ForexGen | Forex Latest News…

Oscillators now remain in fairly oversold territory, but it serves to note that there exists a substantial divergence of price and MACD lows through recent trade. That is to say that the current lows in price have not coincided with fresh lows in the daily MACD or more traditional oscillators. This is a fairly bullish signal, as it suggests selling pressures have eased. Our bias subsequently eyes further retracement from recent lows, and we may have to wait for a renewed panic in AUD/USD selling for the pair to break multi-year lows at 0.6000.

Much as we wrote yesterday, further consolidation in the New Zealand Dollar/US Dollar pair leaves little directional bias for upcoming trade, as the pair trades almost exactly at the middle of its recent price channel. Overall momentum favors further NZD/USD declines, but the lack of conviction in recent price action suggests that the pair may continue to consolidate until further notice. Noteworthy support for the NZD/USD comes in at previous lows of 0.5186. Resistance comes in at weekly highs of 0.5754. Much like we see in the AUD/USD, there exists a fairly clear bullish divergence in fresh price lows and comparatively bullish oscillators.

ForexGen presents British pound/ US Dollar…

The British Pound/US Dollar currency pair has recently broken above trendline resistance, but the GBP has nonetheless failed to break above previous peaks near the 1.5080 mark. Continued failure at said mark would mean that further GBP/USD consolidation is likely, and the break above previous trendline resistance does not signal a new short-term uptrend is underway. Though it arguably seems unwise to call for range trading in such a volatile trading environment, the British Pound is likely to remain confined within its recent 1.4639-1.5090 trading channel.

The US Dollar/Swiss Franc continues to break through key resistance levels, and the pair trades at fresh 15-month highs through time of writing. Subsequent resistance now comes in at June, 2007 highs at 1.2340, and a break of said resistance mark would likely target 21-month highs near the 1.2470 mark. Also ForexGen Yet it serves to note that the USD/CHF remains in increasingly oversold territory, and every further rally increases the likelihood of a short-term retracement.

ForexGen News presents the Euro news….

The Euro continues to trade within a progressively narrower wedge formation against the US Dollar, and the next several days of price action will likely dictate Euro/US Dollar direction for the next several weeks of EUR/USD trading. Already we see the EUR/USD attempting yet another break to the topside after holding support overnight, and such a breakout would likely target previously stiff resistance at the 61.8 percent Fibonacci retracement of 1.3120-1.2390 move at 1.2840. Otherwise, subsequent support comes in at a triple-bottom in the 1.2330-1.2422 range.

The US Dollar/Japanese Yen has seemingly broken its wedge formation, and a dip below support at approximately 95.70 suggests that further short-term losses are likely. Next price floors come in at the important 61.8 percent Fibonacci retracement of the 90.90-100.50 move at 94.60, which likewise coincides with an intraday double-bottom from November 12. Previous trendline support has now become resistance, and the USD/JPY has shown difficulty climbing above 96.00. Our very short-term bearish bias remains intact as long as price remains below the pair’s falling trendline at approximately 97.00.

ForexGen Currency News…

Currency trading markets continue very highly correlated to broader risky asset classes, as the common theme of financial market deleveraging creates strong links between sometimes unrelated market prices. One of the clearest examples is the high correlation between the Japanese Yen and the US Dow Jones Industrials Average—at its strongest in at least 20 years. Highly risk-averse markets tend to buy the Yen and sell equities at the same time. As such, it remains important to watch the Dow and other indices—especially as the Dow Jones trades near important 10-year support.

Other noteworthy relationships include the increasingly tight correlation between the G10 Forex Carry Trade and the Reuters/Jefferies CRB Commodities Index. Given that financial deleveraging can affect all types of highly-leveraged markets, we see that many commodities have sold off and rallied at the same time as the FX Carry trade. The G10 Forex Carry Trade currently consists of going long the New Zealand Dollar, Norwegian Krone, and Danish Krone while going short the US Dollar, Swiss Franc, and Japanese Yen. A continuation of ongoing themes of financial market stress will likely keep these relationships intact through the foreseeable future.

ForexGen Worldwide News…

The New Zealand dollar slipped to a six-year low against the greenback as commodity prices tumbled lower this week, and may fall further over the following week as risk aversion continues to drive price action in the currency market. Fears of a global recession paired with fading demands for high-yielding assets has clearly dragged on the NZDUSD, and the break below the 10/27 low of 0.5350 indicates that the pair has yet to find a bottom, and may test the 0.5000 level for psychological support over the near-term as investors hold a bearish outlook for the commodity currencies.

As credit conditions remain far from normal, fears of a protracted downturn in the $128B economy has already raised bets that the Reserve Bank of New Zealand will once again lower borrowing costs at the December 3rd policy meeting. A Bloomberg News survey showed that 11 of the 14 economists polled expect the central bank to cut the benchmark interest rate by 100bp to 5.50% from 6.50%, while the remaining forecasts recognize a chance for a 150bp rate cut to bring the target rate down to 5.00%.