fx weekly commentary - oct 9 - oct 15 2011

8/3/2019 FX Weekly Commentary - Oct 9 - Oct 15 2011

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The risk aversion drive that has gained sinceJuly slowed significantly last week, the $DXY

dollar index made highs at 79.84. The

greenback is not the typical safety asset.

Rather, the benchmark requires a near-

extreme level of fear to leverage its universal

appeal: liquidity. If one is looking for liquidity

then the US Dollar is where they go. Without

an absolute shift in capital away from

leverage and risky positions, there is little that

the dollar can do to draw capital in. What we

need to ask, is this a key reversal to furthergains in the near future for the world reserve

currency or are we going to be looking at a

reversal from this rally back down for further

declines? Well it is difficult to tell at the

moment, we have the FOMC meeting minutes

this week which will give key indication if the

Fed will be taking further QE measures to help

void a recession. If we do get more QE

measures then we will likely see the US Dollar

continue to pullback to further levels from this

current move up from record lows. Also the

Fed's release of Operation Twist will have

some updates come Wednesday during

minutes release.

The EURO lost it's gains to highs from last

week after the downgrades that occurred

Friday. Although rates remained on hold at

1.50 percent, which if market participants

were forecasting a cut should have boosted

the Euro, it was President Trichets

commentary that weighed on the regions

common currency during his final press

conference. He sated risks to economic

growth remain on the downside. The

European Central Bank announced that it

would resume its covered-bond purchases

and reintroduce year-long loans for banks, asa way to free up liquidity. Another liquidity

crisis onset by a Greek default would destroy

the market, just as what happened when

Lehman Brothers Holdings Inc. collapsed in

September 2008. We await the solution for

the crisis in Greece, and will likely get some

volatile news releases until the solution is

provided by the EU. Look for continued market

uncertainty in the weeks to come.

The U.K. central bank last week raised the

ceiling for its asset purchases, or so-calledquantitative easing, to 275 billion pounds

($428 billion) from 200 billion pounds.

Britains economy grew less than initially

estimated in the second quarter, with gross

domestic product rising 0.1 percent rather

than the initial estimate of 0.2 percent, data

last week showed. With the UK having

flexibility to continue to raise it's asset

purchase gives more reason for why in the

medium to longer term GBPUSD trade is likely

to reach the 1.4000s and maybe further. Adeeper rally could be on tap prior to the next

major move down in the GBPUSD, but don't

be fooled in an long term moves to the upside

in this pair, we have too much evidence

pointing towards a weaker pound.

Fundamental Outlook

Elite Global

Trading Forex Weekly CommentaryOct 9th Oct 15th 2011 Volume 1, Issue 23

In this issue:

Fundamental

Outlook

EURUSD1

AUDUSD

EURAUD2

EURCAD

EURUSD3

Event Risk 4

Contact Info

Disclaimer5
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2/5

Elite Global

Trading

Oct 9th Oct 15th 2011 Volume 1, Issue 23

AUDUSD: The Australian dollar struggled tohold its ground on Friday and the pullbackfrom 0.9877 may gather pace over the

following week as the Reserve Bank of

Australia shows an increased willingness to

reduce interest rate from 4.75 percent. After

keeping the cash rate unchanged in October,

the central bank reiterated that the economic

recovery is weaker than initially expected, and

talked down the risk for inflation, stating that

medium-term price growth is expected to be

consistent with the 2 to 3 percent target

range.

As the AUD/USD fails to push back above the

38.2% Fibonacci retracement from the 2010

low to the 2011 high around 0.9930-50, the

pair appears to have placed a lower high last

week, and the exchange rate may trend lower

over the near-term as the fundamental

outlook for Australia deteriorates. Moreover,

should market sentiment continue to taper off

over the following week, the flight to safety is

likely to sap demands for the high-yielding

currency, and we may see the aussie-dollar

may a run to test lows near .9400. A break of

this would extend this move down to .9200.

Outlook: Remains bearish, a rally orconsolidation may be the present state we are

still in prior to the next major move down.

Price being capped at .9880, shorting the

rally's is still favored, a break above .9880

exposes parity at 1.0000.

Australian Dollar / United States Dollar

EURAUD: This pair is positioned for anothermove towards the 1.3400. A reversal of last

weeks high positrons this weeks move

bearish. We will look for a rally for a better

entry from where it is currently trading. A rally

to 1.3750 could be expected prior to the

move down to 1.3400.

Outlook: Bearish Bias, a rally to 1.3750-1.3826. Short play around 1.3800, with a

stop at 1.4000, and a target of 1.3400.

Euro / Australian Dollar


3/5

Elite Global

Trading


EURUSD: Continued weakness followingthrough lower from last week, further

weakness can be expected. As the same time

we are carving out a short term bottom for a

deeper recover back up towards the 1.3800

area. Ahead of that recovery further lows is

certainly probable, such a case, the 1.3300

level will be targeted at first ahead of the

1.3245 level, its Jan 172011 low and then its

bigger support standing at 1.2874 level, its

Jan2011 low. Looking up the 1.3799 level,

its Sept2011 high will have to be taken out to

reduce its present weakness and possibly

bring further strength towards the 1.3835

level. Further out, resistance resides at the1.3936 level, its Sept 092011 high.

Outlook: Bearish Bias Remains, starting this

week out we see a test of 1.3300-1.3245, a

recovery up towards 1.3600 area and a break

above 1.3700 will bring the 1.3800 in

perspective of a testing. We like this pair short

below 1.3936 level, we look for shorts on the

rallies, ideal shorts are around 1.3800. We

are targeting 1.2900 area in the weeks to

come.

Euro / United States Dollar

EURCAD: This pair has been trading in a rangeof over 1000pips and gives great swings.

Currently trading near the break down point of

1.3850 area. A close below this area we will

likely get momentum to lower prices.

Outlook: Bearish Bias, targeting 1.3680 area.A rally up to the 1.3950 area would be

preferred to take this short, with entry at

1.3950, stop above 1.4130, and targeting

1.3680.

Euro / Canadian Dollar


4/5

Elite Global

Trading


Monday:EUR: French Industrial Production 2:45am

EUR: Sentix Investor Confidence 4:30am

AUD: NAB Business Confidence 8:30pm

Tuesday:EUR: ECB President Trichet Speaks 3:30am

GBP: Manufacturing Production 4:30am

CAD: Housing Starts 8:15am

AUD: Home Loans 8:30am

Wednesday:GBP: Claimant Count Change 4:30am

EUR: Industrial Production 5am

USD: FOMC Meeting Minutes 2pm

EUR: ECB President Trichet Speaks 2:30pm

AUD: Employment Change 8:30pm

AUD: Unemployment Rate 8:30pm

Thursday:CNY: Trade Balance

EUR: ECB Monthly Bulletin 4am

CAD: Trade Balance 8:30am

USD: Trade Balance 8:30am

CNY: CPI 10pm

Friday:G20 Meeting

EUR: CPI 5am

USD: Core Retail Sales 8:30am

USD: Prelim UoM Consumer Sentiment9:55am

Weeks Event Risk


5/5

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News letter Authors:

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James [email protected]

Tel: 786-759-0348

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Elite Global Trading

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fx weekly commentary - oct 9 - oct 15 2011

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