Best Thread FXCM/DailyFX Signals and Strategies

[Jason Rogers]

Risk On Slams US Dollar- Yen Plummets as Trader Chase Yields

Written by Michael Boutros of DailyFX.com

Daily Winners and Losers

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The kiwi is the top performer against a weaker dollar at the open of North American trade today with an advance of 1.85%. A dramatic and substantial improvement in broader risk appetite fueled rallies in higher yielding ‘risk’ currencies like the kiwi and the aussie on hopes that the failed Slovak vote to expand the EFSF bailout fund is only temporary and much stronger than expected industrial production figures out of the Euro zone. The NZD/USD pair broke back above former channel support before encountering stronger resistance at the 0.7950 level. The kiwi is likely to remain well supported so long as investor sentiment continues to improve. A break above interim resistance sees topside targets at the 0.80-figure, backed by 0.8060 and 0.8115. Interim support now rests at 0.7880 with subsequent floors seen at 0.7850, the 0.78-figure, and 0.7760. Overnight traders will be eying data out of the isle-nation with the September business manufacturing performance index and month on month food prices on tap.

The yen was significantly lower at the open of US trade today with the USD/JPY pair higher by more than 0.80%. The pair has largely remained range bound for the past week in a tight channel between the 38.2% and 23.6% Fibonacci extensions taken from the September 9th and October 2nd crests at 76.60 and 76.80 respectively. A sharp break below interim support saw a tag of the 50% extension at 76.35 before mounting a substantial rally breaking above the October 2nd high at 77.25. The yen is likely to remain under pressure as the recent run-up in investor appetite sees traders jettison lower yielding assets in favor of risk. Topside resistance now stands at 77.40 backed by 77.55 and 77.85. Support for the pair rests at 77.10 with subsequent floors seen at 76.95 and the 23.6% extension at 76.80. This sudden surge in the pair may see a strong pullback at some point should risk appetite go on the defensive again. Overnight investors will be closely eyeing minutes from the most recent Bank of Japan meeting for insight as to the outlook for future policy from the central bank. Highlighting the calendar is the Tertiary Industrial index with consensus estimates calling for a print of -0.3%, down from a previous read of -0.1%. The data has the capacity to add even more pressure on the yen as concerns over the health and stability of domestic economy comes into question.

 

[Jason Rogers]

SSI: USDJPY Ratio Narrows, Shorts Jump 23% As Retail Traders Play Range-Bound Prices

Written by David Song of DailyFX.com

FXCM Speculative Sentiment Index (SSI) Statistics

Intraday Highlight:

USDJPY - The ratio of long to short positions in the USDJPY stands at 7.03 as nearly 88% of traders are long. Yesterday, the ratio was at 8.95 as 90% of open positions were long. In detail, long positions are 3.5% lower than yesterday and 0.6% weaker since last week. Short positions are 23.0% higher than yesterday and 25.4% stronger since last week. Open interest is 0.8% weaker than yesterday and 0.4% below its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses.

SSI Details:

EURUSD - The ratio of long to short positions in the EURUSD stands at -1.87 as nearly 65% of traders are short. Yesterday, the ratio was at -1.88 as 65% of open positions were short. In detail, long positions are 9.2% higher than yesterday and 3.6% stronger since last week. Short positions are 8.3% higher than yesterday and 70.1% stronger since last week. Open interest is 8.6% stronger than yesterday and 22.4% above its monthly average. The SSI is a contrarian indicator and signals more EURUSD gains.

GBPUSD - The ratio of long to short positions in the GBPUSD stands at -1.96 as nearly 66% of traders are short. Yesterday, the ratio was at -2.24 as 69% of open positions were short. In detail, long positions are 3.0% higher than yesterday and 6.8% weaker since last week. Short positions are 10.1% lower than yesterday and 5.2% weaker since last week. Open interest is 6.1% weaker than yesterday and 8.1% above its monthly average. The SSI is a contrarian indicator and signals more GBPUSD gains.

The SSI is reported Every Thursday at DailyFX.com and twice every trading day inside DailyFX PLUS.

 

[Jason Rogers]

Short AUD/USD on Confirmed Break of 23.6 Fibo

Written by Christopher Vecchio of DailyFX

The Aussie-Dollar pair has been exceptionally volatile the past few months, though as a carry trade, this would be expected in tumultuous trading conditions. Nonetheless, despite these swings – the AUD/USD just finished a 1000-pip move in less than two-weeks – a descending channel has been carved out since August 1. For the AUD/USD to move back towards its Range Bottom, there will need to be another fallout in equity markets, provoked by concerns that Euro-zone leaders won’t have done enough to contain a liquidity crisis from spreading from Europe to the rest of the world’s advanced economies.

Given recent commentary from the German leadership block – Chancellor Angela Merkel’s spokesman noted that while a “package” of measures would be agreed upon at the European Union summit in Brussels on October 23, but also said that “the chancellor reminds [everyone] that the dreams that are emerging again, that on Monday everything will be resolved and everything will be over, will again not be fulfilled" – it appears that European leaders are starting to come to this realization. This, coupled with the fact that the Reserve Bank of Australia was exceptionally dovish in its recent minutes, falling short of everything but calling for a rate cut at the next policy meeting, paints a scenario in which appetite for higher yielding currencies will be diminished in the coming weeks. As such, on confirmation that the pair is indeed in its next leg lower, a short opportunity has presented itself to range trade AUD/USD back towards its October low at 0.9386.

Levels to Watch:
- Former Range Top: 1.0370/80 (0.0 Fibo, 200-DMA)
- Range Top: 1.0046 (23.6 Fibo)
- October Low: 0.9386
- Range Bottom: 0.8993 (100.0 Fibo)

AUD/USD Daily Chart: July 2011 to Present

The chart above details the descending channel that has materialized over the past few months on a daily timeframe. The most recent test of the Range Top proved fruitless, with no breakout occurring and thus priming the pair for another test of its Range Bottom. Nevertheless, given the volatility of the AUD/USD, the strategy is to remain on the sideline until there is a definitive break lower. Given the nearly 1000-pip range the pair is currently trading in, we’re looking towards the middle of the range for our short entry point.

 

[Jason Rogers]

US Dollar Forecast to Trade Lower on Crowd Sentiment

Written by David Rodriguez of DailyFX.com

Forex trading crowds remain net-long the US Dollar (ticker: USDOLLAR) against the Euro, British Pound, Swiss Franc, Canadian Dollar, and Japanese Yen—giving us contrarian signal that the currency may slide to further lows through upcoming trade.
We have continued to warn that the US Dollar hit bullish sentiment extremes and could trade lower against major counterparts. A key difference between this week and the last, however, is the fact that the USD has indeed seen a large correction and sentiment has moderated accordingly.

Recently range-bound price action in the S&P 500 has kept the US Dollar in similarly tight trading ranges. Indeed, a record US Dollar correlation to the Dow Jones Industrial Average emphasizes that moves in broader financial markets will continue to drive currencies. Thus we will continue to watch the Dow, but we maintain a modestly bearish US Dollar trading bias.

EURUSD– Trading crowds turned aggressively short the Euro against the US Dollar when the pair traded near the 1.3350 mark and continue to remain short, giving contrarian signal that the pair may continue its advance. The ratio of long to short positions in the EURUSD stands at -1.59 as nearly 61% of traders are short. This is mostly unchanged from yesterday, but it serves to note that long positions are 10.3 percent higher than last week while short positions fell 6.5 percent through the same stretch.

We have most recently seen traders pull back their short positions as the Euro itself trades off of its highs. Yet as long as the SSI ratio remains negative we will maintain our contrarian bullish bias and call for further strength.

 

[Jason Rogers]

Euro Back at 13900 – Break Would Shift Focus to Channel Near 14200

Written by Jamie Saettele of DailyFX.com

Daily Bars

The EURUSD has soared from the bottom of its recent range to the top of the range over the last day. That sentence makes clear that the EURUSD is still in a range. Only a break above the mid September pivot of 13937 would negate the range and give scope to an extension towards the channel near 14200. Interim resistance would be expected at 14050/85 (former low and 200 day average).

 

[Jason Rogers]

Aussie Offensive Continues as Pressure Builds Ahead of EU Summit

Daily Winners and Losers

The Australian dollar is the top performer an hour into North American trade with an advance of more than 0.50% against a weaker dollar. Broader market sentiment continues to be supported by strong corporate earnings and optimism that European leaders will agree on a concrete crisis plan to shore up distressed banks and stem the threat of further debt contagion. The AUD/USD pair looks to test interim resistance at the 61.8% Fibonacci extension taken from the October 11th and 18th troughs at 1.0430, with a break eyeing topside targets at 1.0480 and the 76.4% extension at the 1.05-figure. Support rests at the 50% extension at 1.0370 with subsequent floors seen at the 38.2% extension at 1.0308, 1.0260, and the 23.6% extension at 1.0235.

Despite the advance in risk assets, the euro is the weakest performing currency against the greenback early in the session after the EU summit failed to yield concrete solution to the ongoing debt crisis which has plagued the region for well over a year now. However over the weekend officials did cite progress in the talks with investors expecting final details of a rescue plan to be revealed when the summit meets on Wednesday. Markets expectations for a resolution are well rooted with a failure to reach consensus likely to trigger a broad-based sell-off in risk assets. In the meantime the euro is likely to remain well supported here with interim resistance eyed at 1.3865. A breach here eyes subsequent ceilings at the 100% Fibonacci extension taken from the October 7th and 8th troughs at the 1.39-figure, 1.3950, and the 1.40-handle. Support rests at the 76.4% extension at 1.3820 followed by 1.3795 and the 61.8% extension at 1.3770. The single currency is likely to react sharply to developments out of region as investors remain fixated on remarks from various European officials. Barring any major announcements, the euro is likely to trade within this range for some-time until leaders offer further clarity regarding the proposed rescue package.

 

[Jason Rogers]

Dollar at Turning Point vs Top Counterparts, EU Summit and US GDP Key

Written by Ilya Spivak of DailyFX.com

Major Currencies vs. US Dollar (% change)
17 Oct 2011 – 21 Oct 2011

Talking Points

• EUR: Euro May Decline Even if EU Delivers on Debt Crisis Measures
• GBP: Pound Could Find Demand as Anti-Euro if EU Efforts Founder
• JPY: Yen Crosses Reflect Risk Trends, USDJPY Shifts Focus to Yields
• CAD, AUD, NZD: Comm Block Stil Anchored to Risk Sentiment Trends

EURO

Risk sentiment trends continue to dominate price action as most major currencies remain closely correlated with the S&P 500. Broadly speaking, sentiment trends remain driven by the twin themes of the Euro Zone debt crisis and theslowdown in the global economic recovery. On the former front, the spotlight is clearly pointed on the outcome of Wednesday’s EU leaders’ summit as policymakers make a final push toward a tangible near-term solution. On the latter, all eyes are on third-quarter US Gross Domestic Product report.

Turning first to Europe, officials have to achieve on three fronts. They must: dramatically reduce the Greek debt burden by cajoling banks to “voluntarily” accept losses on as much as 60 percent of their bond holdings;come up with the money to recapitalize those banks, cutting off contagion from Greece into the rest of the EU and preventing an evaporation of liquidity that saps the already fragile economy of the credit needed to do business;and craft a mechanism for debt-strapped countries to secure funding, thereby avoiding a replay of the Greek drama elsewhere.
A flurry of would-be proposals have made their way to the newswires over recent days, but looking past the minutiae it is clear that the goal of whatever emerges after all is said and done will be – once again – to only temporarily placate the financial markets. Indeed, the debt crisis was not born of the spending habits of Greece, Italy and company but of the inherent problem in lumping very different economies under one monetary umbrella while maintaining independent and widely divergent fiscal policies. This means that a lasting fix will call for cumbersome, time-consuming steps including augmenting the EU’s core treaties. The object of the game right now then is to squash fears of an immediate meltdown, buying time to haggle over the long-term solution in the years ahead, and any plan that is unveiled will be judged on those grounds.

As for the US GDP release, expectations call for output to rise 2.5 percent in the three months through September, marking the strongest performance in a year. The outcome would confirm that the US recovery is picking up steam after a woefully disappointing first half of the year, warding off fears of a double-recession. Importantly, it is unclear whether the outcome will prove supportive for risk appetite in terms of improving the outlook for global growth or detrimental in that stronger US performance undermines the case for additional quantitative easing (so-called “QE3”). To that end, monitoring the markets’ response to the outcome ought to prove telling as traders gauge the likely dynamics of price action in the weeks ahead.

 

[Jason Rogers]

Euro Likely to Rally Further on Post-EU Summit Surge

Written by David Rodriguez of DailyFX.com

Retail trading crowds remain exceedingly net-long the US Dollar (ticker: USDOLLAR) as it falls sharply against the Euro following the most recent European summit. Such strongly one-sided sentiment suggests the Euro/US Dollar could continue to rally despite significant surges.

Sizeable US Dollar losses have been met with similarly aggressive crowd buying, giving us contrarian signal that the Greenback could fall to fresh lows. Clearly such extreme moves tell us that the Euro/US Dollar could soon see a significant turnaround. Yet trend turnarounds are extremely rare; better to bet on trend extensions as these last much longer than the single reversal.

A record correlation between the US Dollar and the Dow Jones Industrial Average underlines the fact that markets are increasingly moving in tandem. Thus we may expect that the US Dollar will continue to trend lower as the Dow and S&P 500 climb to fresh highs.

 

[Jason Rogers]

Euro Plunges Below mid October Levels

Written by Jamie Saettele of DailyFX.com

Prepared by Jamie Saettele, CMT​

2 days after the EURUSD has its largest one day rally since 7/1/10, the pair endured its largest one day decline since 8/11/10. Having already dropped below the 10/18 low of 13652, focus is now on the confluence of the 61.8% retracement of the rally from 13145 and 10/11 low at 13560/65. Short term resistance is 13720 and 13790 and bears are favored below 13870 (last night’s high).

 

[Jason Rogers]

Dollar on Defense on Hopes for Greek Resolution- Euro Advances

Written by Michael Boutros of DailyFX.com

Daily Winners and Losers

The euro is the top performer in late afternoon trade in New York with a 0.51% advance against a weaker greenback. As markets continue to eye developments out of Europe, the single currency continues to push higher after rumors circulated that Greek Prime Minister Papandreou may cancel calls for a referendum on EU membership as well as the terms for the newly proposed rescue package. Although the situation in Greece remains on shaky ground, markets have continued to advance as the government is now expected to move swiftly with vote of confidence expected tomorrow. The EUR/USD pair continues to hold just below the 1.3820 interim resistance level with a likely break here eyeing topside targets at trendline resistance, 1.3867 and the 23.6% Fibonacci extension taken from the August 29th and October 27th crests at 1.39613. Interim support rests at 1.3750 with subsequent floors seen at the 38.2% extension at 1.3708 and 1.3655. The euro will remain extremely vulnerable to developments out of the region with investors eyeing euro zone PMI, PPI, and German factory orders overnight.

 

[Jason Rogers]

Euro / British Pound Breaks Major Trendline Support

Written by Jamie Saettele of DailyFX.com

Euro / British Pound
Weekly Bars

Prepared by Jamie Saettele, CMT

“The EURGBP has been a choppy mess since the July top. However, a larger trend may be developing as a nearly year and a half trendline is being put to the test for the 3rd time in 8 weeks. Those that wish to jump the gun should keep stops to 8830. A clear break would shift focus to 8283 and the 2010 low at 8066.” The EURGBP is breaking through the long term trendline and focus is on the mentioned 8283. Risk on shorts can be moved to 8660. LEVELS: 8283 8400 8460 8545 8565

Euro / Canadian Dollar
WeeklyBars​

Since the January-June rally from 12771 to 14381, the EURCAD range has tightened. Currently retracing the upswing from the September low, former resistance and the 20 day average at 13712/40 define support. Coming under there would shift focus to the trendline that extends off of the 2011 lows. LEVELS: 13600 13715 13780 13860 13880 13895

Euro / Australian Dollar
Daily Bars​

The EURAUD range has tightened since the start of 2011. If the range continues to tighten, then the EURAUD will probably be near the mid 13600s in a few weeks. Price has overcome its 20 day average which increases confidence in a near term bullish outlook. LEVELS: 13170 13240 13300 13470 13543 13628

Euro / Japanese Yen
Daily Bars

“Yen intervention led to the EURJPY spiking through the resistance line that extends off of the April and July highs. The advance reversed just shy of the late August highs.” The EURJPY has retraced its entire intervention advance and then some. Focus is on 10470. Looking out further, the 3 wave rally from 10076 (corrective) leaves the EURJPY vulnerable to a fresh low (under 10076). LEVELS: 10280 10385 10470 10580 10615 10650

 

[victory12]

Re: Dollar Reversal Evidence Mounting

Thursday, 24 Sep 2009 10:13 EDT at 10:13 by Jamie Saettele

The neckline held Monday and is being tested again. Closing below the line would expose former resistance at 1.5740. 1.6260 and 1.6315 are short term resistance levels. Risk on shorts can be moved to 1.6475.

Read the full report here

Written by Gregory McLeod, Power Course Instructor

The Aussie Ascent

The Australian Dollar has been consolidating in a very tight range and is poised to breakout above the September 2008 highs at 8811 which very near where we it is in 2009. There is little resistance above this area until the .9791 July 22nd high. When this pair came down, it was in the middle of the Financial crisis where there were little or no areas of support. As former support turns into new resistance, there is none to speak of. Look to buy this pair on a 2 pip breakout above the .8788 area.

 

[Jason Rogers]

S&P 500 Chart Setup Hints Losses Ahead, Bolstering US Dollar Outlook

Written by Ilya Spivak of DailyFX.com

THE TAKEAWAY – S&P 500 technical positioning hints a top may be taking shape below the 1300 figure, pointing to forthcoming gains in the safe-haven US Dollar.

S&P 500 – Prices appear to be showing the beginnings of a bearish Descending Triangle chart pattern below the 1300 figure, with support marked by the 23.6% Fibonacci extension at 1225.71. A break below this boundary initially exposes the 38.2% Fib at 1184.14, although the Triangle’s implied measured target is roughly at 1158.52. Alternatively, a break above downward-sloping Triangle resistance exposes 1292.90, the October 27 high.

US DOLLAR – Prices continue to carve out a bullish inverse Head and Shoulders chart formation, with confirmation on a break through the setup’s neckline roughly defined in the 9789-9870 region pointing to a major near-term bottom now in place. The setup implies a measured target near 10169. The recent range bottom at 9665 marks near-term support, with a daily close below this boundary negating the Head and Shoulders pattern.

CRUDE OIL – Prices are approaching 61.8% Fibonacci retracement resistance at $99.86, with RSI studies checking in at their most overbought since April to suggest that a reversal may be brewing ahead. Confirmation requires a break below $95.25, the intersection of the 50% Fib and the bottom of a rising channel that has guided the way higher since early October. Alternatively, a break above immediate resistance exposes the channel top, now at $103.94.

GOLD – Prices completed a bearish Evening Star candlestick formation near the $1800.00 figure, with confirmation of a larger downside reversal requiring a daily close below 1746.26 at the intersection of the 38.2% Fibonacci retracement and a rising channel bottom. The setup would be invalidated with a close above the $1802.77, the November 8 session high, with a subsequent break above the nearby 61.8% Fib at $1809.62 exposing the channel top now at $1850.82.

 

[Jason Rogers]

AUDUSD Heavy on Dovish RBA- Dollar Rebound Underway as Risk Subsides

Written by Michael Boutros of DailyFX.com

The Australian dollar is the weakest performing currency in early US trade with a loss of 0.64% against the greenback. The Reserve Bank of Australia cut the benchmark interest rate by 25 basis points to 4.25% as expected last night with the central bank Governor Glenn Stevens citing that “Financial conditions have become much more difficult, especially in Europe.” Stevens went on to say that, “This, together with precautionary behavior by firms and households, means that the likelihood of a further material slowing in global growth has increased.” The most notable remark made by the Governor was regarding the situation in China with Stevens noting that, “China’s growth has been slowing. Trade in Asia is now, however, seeing some effects of a significant slowing in economic activity in Europe.” The statement was the first time that the central bank has acknowledged the threat of a slowdown in Asia’s powerhouse and suggests that Australian officials continue to see a risk to the economy should conditions in China continue to deteriorate. The increasingly dovish outlook leaves the door open for further easing from the RBA with Credit Suisse overnight swaps now factoring a 116% chance of another 25 basis point cut next month which would mark the third rate cut in three months from the central bank.

The AUD/USD broke below the 50% Fibonacci retracement taken from the October 27th decline at the 1.02-figure overnight before rebounding off the 1.0155 support level to trade just above the 1.02-handle ahead of the US open. Interim support rest here with a break once again eyeing 1.0155, the 38.2% retracement at 1.0070 and parity. Topside resistance holds at 1.0250 with subsequent ceiling seen at the 1.03-figure and the 61.8% retracement at 1.0330. Look for the aussie to remain under pressure as interest rate expectations and concerns over the ongoing crisis in Europe continue to weigh on broader market sentiment.

Overnight traders will be eying key data out of Australia with 3Q GDP figures on tap. Consensus estimates call for the quarter on quarter print to hold at 1.2% while the year on year print is expected to climb to 2.3% from a previous read of 1.4% y/y. A weaker than expected print here would likely weigh heavily on the aussie as the data would echo concerns cited by RBA Governor Stevens last night with longer term targets for the aussie eyed at the 99-figure.

 

[Jason Rogers]

What is the Number One Mistake Forex Traders Make?

Written by David Rodriguez and Timothy Shea of DailyFX.com

Summary: Traders are right more than 50% of the time, but lose more money on losing trades than they win on winning trades. Traders should use stops and limits to enforce a risk/reward ratio of 1:1 or higher.

Big US Dollar moves against the Euro and other currencies have made forex trading more popular than ever, but the influx of new traders has been matched by an outflow of existing traders.

Why do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through amalgamated trading data on thousands of FXCM live accounts. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately.

Why Does the Average Forex Trader Lose Money?
Many forex traders have significant experience trading in other markets, and their technical and fundamental analysis is often quite good. In fact, in almost all of the most popular currency pairs that FXCM clients trade, traders are correct more than 50% of the time:

The above chart shows the results of a data set of over 12 million real trades conducted by FXCM clients worldwide in 2009 and 2010. It shows the 15 most popular currency pairs that clients trade. The blue bar shows the percentage of trades that ended with a profit for the client. Red shows the percentage of trades that ended in loss. For example, in EUR/USD, the most popular currency pair, FXCM clients in the sample were profitable on 59% of their trades, and lost on 41% of their trades.

So if traders tend to be right more than half the time, why do most forex traders lose money? The below chart says it all:

In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite bring right more than half the time. They lose more money or their losing trades than they make on their winning trades.

Let’s use EUR/USD as an example. We know that EUR/USD trades were profitable 59% of the time, but trader losses on EUR/USD were an average of 127 pips while profits were only an average of 65 pips. While traders were correct more than half the time, they lost nearly twice as much on their losing trades as they won on winning trades losing money overall.

The track record for the volatile GBP/JPY pair was even worse. Traders were right an impressive 66% of the time in GBP/JPY – that’s twice as many successful trades as unsuccessful ones. However, traders overall lost money in GBP/JPY because they made an average of only 52 pips on winning trades, while losing more than twice that – an average 122 pips – on losing trades.

 

[Jason Rogers]

EURUSD: Stay Short as Prices Drift Lower

Written by Ilya Spivak of DailyFX.com

- Strategy: Short at 1.3526, Targeting 1.3144
- Floating Profit / Loss: +175 pips​

We initially sold EURUSD at 1.3526. Prices continue to inch lower along resistance at a downward-sloping channel top, a barrier reinforced by the 23.6% Fibonacci retracement at 1.3455. We will remain short, maintaining an initial target at 1.3144 and a stop-loss to be activated on a daily close above 1.3882.

 

[Jason Rogers]

Dollar Bid Higher as Merkel Remarks Halt Risk Rally- Euro Heavy

Written by Michael Boutros of DailyFX.com

The euro is the worst performing currency against the greenback as headlines out of Europe sparked a sell-off in risk with the single currency falling more than 0.80% early in the session. The EUR/USD broke below the key 61.8% Fibonacci extension taken from the November 13th and December 2nd crests at 1.3175 before finding solace around the 76.4% extension at 1.3085. A likely break here eyes interim support at 1.0350 backed by the 1.30-handle, and the 100% extension at 1.2950. Topside resistance now stands at 1.3125 with subsequent ceilings eyed at 1.3175and 1.3220. The medium to long-term bias on the single currency remains weighted to the downside as officials struggle to convince markets that they have a plan in place to save the currency bloc. Overnight traders will be eyeing industrial production data out of the region with consensus estimates calling for production to come in flat for the month of October. The year on year data is expected to slide to 2.1% from a previous read of 2.2% y/y.

 

[Jason Rogers]

Written by Ilya Spivak of DailyFX.com

US DOLLAR – Prices broke through the 23.6% Fibonacci extension at 9982, exposing the 38.2% Fib at 10075 and the year-to-date closing high at 10081. The 23.6% level has been recast as near-term support. Longer term, the measured target of a Head and Shoulders bottom completed in mid-November is 10237.

Dow Jones FXCM US Dollar Index Basket

 

[Jason Rogers]

Euro Bounce is Corrective

Written by Jamie Saettele of DailyFX.com

The EURUSD has dropped below the October low (13143), which shifts focus to the January and 2011 low at 12858. A drop below there would encounter a potential channel and downward sloping trendline below 12800 and then 12500! Not to be overlooked is the break of the neckline from the year + head and shoulders top. 13145-13280 is the resistance zone on pullbacks but that zone is unlikely to see a test for at least a week. Expect near term resistance from 13065-13100 to hold this week.

 

[Jason Rogers]

USD Weakness To Be Short-Lived, RBA Minute To Drag On Aussie

Written by David Song of DailyFX.com

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) remains 0.20 percent higher from the open after moving 56 percent of its average true range, and it seems as though the greenback is carving out a floor around 10,000, which could pave the way for a short-term rally in the reserve currency. As the Federal Reserve softens its dovish tone for monetary policy, easing bets for another round of quantitative easing continues to support a bullish outlook for the greenback, and we should see the USD push higher over the remainder of the year as the central bank holds an improved outlook for the world’s largest economy. However, as the USD appears to be consolidating within a downward trending channel, the pullback in the reserve currency may turn into a larger correction, and the index may fall back towards 10,000 before we see a run at the yearly high (10,134).

As Fed officials expect the economic recovery to gather pace in the following year, we should see the central bank continue to highlight an improved outlook for the region, and Chairman Ben Bernanke may see scope to start normalizing monetary policy in the second-half of 2012 as the risk of a double-dip recession subside. In turn, the bullish sentiment surrounding the USD should gather pace over the coming months, and we are still looking for a higher high as the index trades within a broad upward trending channel on the daily chart. However, as the European debt crisis bears down on the work economy, the central bank head may keep the door open to expand policy further, and we may see the FOMC maintain a wait-and-see approach throughout the following year as it aims to encourage a sustainable recovery.