300 Minute Bars

Prepared by Jamie Saettele, CMT

“After exploding through the July high of 10057, crude reversed at the June high near 10330, forming a key reversal in the process. The key reversal and the excitement that surrounded the reversal suggests to me that the reversal is ‘for real’…” A look at the weekly reinforces my bearish interpretation. A weekly key reversal unfolded 2 weeks ago and this latest rally is testing the underside of former trendline support (now resistance).

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Article source: http://www.dailyfx.com/forex/technical/elliott_wave/oil/2011/12/01/eliottWaves_oil.html

Crude Showing Signs of Secondary Top

300 Minute Bars

Prepared by Jamie Saettele, CMT

The 3 wave rally from the September low is viewed as a correction of the decline from the record high and should be completely retraced. Gold briefly traded under channel support and the former 1681 pivot low from late October before rebounding. A look at the long term picture reveals that gold remains above long term trendlines but some of those lines are well below the current level. Even a test of the trendline that has defined price since the summer 2010 lows would result in a test of the mid 1500s (52 week average in the vicinity). A drop similar in amplitude to the one that occurred in September would reach the low 1400s.

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Article source: http://www.dailyfx.com/forex/technical/elliott_wave/gold/2011/12/01/eliottWaves_gold.html

Gold 61.8% Retracement Acting as Resistance

Fundamental Headlines

• Fed Dollar-Funding Cut Shows Limits of Action – Bloomberg

• France-Spain Bond Sales Win Investor Backing After Bank Palliative – Bloomberg

• German “No” to Euro Bonds Non-negotiable: Economy Minister – Reuters

• Draghi Opens Door to Bigger ECB Crisis Role – WSJ

• Euro-zone Debt is ‘Systemic Crisis’ – WSJ

European Session Summary

After weeks of U.S. Dollar dominance – essentially since the Japanese Ministry of Finance intervened on October 31 – the first part of this week has not been so kind. Yesterday’s price action certainly changed the FX landscape in the near-term. Still, the run up by higher yielding currencies and risk-correlated assets in recent days was not expected to last. The overnight price action suggested the U.S. Dollar may be bottoming; although we are still in the early development stages of forming a base here.

Poor data out of Australia and disappointing manufacturing data from China weighed on the commodity currencies, leading the Australian Dollar lower overall against its peers. After a string of days cumulatively accruing 5.89 percent against the U.S. Dollar, the Aussie was due for a pullback. Overall, the FX Carry Trade Index – an equal-weighted basket of long-Aussie, Canadian Dollar and New Zealand Dollar positions against short-Japanese Yen, Swiss Franc and U.S. Dollar positions – was down by 0.47 percent, at the time this report was written.

EUR/USD 5-minute Chart: November 30 to December 1, 2011

Charts created using Strategy Trader– Prepared by Christopher Vecchio

Despite the sell-off in higher yielding currencies, the Euro found support in the European session, finding bids higher on bond auctions in France and Spain that produced palatable results. At the time this report was written, the EUR/USD was trading at 1.3480, just below its daily high and 20-DMA, at 1.3520. Why is the Euro leading the pack? It’s evident that the European Central Bank is back in the secondary market buying up Italian and Spanish bonds. Ahead of trading in New York, the Italian 10-year bond yield dropped by 18-bps to 6.801 percent, while the Spanish 10-year bond yield fell by 23-bps to 5.942 percent.

With the United States’ labor market reading due tomorrow, markets are likely to consolidate ahead the storied report. The non-farm payrolls report coupled with the unemployment rate print offers the greatest potential for significant price action in light trading tomorrow. The American economy has been steadily adding jobs, albeit at a slower-than-desired pace in 2011, and the trend is expected to continue. According to a Bloomberg News survey, 120K jobs are expected to have been added in November, from 80K in October. This would keep the unemployment rate at 9.0 percent, in line with its 2011 average.

This NFP print is of particular interest given the shifting dynamic of global capital flow. Over the past few years, the U.S. Dollar has served as the ultimate safe haven in bad times (see: August 2008 to March 2009) and the ultimate funding currency in good times (see: November 2010 to May 2011). Now, as other countries face growth concerns while the United States does not, the U.S. Dollar is finding revival on hopes that the American economy can once again power global growth. If tomorrow’s NFP print meets or beats expectations, the Federal Reserve would have another data point suggesting that there isn’t a strong need for further quantitative easing. This is a new trend that is starting to take hold, and will be monitored over the coming weeks.

24-Hour Price Action

Key Levels: 13:50 GMT

Thus far, on Thursday, the Dow Jones FXCM Dollar Index is slightly higher, trading at 9845.00, at the time this report was written, after opening at 9837.73. The index has traded mostly higher, with the high at 9884.59 and the low at 9830.04.

— Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com.

Follow him on Twitter at @CVecchioFX

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Article source: http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/top_fx_headlines/2011/12/01/Euro_and_Swissie_Lead_Rally_But_U.S._Dollar_Firmer_Overall.html

Euro and Swissie Lead Rally, But U.S. Dollar Firmer Overall

DJ FXCM Dollar Index

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) remains 0.10 percent higher from the open after moving 64 percent of its average true range, and it seems as though we will see the greenback consolidate throughout the North American trade as price action holds along the 20-period moving average. However, as the USD trades back within the downward trending channel carried over from the previous month, we may see the index track lower in December, and the reserve currency may continue to trade heavy in 2012 should the rise in risk-taking behavior gather pace. Nevertheless, as the slew of positive data coming out of the world’s largest economy limits the Fed’s scope to ease monetary policy further, easing bets for another large-scale asset purchase program could prop up the dollar next year, and we may see central bank chairman Ben Bernanke soften his dovish tone for monetary policy as the economic recovery gradually gathers pace.

As the USD holds above the 50.0 percent Fibonacci retracement around 9,828, and it seems as though the greenback may move sideways over the near-term as it breaks out of the upward trend from November. However, as the moving average crossovers point to higher prices, the greenback could be carving out a higher low, and the dollar may continue to retrace the sharp reversal from 10,074 as the fundamental outlook for the world’s largest economy improves. Indeed, U.S. Non-Farm Payrolls are projected to increase another 125K in November after advancing 80K in the previous month, and the pickup in job growth could increase the appeal of the greenback as the development dampens the likelihood for QE3. In turn, we may see the rebound from 9,799 gather pace going into the end of the week, and the reserve currency may finally mark a higher high as growth prospects pickup.

Three of the four components weakened against the greenback on Thursday, led by a 0.46 percent decline in the Australian dollar, and the high-yielding currency may face additional headwinds in the coming days as market participants see the central bank taking additional steps to shore up the isle-nation. According to Credit Suisse overnight index swaps, investors have fully priced a 25bp rate for the rate decision next week, while borrowing costs are anticipated to fall by nearly 150bp over the next 12-months. As interest rate expectations remain weak, speculation for additional monetary support continues to cast a bearish outlook for the AUD/USD, and the recent rebound in the exchange rate looks to be tapering off ahead of the RBA as it fails to test of the 23.6% Fib retracement from the 2010 low to the 2011 high around 1.0350-60. As a result, we may see the aussie-dollar further retrace the rally from the end of November, and the pair may ultimately threaten the rebound from 0.9390 should central bank Governor Glenn Stevens talk up speculation for more easing.

— Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

To be added to David’s e-mail distribution list, send an e-mail with subject line “Distribution List” to dsong@dailyfx.com.

Join us to discuss the outlook for the major currencies on the DailyFX Forums

Article source: http://www.dailyfx.com/forex/fundamental/us_dollar_index/daily_dollar/2011/12/01/USD_To_Hold_Steady_Ahead_Of_NFPs_Aussie_Weakness_Ahead.html

USD To Hold Steady Ahead Of NFPs, Aussie Weakness Ahead

Talking Points

• Crude Oil Adrift Along with SP500 Futures Ahead of Wall Street Open
• Gold Needs US Dollar to Pick Direction to Establish a Directional Bias

WTI Crude Oil (NY Close): $100.36 // +0.57 // +0.57%

Risk sentiment trends are adrift after yesterday’s sharp recovery, with traders apparently rethinking the implications of a 50bps swap rate cut from the world’s top central banks, clouding the outlook for crude oil prices. The US ISM manufacturing gauge headings the economic calendar, with expectations calling for the highest reading in five months. This may underpin prices in the absence of anything new out of the Eurozone, but the debt crisis clearly continues to preoccupy investors.

On the technical front, prices are retesting support-turned-resistance at the bottom of a rising channel set from early October, now at 102.32. A break above this boundary exposes the November 17 high at 103.35. Support lines up at 94.56.

Spot Gold (NY Close): $1746.38 // +30.65 // +1.79%

Indecisive risk trends make for a convoluted outlook for gold as the metal continues to take its cues from the decisively sentiment-driven US Dollar. As with crude, the ISM reading may prove to be a catalyst, with a stronger outcome weighing on gold by reducing the chance of a forthcoming QE program, but such considerations would quickly fade into the background in the face of another market-moving headline from the Eurozone.

Prices are testing resistance at 1746.08, the 14.6% Fibonacci extension, with a break higher exposing the November 8 high at 1802.77. Near-term support lines up at 1711.13, the 23.6% level, a boundary reinforced by a rising trend line underpinning price action since late September.

Spot Silver (NY Close): $32.79 // +0.86 // +2.64%

As with gold, silver is looking for direction cues from the US Dollar, which s itself looking for a defined directional bas as risk trends search for conviction. Prices remain wedged below familiar range resistance at 33.04, with support at a rising trend line underpinning price action since late September (now at 30.81). A break lower initially exposes the 30.00 figure. Alternatively, a push upward through immediate resistance exposes 35.35.

— Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow me on Twitter at @IlyaSpivak

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Article source: http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/commodities/2011/12/01/Crude_Oil_Gold_Looking_for_Direction_Amid_Indecisive_Risk_Trends.html

Crude Oil, Gold Looking for Direction Amid Indecisive Risk Trends

Talking Points

• Euro: France’s Credit Rating Still At Risk, ECB Says Asset Purchases ‘Limited’
• British Pound: BoE Turns Increasingly Cautious, Sees Risk Of ‘Systemic Crisis’

Euro: France’s Credit Rating Still At Risk, ECB Says Asset Purchases ‘Limited’

Although the EUR/USD advanced to a high of 1.3520 on Thursday, the single currency may consolidate going into the end of the week as it holds within the previous day’s range. Indeed, France sold EUR 1.57B of 10-Year bonds yielding 3.18%, which compares to the 3.22% offered back in November, but the ongoing turmoil in the financial system continues to instill a bearish outlook for the Euro as Europe’s second-largest economy faces a risk of a credit rating downgrade.

Fitch Ratings’ head of sovereign rating, David Riley, warned France’s AAA credit rating may be at risk should the debt crisis intensify, and went onto say that the European Central Bank ‘is the only pan-European institution that can provide the bridge financing to the new euro zone’ as the EU struggles to nail out the details of leveraging the European Financial Stability Facility. In response, ECB President Mario Draghi said drawing up a ‘new fiscal compact’ is the most important step in restoring investor confidence, and argued that the central bank’s nonstandard measures ‘can only be limited’ while speaking to the European Parliament in Brussels. As the asset purchase program comes under increased scrutiny, we may see the ECB restore to another rate cut in December, and we expect the Governing Council carry its easing cycle into the following year as the region braces for a ‘mild recession.’ As interest expectations falter, the outlook for the Euro remains bearish, and we may see the EUR/USD give back the advance from earlier this week as the 20-Day SMA (1.3519) holds up as near-term resistance.

British Pound: BoE Turns Increasingly Cautious, Sees Risk Of ‘Systemic Crisis’

The British Pound struggled to maintain the overnight advance to 1.5743 as the Bank of England turned increasingly cautious towards the economy, and we may see the sterling trade heavy over the next 24-hours of trading as risk sentiment appears to be tapering off. BoE Governor Mervyn King encouraged commercial banks in the U.K. to strengthen their balance sheets as the central bank sees an increased threat of a ‘systemic crisis,’ and went onto say that Britain is working on ‘a wide range of contingency plans’ as European policy makers struggle to stem the risk for contagion. In light of the recent comments, it seems as though the MPC is ready and willing to expand its Asset Purchase Facility beyond the GBP 275B target, and we may see the central bank ramp up the program by another GBP 100-150B in order to shield the economy. As the GBP/USD marks another failed run at the 20-Day SMA (1.5767), the recent pullback in the exchange rate could turn into a larger correction, and the pound-dollar may give back the rebound from 1.5422 as the BoE talks up speculation for more easing.

More to Follow…

— Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

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Will the EUR/USD Retrace The Advance From Earlier This Year? Join us in the Forum

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Article source: http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/us_open/2011/12/01/Euro_British_Pound_Correction_On_Tap_Ahead_of_NFPs.html

Euro, British Pound Correction On Tap Ahead of NFPs

Talking Points

• US Dollar Consolidates as FX Markets Digest Yesterday’s Volatility Surge
• Australian Dollar Falls as Chinese PMI Shows Manufacturing Contracted
• Risk Aversion to Return as Traders Rethink Central Banks’ Swap Rate Cut
• SP 500 Stock Index Futures Lower, Hinting Sentiment Turning Defensive

The US Dollar was little changed against the major currencies as markets consolidated after yesterday’s breakneck volatility. The Australian Dollar underperformed, sliding as much as 0.8 percent against its top counterparts after Chinese Manufacturing PMI data fell short of expectations, showing the bellwether factory sector shrank for the first time since February 2009. China is Australia’s top export partner and a dent in demand for the country’s coal and iron ore foreshadowed by a contraction in the East Asian giant’s industrial sector naturally bodes ill for economic growth, interest rates, and thereby the exchange rate.

Looking ahead, a re-evaluation of recent news-flow seems likely to put the brakes on the surge in risk appetite witnessed over the preceding 24 hours. Needless to say, the top catalyst for investors’ optimism was the announcement of a multilateral 50bps reduction in major central banks’ swap rates. Traders initially cheered the announcement, but its subtext seems altogether negative.

A reduction in swap rates allows the ECB to borrow Dollars from the Federal Reserve at a lower cost and pass on those savings to banks thirsting for liquidity. Presumably, this reduces the threat of a credit shortage in event that a Eurozone member state defaults and banks scramble to raise cash to cover losses on their holdings of the failed country’s debt, withholding loans and sapping funding access for the real economy (complete with all the negative growth implications therein).

While this seems positive at first blush, the central banks’ decision to explicitly prepare for the default of a Eurozone member state is hardly encouraging. Indeed, if the world’s leading monetary policy authorities were confident in the ability of the currency bloc’s officials to get their house in order, the swap rate reduction would be unnecessary. While its certainly better to be safe than sorry – meaning the move was likely precautionary rather than indicative of the certainty that the worst-case scenario will transpire – the lack of confidence in Eurozone policymakers that it implies begs the question. After all, if the G10 central bankers see a credible-enough threat that Europe fails, why shouldn’t investors?

With this in mind, it seems reasonable that some of the pro-risk sentiment witnessed yesterday is unwound. Indeed, SP 500 stock index futures are ticking lower (albeit slightly so) in late Asian trade, hinting optimism is already fading and suggesting the safe-haven US Dollar may mount a deeper recovery against its sentiment-linked counterparts. On the economic data front, Manufacturing PMI figures from Switzerland and the UK are expected to show the factory sector in both continued to deteriorate in November, reminding investors of the negative regional impact of the Eurozone debt crisis as exporters in both countries feel the pain of slowing growth in the currency bloc.

Asia Session: What Happened

Euro Session: What to Expect

Critical Levels

Complete Table of Support and Resistance Levels: www.dailyfx.com/technical_analysis/pivot_points/

— Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow me on Twitter at @IlyaSpivak

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Article source: http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2011/12/01/FOREX_Dollar_May_Rise_as_Traders_Rethink_Cental_Banks_Swap_Rate_Cut.html

FOREX: Dollar May Rise as Traders Rethink Cental Banks’ Swap Rate Cut

• Markets consolidate following intense Wednesday move
• EUR/USD expected to hold below 1.3500 on a daily close basis
• Coordinated central bank action while welcome, should not be taken as risk positive
• Australian Dollar reverses course and underperforms

Markets have mostly been locked in some consolidation following the massive surge in risk appetite on the back of Wednesday’s coordinated central bank action, and it now remains to be seen whether this recovery rally can be sustained. We contend that the rally will not be sustainable, and ultimately, we should once again see a resumption of risk liquidation, with currencies and equities under pressure and the US Dollar as the primary beneficiary. Look for EUR/USD to hold below 1.3500 on a daily close basis.

The central bank actions on Wednesday only reinforce the severity of the global crisis and while necessary, should certainly not be taken as a risk positive. It is true that the actions of the central banks will make money cheaper and attempt to stimulate the global economy, but let us not forget that cheap money means nothing if it is still not accessible. This has been a major critique of these alternative forms of monetary policy measures, and at the end of the day, there are still serious risks of a liquidity trap.

The Australian Dollar which outperformed on the Wednesday risk correlated flows is a gross underperformer on Thursday thus far with some softer retail sales, atrocious building approvals, and disappointing China manufacturing PMIs all factoring into the price action. This all but solidifies an additional 25bp rate cut at next week’s RBA meeting, and we continue to project relative underperformance in the Australian Dollar over the coming weeks and months. Unfortunately, our short position from this week was stopped yesterday at 1.0280, but we still hold onto our core short position from 1.0550.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD: Overall, the market is still locked in a downtrend and we expect a retest and break of the key October lows at 1.3145 over the coming days. Rallies are classed as corrective and look for these moves to be well capped below 1.3500 on a daily close basis, while only back above 1.3750 would ultimately delay. Once 1.3145 is taken out, it will negate the corrective October price action and should result in a more aggressive bout of selling into the 1.2000’s. We continue to project weakness over the coming weeks into the lower 1.2000’s as per the monthly chart.

USD/JPY:The market has managed to successfully hold above the bottom of the daily Ichimoku cloud to further strengthen our constructive outlook and we look for the formation of a inter-day higher low by 76.55 ahead of the next major upside extension back towards and eventually through the recent multi-day highs by 79.55. Ultimately, only a close back below the bottom of the Ichimoku cloud would negate outlook and give reason for pause.

GBP/USD: The latest daily close below 1.5625 further confirms our bearish outlook and should now open the door for a bearish resumption back towards the key October lows at 1.5270 over the coming days. Next key support comes in at 1.5400, while any intraday rallies are expected to be very well capped below 1.5800 on a daily close basis.

USD/CHF: The previous weekly break above the critical October highs at 0.9315 is significant and now opens the door for the next major upside extension over the coming weeks back towards parity. Daily studies are looking slightly stretched at current levels, so we would not rule out the potential for some corrective selling, but ultimately, look for any setbacks to be well supported in the 0.9000 area, where a fresh higher low is sought out.

— Written by Joel Kruger, Technical Currency Strategist

To contact Joel Kruger, email jskruger@dailyfx.com. Follow me on Twitter @JoelKruger

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Article source: http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/opening_comment/2011/12/01/Currencies_Well_Bid_But_is_the_Price_Action_Warranted.html

Currencies Well Bid But is the Price Action Warranted?

The greenback fell for a third consecutive day in North American trade with the Dow Jones FXCM Dollar Index (Ticker:USDollar) plummeting 1.08% on the session. News of a coordinated effort by global central banks to boost liquidity measures, stronger than expected US data, and a move to ease policy in China converged to spark a massive rally with equity markets surging across the board. US stocks were sharply higher at the close with the Dow, the SP, and the NASDAQ soaring 4.24%, 4.33%, and 4.17% respectively.

Although the coordinated effort by the Fed, ECB, BoE, BoC, BoJ, and the SNB eased immediate concerns over a looming credit crunch, the move does little to address the underlying solvency issue that has continued to weigh broader market sentiment. The fact that these central banks have taken this bold step also suggests that officials see a growing risk of the possibility of another credit event as institutions look to shield themselves from the looming debt threat in Europe. Accordingly today’s rally is widely expected to taper off heading into the close of the week with investors looking ahead to Friday’s non-farm payroll report which is expected to show the addition of 125K jobs in the month of November.

A glance at a daily chart shows the dollar breaking below the 9900 support level noted in yesterday’s USD Trading report. The index now risks further losses with a close below 9830 noting stronger support lower at the 38.2% Fibonacci extension taken from the June 2010 and November 2010 crests at 9745. Resistance now stands at 9900 backed by the 23.6% extension at 9970. A sharply sloped RSI break below support at the 57 mark also suggests the index could continue to face some headwinds as the risk rally subsides.

An hourly chart shows the severity of today’s price action with the index promptly reversing a topside break above channel resistance before rebounding off the 9800 support level to close back within the confines of the descending channel formation which has held since the start of the week. Interim support rests at 9800 with a break below eyeing subsequent floors at the 38.2% Fibonacci extension taken from the August 1st and October 27th troughs at 9754 and 9700. A break above interim resistance at the 50% extension at 9850 eyes topside targets at 9900 and the 61.8% extension at 9946.

The greenback fell against all four component currencies again today, highlighted by a 2.85% declines against the Australian dollar. As noted in today’s Winners / Losers report, the aussie has posted the largest three day rally in three years with an advance of 3.82% this week alone. The run-up in risk appetite over the past few days has been profound with traders flocking into higher yielding assets as debt concerns temporarily eased. The worst performer of the lot was the Japanese yen which advanced 0.51% against the greenback as dollar losses outpaced those of the yen. The yen is lower against all its major counterparts save the dollar as a shift in broader market sentiment saw investors jettison lower yielding assets in favor of risk.

Tomorrow’s economic docket is highlighted by construction spending, ISM prices, and ISM manufacturing PMI. Construction spending is expected to have expanded in the month of October by 0.3%, a slight improvement from the 0.2% print seen a month earlier. November ISM manufacturing PMI is also expected to improve with consensus estimates calling for a print of 51.7, up from a previous read of 50.8, with ISM prices seen climbing to 45.0 from 41.0. Despite today’s substantial rally in risk assets, markets are likely to consolidate over the next 24-hours ahead of Friday’s much anticipated non-farm payroll report.

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— Written by Michael Boutros, Currency Analyst with DailyFX.com

To contact Michael email mboutros@dailyfx.comor follow him on Twitter @MBForex.

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Article source: http://www.dailyfx.com/forex/fundamental/us_dollar_index/usd_trading_today/2011/11/30/USD_Posts_Sharpest_Decline_of_Month_on_Monster_Dow_Jones_Rally.html

USD Posts Sharpest Decline of Month on Monster Dow Jones Rally

Daily Bars

Prepared by Jamie Saettele, CMT

“After exploding through the July high of 10057, crude reversed at the June high near 10330, forming a key reversal in the process. The key reversal and the excitement that surrounded the reversal suggests to me that the reversal is ‘for real’…” A look at the weekly reinforces my bearish interpretation. A weekly key reversal unfolded 2 weeks ago and this latest rally is testing the underside of former trendline support (now resistance).

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Article source: http://www.dailyfx.com/forex/technical/elliott_wave/oil/2011/11/30/eliottWaves_oil.html

Crude Threatens November High