Forex Market Issues and Risks

G20 meeting ended without concrete results and overall plan to stimulate the economy

News and Events:

The Dollar and the Yen rose against the Euro on Friday as investors were looking for safe-haven amid a deteriorating global economic outlook and losses on Wall Street. This partly reversed losses in the previous session triggered by a more than 6% jump in US stocks. The Dollar remained supported despite data showing sales at US retailers suffered a record decline in October. A separate report showed US consumer confidence rose unexpectedly in November but remained at depressed levels.

Currency traders have closely watched equity performance for direction in recent weeks, with rising share prices boosting risk appetite and hurting demand for the Dollar and the Yen.

Federal Reserve Chairman Ben Bernanke said on Friday financial markets are under severe stress and central bankers around the world are ready to do more to ease credit strains and support faltering economic growth. Fears of a severe global economic slump were heightened after new data confirmed recession in Europe. Chinese growth is also showing signs of slowing, prompting Beijing to unveil a massive multibillion-dollar stimulus package.

On Friday, EurUsd was 0.76% lower at 1.2690, well off the 2-week low of 1.2389 touched on Thursday. EurJpy fell 1.27% to 123.22. UsdJpy fell 0.53% to 97.09. UsdChf rose 0.51% at 1.1919. GbpUsd was 0.68% lower at 1.4802. GbpJpy dropped 1.2% at 143.72. The Yen gained last week 1.26% against the Dollar and 1.82% versus the Euro as ongoing worries about the global economy and credit markets prompted investors to unwind positions funded by cheap borrowing in the Japanese currency.

The Group of 20 major economies ended with lots of pledges of action but few actual proposals to combat a looming global recession. Analyst said 'The Yen and Dollar are again finding support from weaker risk appetite due to the lack of concrete results from the weekend meeting'. Investors had been hoping for an overall plan that would stimulate the global economy in the short-term.

Today Key Issues:

• 010:00 EUR September Euro zone Eurostat trade -€7.3b vs -€9.3b
• 13:30 USD November NY Fed manufacturing -26 vs -24.62
• 14:15 USD October Capacity utilization 76.4% vs 76.4%
• 14:15 USD October Industrial output 0.2% vs -2.8% (mom)

The Risk Today:

EurUsd Market dropped as low as 1.2330 on October 28th and sharply rebounded to 1.3298 high Thursday last week. This shows actual trading range 1.2330 – 1.3298. On the downside, renewed weakness will open the way down to trendline support 1.2208. Next long-term support holds 1.1640 November 2005 low. Further support holds 1.0739 September 2003 low. On the upside, only a return over 1.4000 (former trendline support) and 1.5000 will release actual pressure and may put key resistance 1.6000 into focus. Resistance holds 1.4002 former trendline support. Initial resistance holds 1.3769 14th October high.

GbpUsd Market dropped as low as 1.4558 last Thursday in current 3-month downtrend. It also posted 1.6673 high last week. Strong supports hold 1.4560 trendline and 1.3682 March 2001 low. On the upside, strong resistance holds 1.6673 last weeks high ahead of 1.7144 (38.2% retracement of 2.0158 – 1.5265 3-month drop). Further resistance holds 1.7744 (50% retracement).

UsdJpy Market has been holding slightly below 99.80 September-October trendline resistance in the latest weeks and drop to 94.47 yesterday. Initial resistance holds 99.48 Monday high. On the upside, only a recovery over 103 upper trendline and 105 pivot point will put focus again on 108 and 110.67 15th August high. Strong resistance holds 100 pivot point. Staying in the current downtrend might open the way down to 79.70 April 1995 low. Strong support holds 90.91 24th October low.

UsdChf Market hit 1.2002 new 1-year high this morning. Further strength may open the way over 1.2153 trendline resistance. Next resistance holds 1.2463. On the downside, renewed weakness below 1.1605 initial support and 1.1203 30th October low would undermine the current uptrend and reverse through 1.0692 22nd September low and down to 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low.

ACM FOREX

Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.