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Gold prices weaken slightly in Asia on prospects for Fed tapering
Investing.com - Gold prices eased slightly in Asia Tuesday on firming expectations for the Federal Reserve to begin scaling back monetary stimulus programs in early 2014.
Stimulus tools such as the Fed's USD85 billion in monthly bond purchases aim to drive recovery by pushing down long-term interest rates, weakening the dollar in the process, with talk of their dismantling strengthening the greenback. Gold and the dollar tend to trade inversely with one another.On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD 1,221.50 a troy ounce, down 0.03%.
The Institute for Supply Management reported that U.S. manufacturing activity in November expanded at its fastest pace since April 2011, fueling optimism for more robust economic recovery down the road.
The ISM manufacturing purchasing managers’ index rose to 57.3 in November from 56.4 in October. Analysts were expecting the index to fall to 55.0
Reserve Bank of Australia keeps cash rate at 2.5%, concerned over AUD
Investing.com - The Reserve Bank of Australia kept its cash rate steady at a record low 2.5% on Tuesday in its November review as expected, adding that the Australian dollar remains uncomfortably high and it would assess its outlook and adjust policy as needed.
The RBA has trimmed the cash rate by a total of 225 basis points since an easing cycle that began in November 2011, but there is continued speculation whether the easing is over because of a persistently strong Australian dollar in the central bank's view.
"The Australian dollar, while below its level earlier in the year, is still uncomfortably high. A lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy," Governor Glenn Stevens said in the statement announcing the rate decision.
The Australian dollar had fallen nearly 4.0 cents in the past month.
The RBA reiterated it expects inflation to remain consistent with the medium-term trend over the next one to two years.
GBP/JPY trading 168.50
FXstreet.com (London) - GBP/JPY has maintained higher ground while the pound has been bid following another strong manufacturing PMI report.
GBP/JPY has extended gains along the ascending trend line into the168 territory and convincingly holds the handle at mid point. The pair is consolidating here within a tight range of 40 pips. The low has been 168.22.
GBP/JPY Levels
The 20 DMA is 161.55, the 50 DMA is 159.20 and the 200 DMA is 152.75. RSI (14) reads 59.25. Supports are ascending from 166.00, 166.50, 166.80 and 167.50. Spot is 168.58 and resistances are 168.70, 170.45, 173.00 and 173.65
GBP/JPY trading 168.50
FXstreet.com (London) - GBP/JPY has maintained higher ground while the pound has been bid following another strong manufacturing PMI report.
GBP/JPY has extended gains along the ascending trend line into the168 territory and convincingly holds the handle at mid point. The pair is consolidating here within a tight range of 40 pips. The low has been 168.22.
GBP/JPY Levels
The 20 DMA is 161.55, the 50 DMA is 159.20 and the 200 DMA is 152.75. RSI (14) reads 59.25. Supports are ascending from 166.00, 166.50, 166.80 and 167.50. Spot is 168.58 and resistances are 168.70, 170.45, 173.00 and 173.65
EUR/USD likely see stronger selling interest after 1.3550/60 loss
FXstreet.com (Bali) - The EUR/USD saw a convincing bearish move on Monday, likely to spur further selling interest as the close below 1.3550 confirms low conviction by Euro bulls to explore levels past 1.36.
EUR/USD technicals deteriorate
From a daily perspective, the EUR/USD is trading in a neutral tone in the mid-point of its kumo cloud, with further slides likely to find demand ahead of the Tenkan sen at 1.3510 and round number 1.35 (kumo cloud bottom H4 chart).
Expect the EUR/USD market to have shifted from a consistent 'buy-dips' profile to now see any retest of 1.3550/60 resistance as an opportunity to sell on strength short term.
ECB, NFP eyed
While the technical indicators are not as constructive as last week, traders should not expect major moves either side with flows likely to be compressed in relatively tight ranges (daily ATR) ahead of the ECB Thursday and NFP Friday.
Pro Fed taper bets on the rise
The sentiment towards a Fed taper in coming months has slightly improved early this week, after surprisingly strong manufacturing data in the US on Monday.
USD/JPY breaks above 103.25 barrier
FXstreet.com (Bali) - With the ease that only a strong bullish momentum can deliver, such as in the Yen crosses at present, USD/JPY has bursts through 103.25 barrier to set a new trend high at 103.35 en route to test next option barrier at 103.50.USD/JPY has transitioned from 102.83 - session low - to snap a new trend high, as the Nikkei expands gains above the critical resistance 15,700, currently at 15,760 (up 0.7%), and dragging the Yen crosses higher as a result.
Technically, traders should expect area 103/103.10 to provide support on dips while 103.50 up to 103.70 (year high) should see a decent cluster of offers challenging the ebullient bullish momentum.
Forex - Dollar near six-month highs vs. weaker yen
Investing.com - The dollar was trading close to six month highs against the yen on Tuesday after unexpectedly strong U.S. manufacturing data reinforced expectations that the Federal Reserve will soon start to roll back its stimulus program.
During late Asian trade, USD/JPY rose to highs of 103.37, the loftiest level since May 23 and was last up 0.22% to 103.15.The pair was likely to find support at 102.82, the session low and resistance at 103.75.
The dollar was boosted after the Institute for Supply Management said Monday that manufacturing activity in the U.S. expanded at the fastest rate since April 2011 in November, fuelling optimism over the economic recovery.
The ISM manufacturing purchasing managers’ index rose to 57.3 in November from 56.4 in October. Analysts had expected the index to fall to 55.0.
Expectations that the Bank of Japan will have to expand its stimulus program in order to meet its target of 2% inflation by 2015 continued to pressure the yen lower.
Speaking Monday, BoJ Governor Haruhiko Kuroda pledged to counter any new downside risks to the bank’s inflation goal, saying the BoJ would act by "adjusting monetary policy without hesitation."
The euro traded up to five year highs against the yen, with EUR/JPYclimbing 0.32% to 139.83, the highest level since October 2008.
Elsewhere, the euro edged higher against the dollar, with EUR/USDinching up 0.09% to 1.3552, from 1.3540 on Monday.
Forex -AUD/USD edges lower on RBA comments
Investing.com - The Australian dollar edged lower against its U.S. counterpart on Tuesday, as comments by Reserve Bank of Australia Governor Glenn Stevens weighed, while expectations for the Federal Reserve to soon scale back its stimulus program still supported the greenback.
AUD/USD hit 0.9058 during late Asian trade, the pair's lowest since November 29; the pair subsequently consolidated at 0.9094, slipping 0.14%.
The pair was likely to find support at 0.8972, the low of September 3 and resistance at 0.9168, Monday's high.
At the end of its monthly policy meeting, the RBA left its benchmark interest rate unchanged at a record low 2.50%, in line with expectations.
Commenting on the decision, RBA Governor Stevens said the Aussie was "still uncomfortably high" and that a lower currency "is likely to be needed to achieve balanced growth in the economy."
Earlier in the day, official data showed that retail sales in Australia rose 0.5% in October, more than the expected 0.4% rise, after an upwardly revised 0.9% increase the previous month.
Meanwhile, the greenback remained supported after the Institute for Supply Management said Monday that manufacturing activity in the U.S. expanded at the fastest rate since April 2011 in November, fuelling optimism over the economic recovery.
The ISM manufacturing purchasing managers’ index rose to 57.3 in November from 56.4 in October. Analysts had expected the index to fall to 55.0.
The Aussie was also lower against the euro, with EUR/AUD rising 0.29% to hit 1.4912.
The Importance of Strength and Weakness (adapted from dailyfx article)
Trends develop from deviations in strength and weakness… if the Euro is stronger than the US Dollar over a period of time, prices will be trending higher. That’s one of the great parts about technical analysis; it will give us an honest depiction of strength and/or weakness in each pairing over whatever time frame that we want.
Strong/Weak Analysis to the Scalper
This brand of analysis is extremely common for short-term traders (commonly called ‘scalpers’ in the FX market).
The allure of such a system is logical: If traders are able to find longer-term trends, or ‘bigger-picture’ moves, they can look to scalp inside of those moves in the direction of those trends.
Scalpers are often best served by identifying trends on the hourly and/or four-hour charts so that they can look for that momentum to take their trade(s) on the shorter-term chart to profitable territory.
Scalpers can look for pairs with the greatest strength/weakness deviation on the hourly chart, and then look for a short-term pullback in prices.
After the retracement has finished, as the pair moves in the direction of the general trend, traders can look to enter in that direction; anticipating that the longer-term trend may win out.
Traders can look to trigger in a variety of ways. An oscillator on the shorter-term chart can be an excellent entry mechanism, as can a cross of a moving average.
Scalpers can use strong weak to find the trend; and enter using indicator triggers
The benefit of waiting on a pullback is the fact that the trader can look to enter relatively cheaply; so that if the trend comes back, the payoff could be large relative to the amount of risk that it took to initiate the position. But if the trend doesn't come back, the loss can be mitigated, and the trader can look for greener pastures elsewhere (or later).
Strong/Weak Analysis to the Swing Trader
Swing traders take a slightly different view on markets than the scalper, but the approach is often similar with longer time frames being used.
Swing traders can look to the four-hour, and daily chart to grade trends and determine biases that they may want to work with. And like the scalper, they often want to wait for prices to pull back in those trends so that they can look to buy low, and/or sell high.
Traders can look for pairs with the greatest strength/weakness deviations, and look to trade those pairs in the direction of the trend after the currency pair retraces.
Traders can look to trade in the direction of the trend, triggering with an Oscillator or moving average entry as seen above; or by using a price action formation such as a Bullish Hammer as outlined in The Four Hour Trader.
Swing traders can use price action to trigger in the strongest trends
Strong/Weak Analysis to the Long-Term Fundamental Trader
If you already have your own bias, then deciding the direction you want to trade a currency is rather simple, because you already know if you want to buy or sell it.
Traders with a long-term fundamental viewpoint often have this bias based on their own macro-economic analysis. Perhaps they expect weakness in Europe due to structural problems with debt obligations, or maybe they’re looking for weakness in the Yen under the expectation of another round of Abenomics.
These traders can use Strong/Weak analysis for a couple of different purposes.
First and foremost, these traders can use Strong/Weak analysis to properly voice their trade opinion in the first place.
After a trader has a profitable position, they can use those profits to finance additional positions should the trend continue moving higher. This is the way many of the greatest traders have speculated, turning big moves into huge gains, all financed by one initial position.