Forex Trading − Dollar Sentiment Down on Recovery Concerns

The USD held on to modest gains Tuesday as equities and commodities declined. However, pressure on Dollar sentiment came following the FOMC Meeting Minutes. The Federal Reserve said Tuesday that officials believe the economy is going to recover at a slow rate while unemployment will remain high. These statements affirmed expectations the Federal Reserve will keep rates low for an extended period of time.

The Dollar Index, which tracks the greenback against a trade-weighted basket of six currencies, was at 75.116, compared with 75.130 Monday; remaining fairly directionless and within recent ranges against most major counterparts. The Fed's near 0% interest rates and monetary stimulus programs have weighed on the greenback this year, since the programs have effectively printed more Dollars and flooding the markets with extra currency.

Earlier in the day the USD received some support from disappointing U.S economic data. The U.S. economy's recovery wasn't as strong as earlier believed with Gross Domestic Product (GDP) rising at a 2.8% annual rate July through September after falling by 0.7% in the second quarter. This was a revision from a month ago, when the estimated was that GDP rose by an annual 3.5% in the third quarter. However, The Conference Board's U.S. Consumer Confidence Index improved to 49.5 in November from 48.7 in October, beating economists' expectations.

Looking ahead to today, another full news day is expected from the U.S with the Core Durable Goods Orders and Unemployment Claims due to be released at 13:00 GMT and the New Home Sales at 15:00 GMT.

Forex: EUR/USD: Euro, above 1.5000, approaching 1.5045

Euro rally from Tuesday's low at 1.4885 has extended above 1.5000 on generalized Dollar weakness, hitting a fresh 2-week high at 1.5040.

On the upside, next resistance levels lie at 1.5045 (Nov 11 high) and above here, 1.5065 (Oct 26 high) and 1.5090. On the downside, support levels lie at 1.4950/55, and below here, 1.4925 and 1.4885 (Nov 24 low).

According to Nicole Elliott, senior technical analyst at Mizuho Corporate Bank, the Euro is about to re-test year to date high at 1.5064: "The euro is not at all overbought, though bullish momentum is low. It looks as though we are setting up for a re-test this year’s high at 1.5064. Rising trendline and the Ichimoku ‘cloud’ should also provide support and suggest a long position for a break to new highs later on."

Forex: GBP/USD: Pound back below 1.6700 after GDP

The Pound has pulled down to levels right below 1.6700 after UK GDP has been revised to a 0.3% decline on the third quarter and a 5.1% year on year drop from -0.4% and -5.2% declines previously estimated.

GBP/USD rally from 1.6495 low on Tuesday has been capped at 1.6727 on early European session, and the pair has dipped to 1.6670 after UK GDP revision was released. At the moment of writing the pair trades at 1.6685.

On the downside, the Pound could find support at 1.6650 (Nov 13 high), and below here, 1.6570 (Nov 13 low) 1.6500/15 (Nov 12/24 low). On the upside resistance levels lie at 1.6725 session high, and above here, 1.6755 (Nov 19 high) and 1.6800.

Forex: EUR/USD: Euro returns upwards to test 1.5045 resistance

Euro rally from Yesterday's low at 1.4885 has stalled at 1.5045 resistance area, and after rejection on its first attempt, the pair has bounced at 1.5020 to returns to test 1.5045 at the moment of writing.

According to Peter Rosenstreich, technical analyst at ACM - Advanced Currency Markets, below 1.5063 considerable resistance should be expected: "The first attempt at 1.5049 resistance has repelled a further rally, and considerable resistance can be expected ahead of 1.5063 (26 Oct highs and last major resistance); where a break higher would open up a move to 1.5200 levels."

Resistance levels, according to Rosentreich, lie at 1.5049, 1.5063 and 1.5100. On the downside, support levels lie at 1.4800, 1.4700, 1.4626.

Forex reserves rise by $962 m on dollar buys

Foreign exchange reserves rose $962 million during the week ended November 13 as the central bank bought the dollars that came in as
portfolio investments by foreign institutional investors. According to the latest Reserve Bank data, the total foreign exchange reserves, including gold and special drawing rights (SDR — currency with the International Monetary Fund), rose $962 million to touch $286.37 billion during the week ended November 13. While foreign currency assets rose $948 million, SDR rose $12 million during the week.

“Growth and interest rate differentials are causing a renewed surge in capital flows to emerging markets. This has resulted in currencies appreciating, forex reserves rising (in most cases to pre-crisis levels) and some countries imposing controls on capital flows,” said Rohini Malkani of Citigroup in a report released on Thursday.

As per the updated money supply figures, the total stock of money, comprising cash currency and deposits with the banks, amounted to Rs 51,73,152 crore as on November 6, up Rs 17,823 crore (0.3%) over the previous fortnight’s levels. Currency with the public and term deposits rose Rs 1,968 crore and Rs 24,152 crore respectively, while demand deposits dipped Rs 9,150 crore during the fortnight. Other deposits with the central bank dipped Rs 10,933 crore. The annual money supply growth now stands at 17.8%, lower than previous year’s 19.7%. In the other developments, the government has parked over Rs 8,756 crore as surplus with the central bank during the week ended.

India rupee drops on choppy stx; dollar moves eyed

The Indian rupee was weaker in afternoon trade on Wednesday tracking a choppy sharemarket which failed to provide clarity on fund flows while traders also watched the dollar's performance versus majors for direction.

* At 1:50 p.m., the partially convertible rupee INR=IN was at 48.54/55 per dollar, weaker than its previous close of 48.47/48. The rupee has traded in a 48.45-48.585 band so far during the session.

* Shares .BSESN were choppy as investors booked profits after the market rallied 4.7 percent over three days and doubled gains on the main index from 2009 lows.

* The dollar's broad slide paused after it hit its lowest in a year against the Australian and New Zealand dollars on Wednesday, but it held near its 2009 low on the euro, as investors sold the low-yielding greenback in a renewed shift to riskier assets.

* In the currency futures market INRFUTURES, the most traded near-month contracts on the National Stock Exchange and MCX-SX were both quoting at 48.50 each, with the total traded volume on the two exchanges at about $1.2 billion.

FOREX-Dollar rises from 2009 low on recovery concerns

The dollar rebounded on Tuesday from its lowest level this year against a basket of currencies as a drop in U.S. consumer confidence fueled worries about the economy, enhancing the greenback's safe-haven appeal.

The weaker-than-expected U.S. data added to pessimism already in the financial markets sparked by disappointing quarterly results from a handful of major companies such as Office Depot Inc (ODP.N: Quote, Profile, Research).

That weighed heavily on stock and oil prices and dragged down the Australian dollar from its highest level against the U.S. currency since last September. The yen rallied across the board as investors dumped riskier assets.

"Consumers are feeling no love in this recovery," said Boris Schlossberg, director of currency research at GFT Forex in New York. "All this suggests is that the critical assumption by the recovery bulls that consumption will come back as the recovery takes hold is faulty."