Forex News – Haven currencies rally as China pledges to curb overcapacity.
Aug 27, 2009 Make Money Online
Forex News and Events:
The news that hit the news wires earlier this morning that has rattled the markets has firmly reasserted risk aversion into as a central theme to current market dynamics. It stands to reason that current “over-optimism” is due for a reality check but are we looking at another slump as we head into winter or is this just another growing pain in the “green shoots” theory.
China announced a plan to curb over-capacity in manufacturing industries such as Steel production and Cement. Furthermore the government said it would increase “guidance” over parts of the coal, glass and power industries said the State council on their website. This, coupled with more strenuous controls on stock and bond sales are all measures the government hopes will put an accent on solid growth and cut out unnecessary credit expansion that could hinder the long term well being of the economy. The IMF expects the Chinese economy to grow by up to 8.5% this year, while the worldwide figure stands at 2.5%.
US GDP at 12:30 GMT today is expected to show and annualized decline of -1.5% and initial jobless claims at 565K – taking on our newsletter from yesterday one could expect the dollar to rise on a negative number. Looking back, the durable goods orders number yesterday jumped more than expected to 4.9%m/m – again the changing dollar dynamic is something we are watching very closely.
While commodities have slumped on the back of this return to risk aversion, Gold has risen, most probably on fundamental demand as the global economy picks up. We do see a wedge forming – strong indication of an imminent directional move.
12:30 USD GDP (annualized) – -1.5% Vs. -1.0%
12:30 USD GDP (Price Index) – 0.2% Vs. 0.2%
The Risk Today:
EurUsd More of the same on EUR USD with range traders taking plenty of pips out of the pair for nearly a week now. 1.4338 / 60 continues to cap the market and 1.4210 / 40 providing a shelf of support. A break lower singals a move to 1.4135 and the head and shoulders starts to look a lot more developed.
GbpUsd A close below the 1.6272 support has put cable under some serious pressure going forward. We spoke last week about keeping an eye on commodity prices for clues in the USD and a visit to 1.5947 is now looking like an increasingly likely prospect. The medium term uptrend channel is broken so any retest of that break back at 1.6435 will likely be met with a second round of selling.
UsdJpy Support at 93.86 has finally been broken so any moves back the 94.00 region look likey to be met with sellers as risk appetitie across the board seems to be faltering. Medium term uptrend channel at 93.10 should provide an interesting battle between the bulls and bears. Expect the first visit to that level to be met with a bounce.
UsdChf The strength in USD of the last few days has been a great help for the SNB as the pair rallied up to 1.0692 resistance. Expect a small pullback from here to 1.0632 where there is a short term long sweet spot. As before, keep a close eye on commodities for further signs of USD strength.
| EURUSD | GBPUSD | USDJPY | USDCHF | |
| 1.4445 | 1.6620 | 95.45 | 1.0797 | |
| 1.4380 | 1.6546 | 94.78 | 1.0740 | |
| 1.4338 | 1.6460 | 93.85 | 1.0692 | |
| 1.4256 | 1.6182 | 93.66 | 1.0675 | |
| 1.4240 | 1.6160 | 93.37 | 1.0556 | |
| 1.4180 | 1.6078 | 93.00 | 1.0452 | |
| 1.4060 | 1.5980 | 92.15 | 1.0340 | |
| S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot | ||||
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