of intervention in August.
USD/CHF
The Swiss franc has once again resumed its downtrend versus the USD after moving as low as 0.8550, a level that has previously served as both support and resistance. A bounce from here could find an offer at 0.8900 from the resistance line off of the October peak. Should the downtrend from October extend into November a break of 0.8550 may have scope to 0.8240 from the August high.
The Wild Card
EUR/CHF
This currency pair has disappeared from the spotlight following the 1.20 floor the SNB put under its value but forex traders should watch more closely as the EUR/CHF drifts lower. The EUR/CHF as traded as low as 1.2140, the pair’s lowest level since early October. This is not far from the 1.20 limit the SNB has vowed to defend. It should be noted that the peak in the EUR/CHF failed to break the long term trend line that falls off of the May 2010 high and now comes in at 1.2410. Could an escalation of the European debt crisis bring the market to test the limits the SNB is willing to go to defend the floor?
Written by Forexyard.com