South Africa’s central bank maintained its key repurchase rate unchanged at 5.5 percent, a move expected by market analysts. The main lending rate is at 30-year low. Gill Marcus, Bank’s Governor, said that the current monetary policy “is accommodative and supportive of the real economy”. Positive developments in the global economy reduced need for an interest rate cut, but investors think that an interest rate hike also isn’t likely to happen in the near future.

High lending rates help to attract to South Africa investors interested in so-called carry trades. Such investors borrow in countries with low interest rates (like the United States and Japan) and invest in currencies with high yield. Bloomberg economists estimated that the South African currency has returned 2.6 percent this year in such trades.

USD/ZAR traded at 7.9060 as of 7:01 GMT today after it dropped from 7.9320 to 7.9070 yesterday.

If you have any questions, comments or opinions regarding the South African Rand, feel free to post them using the commentary form below.
source form: topforexnews

Yen is gaining against the euro as worries about what happens to talks about Greek debt creeps into the picture. Risk appetite is slowly fading away as investors and Forex traders worry that a deal regarding Greek debt may not go through. Additionally, investors are also weighing the latest earnings data, which isn’t as good as expected.

However, there is enough good news about the US economy that some risk appetite is hanging on, as evidenced by some high beta currencies, such as the UK pound, retaining some of their gains.

In Japan, some business leaders are asking that the policy makers add a cap to the Japanese yen. The Swiss put a cap on their currency in 2011, and businesses in Japan are concerned about what happens if the yen appreciates too far and interferes with their exports. A franc-style cap on the yen might prevent that.

At 14:30 GMT USD/JPY is higher at 77.1805, up from the open at 77.1095. EUR/JPY is lower at 99.6650, down from the open at 100.0150. GBP/JPY is higher at 119.7550, up from the open at 119.4350.

If you have any questions, comments or opinions regarding the Japanese Yen, feel free to post them using the commentary form below.
source form: topforexnews

Back in October, private bondholders agreed to a steep haircut in order to help Greece, but many analysts think that even with the concessions from private bondholders the debt will be unsustainable going forward. As a result of some of this uncertainty, a bit of risk aversion is showing through the recent risk appetite.

Euro losses have been somewhat limited, thanks to better economic news in the United States, especially with the jobs data. Additionally, recent eurozone data has been reasonably strong, especially with the recent ZEW readings. However, there is still plenty of downside potential for the euro going forward, especially if the Greek debt problem isn’t resolved. There is still plenty of weakness for the euro, though, and enough uncertainty that the euro is wavering. It will be interesting to see if the eurozone problems are resolved.

At 16:36 GMT EUR/USD is down to 1.2933 from the open at 1.2968. EUR/GBP is down to 0.8327 from the open at 0.8372. EUR/JPY is down to 99.5035 from 100.0150.

If you have any questions, comments or opinions regarding the Euro, feel free to post them using the commentary form below.

source form: topforexnews

The Bank of Mexico left its benchmark overnight interbank funding rate at the record low 4.50 percent as inflation exceeded expectations for three consecutive months. Inflation accelerated to 3.82 percent in the fourth quarter from 3.14 percent in the third quarter after the peso declined, being the worst performer among major currencies of Latin America, and a drought pushed up food prices. The high inflation rate harmed economic growth. The Mexican economy grew 3.68 percent in October, while it expanded 4.52 percent in September. The central bank predicted that economic growth will be 3.5 percent this year, down from 4 percent in 2011.

Some analysts think that the Mexican central bank will keep lending rates stable for a prolonged time to support growth of the economy. Yet the rally of peso amid improving prospects for the global economy may change outlook for Mexico’s economy, prompting Mexico’s bank to change its policy and perhaps to raise rates.

USD/MXN dropped from 13.2110 to 13.1640 as of 18:14 GMT today after rising to 13.2800 earlier. Today’s maximum was 13.1570 — the lowest rate since October 31.

If you have any questions, comments or opinions regarding the Mexican Peso, feel free to post them using the commentary form below.

source form: topforexnews

British retail sales rose 0.6 percent in December for a month ago, when sales were down 0.5 percent. Automotive fuel and textile, clothing and footwear stores were the biggest contributors to the increase. At the same time, sales in household goods stores and other stores declined.

Investors are worried that Greece wouldn’t be able to reach an agreement with private bondholders on a debt swap that are crucial for securing a next portion of bailout. It looks like Forex market again has seen a same pattern as in the previous week: market participants were optimistic for the most part of the week, but lost their optimism by the weekend.

GBP/USD jumped from 1.5484 to close at 1.5574, near its daily high of 1.5576 (the highest level since January 5), while GBP/JPY climbed from 119.39 to 119.95 and its intraday maximum was 119.98 (the price not seen since January 4). At the same time, EUR/GBP dropped from 0.8369 to 0.8300.

If you have any questions, comments or opinions regarding the Great Britain Pound, feel free to post them using the commentary form below.
source form: topforexnews

Gold has been technically and fundamentally supported for several years. The technical patterns arebeginning to break down which could mean the shiny metal has the potential to sell off from current levels.

A break below 1532 would confirm a new downtrend and offer a trader an entry to sell.

(Created using FXCM’s Marketscope 2.0 charts)

Last week, Gold broke below the 40 week moving average for the first time since January 2009. This technical indicator is watched by many large institutions to give clues about trend direction.

(Created using FXCM’s Marketscope 2.0 charts)

Additionally, Gold broke below the 200 Day Simple Moving Average last week which is another technically bearish sign. Earlier today, gold pierced the 200 SMA from the bottom side and immediately turned lower. This respect for these important moving averages indicates the appetite for owning gold at these prices is waning.

Therefore, we’ll look for technical reasons to sell gold. Since the low of late September 2011 is 1532, place an entry to sell 1 point below at 1531. Prices trading to these levels will indicate that prices are trading at levels not seen in 5 months which also indicates technical weakness. Place a stop just above a recent swing high on a break below 1531.

source form: dailyfx

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) is 0.13 percent higher from the open after moving 57 percent of its average true range, and the greenback may continue to recoup the losses from the overnight trade should the flight to safety gather pace. However, as the USD falls back within the upward trending channel from earlier this month, the pullback from 9,945 may turn into a larger correction, and we may see the greenback trade heavy over the coming days should the Fed keep the door open to expand monetary policy further. In turn, we may see the index tag the lower Bollinger Band around 9,888, but the reserve currency may threaten the upward trend should market participants raise bets for another round of quantitative easing.

As the near-term rally in the USD tapers off ahead of the 61.8 percent Fibonacci retracement around 9,947, the greenback looks poised for a near-term correction, and the index may fall back towards the 38.2 percent Fib around 9,708 to test for near-term support. As the relative strength index approach overbought territory, the oscillator should provide conviction to see a pullback in the reserve currency, and we should see the greenback consolidate in the days ahead as long as the RSI holds below 70. However, as the 20-Day SMA (Blue) looks poised to cross back above the 50-Day SMA (Green) at 9,790, the technical developments reinforce a bullish outlook for the dollar as they carve out a higher low. Nevertheless, the FOMC meeting minutes could weigh on the exchange rate should the central bank talk up speculation for QE3, but the statement could highlight a growing rift within the committee as Fed officials expect economic activity to gather pace over the coming months. As policy makers see the world’s largest economy avoiding a double-dip recession, Fed Chairman Ben Bernanke may no longer see a case for additional monetary support, and the developments are likely to instill a bullish outlook for the USD as the central bank concludes its easing cycle.

Two of the four components weakened against the greenback on Tuesday, led by a 0.23 percent decline in the Japanese Yen, but the USD/JPY may continue to retrace the market reaction to the intervention at the end of October as the pair remains capped by the 100-Day SMA around 77.34. As the dollar-yen trades within a downward trending channel, the pair should continue to pare the overnight advance to 77.32, but the recent strength in the low-yielding currency appears to be fueling expectations for another intervention as Japanese policy makers try to balance the risks for the region. Indeed, retail trades remain net long against the USD/JPY as the DailyFX Speculative Sentiment index currently holds at 6.25, and market participants may become increasingly bullish on the dollar-yen as it pares the sharp rebound from 75.57.

source from: dailyfx

There is a critical difference between a relief rally and a true bull trend. Though we have just recently the market’s drive the fundamentally-troubled euro higher; we have already seen the signs that the market is making the distinction. In a sustainable ‘bull wave’ it is imperative to draw capital in at higher levels to maintain momentum. Yet, to encourage such aggressive investment, there must be a clear view whereby risk diminishes to boost the relative appeal of return or the potential for a European investment yield itself needs to rise dramatically (beyond the possibility of short-term capital gains on a depressed exchange rate). We simply do not have the case for a strong sustainable advance.

The rally has managed a rally against its benchmark counterpart (the US dollar) since the beginning of October. Notably, this is a move that coincides with the climb from the S&P 500. This suggests that a rebound in speculative interests / risk appetite has been the most influential driver to this point. The encouragement that the EU has stemmed the time of a financial crisis through its Summit really didn’t factor in until the EU and banks reached an agreement for a 50 percent writedown on private Greek bond holdings early Thursday morning. Taking a critical view of the three point approach that was agreed to; the writedown is the only factor that is immediately actionable – and even believable.

For an increasingly skeptical market (there have been many efforts at a rescue before this), the fact that the EFSF is expected to be leveraged by 4 times (to approximately 1 trillion euros) comes into question when we consider the lack of details and the inherent risk in using a bailout program. Furthermore, the bank recapitalization scheme sets an aggressive 9 percent core tier one capital ratio; but the 106 billion euro expected funding need smacks of an underestimate akin to past Stress Tests and forcing the banks to ask a skeptical market first is an unfavorable confidence vote that could stir fear once again. We may find more details next week to their process and approach when the G20 meets in Cannes, France Thursday and Friday; but we won’t likely receive serious details until the November 8th Summit.

We will fully be concentration this coming week on risk appetite trends for euro guidance. Should the October rally that has carried sentiment for the fundamentally-troubled and speculatively-depressed alike falter, the Euro’s heavy risk going forward could easily swamp the measured return potential for the currency and its assets. Potentially cutting the return factor even further, we have the ECB rate decision on Thursday. The economist and market consensus is for no change under new President Mario Draghi; but there is a small contingent calling for a cut. After the efforts made this past week on the fiscal front, it is not so far-fetched to see a cut. A reduction is not priced in; and that creates a serious ‘fat tail’ situation. An interesting question though: could a cut be seen as encouraging?

source from: dailyfx

Japan’s Finance Minister, Jun Azumi, vowed to take ‘bold’ actions against the Yen as the marked appreciation in the local currency dampens the prospects for an export-led recovery, and the government may make a greater push to specifically target the exchange rate as the fundamental outlook for the world’s third-largest economy deteriorates. Nevertheless, it seems as though the Bank of Japan will continue to take a different route as it expands its nonstandard program by another JPY 5 trillion, and the central bank may resort to easing monetary policy further rather than intervening in the currency market. Indeed, the BoJ voted 8-1 to increase its asset purchases, with board member Ryuzo Miyao arguing for a JPY 10 trillion expansion, and we are likely to see the central bank take additional steps to shore up the ailing economy as it aims ‘to ensure a successful transition to a sustainable growth path with price stability.’ However, retail traders continue to look for a bottom in the USD/JPY as the DailyFX Speculative Sentiment index currently stands at a whopping 14.99, and the contrarian indicator foreshadows lower prices for the pair as market participants try to fade the recent strength in the Yen.

As the USD/JPY resumes the downward trend carried over from back in 2007, we are likely to see fresh record-low prices in November, and the BoJ may have little choice but to expand monetary policy further as government officials maintain a cautious outlook for the region. Nevertheless, there is a risk of seeing a short-term correction next week should the relative strength index continue to hold above 30, but the exchange rate may extend the decline from earlier this month if the oscillator pushes into oversold territory.

source from: dailyfx

US Personal Spending and Income set for gains: The monthly income and spending report from the US concludes a busy week were we saw numbers on Durable Goods Orders, home prices, New Home Sales, GDP from the US and PMIs from the Eurozone, though they have understandably been overshadowed by the Eurozone developments.
Consensus expects today’s income and spending report to show of 0.3 and 0.6 percent, respectively, in September following a rather poor August. With 3Q GDP already released analysts should have a good gauge of the September numbers, and we want to focus on savings instead. We suggested as far back as our Yearly Outlook that a decline in the savings rate would support domestic consumption (as seen in yesterday’s GDP report where PCE grew 2.4 percent annualised), the concern is now that unless the US is headed back down to credit-binge levels of savings then this method of boosting consumer spending will soon be more or less depleted and consumers in the US will have to find more sustainable ways to support consumption. Having seen an average of 5.3 percent in 2010 the average for the first eight months of 2011 is 4.9 percent and bound to head lower. As long as employment and wages do not improve faster than is currently the case, consumption may be weaker in the fourth quarter or 2012 – depending on whether American households can draw down savings further amid pressures to deleverage.

Update:
SW Consumer Confidence out at -7.5
SW Manufacturing Confidence out at -7 (Sep revised to -4)
SW Economic Tendency Survey out at 94.3 (Sep revised to 96.6)
SW Retail Sales MoM out at -0.2%

source from: tradingfloor