FOMC cautious on low inflation/growth concerns. Today sees global flash manufacturing PMI's.

The FOMC minutes underlined the Feds concerns over low inflation and global growth prospects and the dollar has since seen some volatility against the majors, but is ending the US session pretty much where it was before the announcement, with more choppy consolidation looking likely. Yen weakness is still the major theme, which appears unlikely to change. Today sees the flash global manufacturing PMI’s, (where Asia will closely watch the HSBC China figure),  and later, the US CPI. The UK gets October Retail Sales .

EUR/USD: 1.2536

The dollar came under some mild selling pressure after the FOMC Minutes suggested that the Fed will need to watch for falling inflation concerns, although the general expectation is that inflation will move towards the 2% goal over the medium term.

The Euro headed towards a high of 1.2599 before retreating to where it started, near 1.2540, with the Euro likely to see some headwinds, in the form of the Markit Manufacturing PMI’s due later today. Another generally soft outlook will quickly snuff out any potential for a move higher and would see 1.2500 and lower come back into view. The ECB’s Linde reminded everyone of the possibility of further easing in the EU today if things do not start to pick up, reiterating that the ECB is committed to further easing measures if required.

Later in the session the US CPI will be the focus, with expectations being for a reading of -0.1% mm, 1.6% yy

Technically, a move above 1.2600, which the indicators generally suggest is a possibility, – although the descending trend resistance may decide differently having just repelled the Euro’s rally, – would see a run towards 1.2620 (50% of 1.2886/1.2357). A break of this would trigger stops and could see an acceleration towards 1.2682 (38.2% of 1.2886/1.2357) and then to 1.2700 and possibly even to 1.2740 (23.6% of 1.3995/1.2357).

A turn to the downside will now find minor support  here at 1.2540, below which would run to 1.2500 (100 HMA) and to 1.2470 (200 HMA). Below there would take us back to 1.2440 (minor), 1.2400 and then to the trend low of 1.2357 although I don’t really see this being tested today.

Further out, we would then test 1.2342 (21 Aug 2012 low) and 1.2295 (20 Aug 2012 low), which both lie ahead of the 200 Month Moving average at 1.2205 and the long term support off the Nov 2005/June 2010 lows at 1.2100. Then comes the major target at 1.2041 (July 2012 low), but which looks unlikely to come about for a while.

Economic data highlights will include:

Provisional EU Mfg PMI data, EU Consumer Confidence,  US CPI, Markit Mfg PMI, Existing Home Sales Philly Fed Mfg Survey, Jobless Claims.

Meta Trader – AxiTrader  EUR/USD: 4 Hour

USD/JPY: 117.98

Yen weakness remains the broad theme following the BOJ decision to keep policy unchanged and the dollar has now reached our long term target of 117.93 (14 Oct 2007 high)  having so far traded above 118 to a high of 118.07. The next barrier is at  118.50 although realistically there is not too much to stop it heading towards 120.00 – and in the longer term, the target of 124.13 (June 2007 high) remains valid but will take time.

With the dailies becoming increasingly overstretched on the topside, staying long will be an increasingly fraught affair and we could get a decent cleanout of short Yen positions at any time. Although this would be painful, any decent dip would present a decent buying opportunity but it seems unlikely that we are going to see anything to change the status quo today. Any requirement though to see a run back  into the safe haven Yen – such as an increase in Russian/Ukraine tensions –  would see a swift turn lower for the dollar, so raising stops is probably a good idea.

The points to watch would be at 117.04 (previous minor double top) and then 116.50 (100 HMA). Below this would run to the 200 HMA at 115.88, albeit probably not for a while.

The uptrend looks set to continue today although there could be some profit taking from Japanese exporters at 118.00 which may cap it for a while..

Economic data highlights will include:

Merchandise Trade balance, Nomura Mfg PMI, Monthly Economic Survey.

Meta Trader – AxiTrader  USD/JPY: 4 Hour

GBP/USD: 1.5669

Cable recovered from new trend lows of 1.5589, after the BOE Minutes that suggested that the economic slowdown and exchange rate effects may be overstated, and then rallied further, back to a high of 1.5720 on the release of the FOMC Minutes before settling lower at the end of the US session, back currently at 1.5670.

Earlier, the MPC vote came in as expected, unchanged at 7-2 in favour of keeping rates on hold and today’s action will be led by the release of the UK Retail Sales (exp 0.3%mm, 3.8%yy).

For its part, Cable appears to have further near term upside potential and if it can regain 1.5700, the targets to watch would be at 1.5720 (session high) and at 1.5730 (23.6% of 1.6182/1.5593). I don’t really see it up here today though unless the R/S are very strong, but if wrong look for further gains towards the 200 HMA at 1.5755. A break of this would then drive towards the Fibo resistance at 1.5813 (1.6182/1.5589).

The downside will now see bids, close by at the 100 HMA (1.5660) and then at 1.5640 (minor). Back below here would see another run towards 1.5590/00, which if seen, should be pretty solid support but if Cable does come under further pressure, look for a run, below 1.5590 towards 1.5550 and then to 1.5500. There really is not too much support to be seen below there until we approach 1.5400.

Economic data highlights will include:

UK Retail Sales.

Meta Trader – AxiTrader  GBP/USD: 4 Hour

USD/CHF: 0.9582

US$/Chf has traded a choppy 0.9530/0.9600 range today and currently trades pretty much unchanged from this time yesterday.

The short term indicators remain mildly negative at this point and we could therefore see the dollar head back towards 0.9535 (23.6% of 0.8855/0.9741 & daily cloud top), which once again should provide decent support. Under here would then take a look at the larger degree of Fibo support at 0.9495(23.6% of 0.9360/0.9471) and eventually would hint at 0.9441 (29 Oct low).

The topside will again find sellers at 0.9600 and then at 0.9635 (200 HMA), above which, the previous session high at 0.9653, where the daily Tenkan lies, will provide a cap. I don’t really see it getting up here today, but above 0.9650 would then see a run towards 0.9700, a break of which could see a run towards Friday’s 0.9741 peak. Beyond there would target 0.9789 (29 May high) and 0.9838 (22 may high).

Economic data highlights will include:

Trade Balance.

Meta Trader – AxiTrader   USD/CHF: 4 Hour

AUD/USD: 0.8609

The Aud had a tough day, drifting steadily lower on the back of the 5 year low on Iron Ore prices, and it has just seen a session low of 0.8600 following the FOMC Minutes. Iron Ore is weaker again today and will do little to help the Aud. A weak reading from today’s HSBC China Flash Mfg PMI number (exp 50.3) will see further downside pressure.

The recent low at 0.8590 will provide some decent support, but stops are noted below here, which if triggered would see a run towards 0.8570 and then possibly to the 7 Nov low at 0.8540.  As we said before, this will provide very strong support, being both 50% of the move from 0.6006/1.1082 and also the base of the monthly cloud. A break of this level though, and a November close below it, would have very bearish implications, for a test of the major channel base at around 0.8474 and then the May 2010 lows at 0.8066.

While the shorter term indicators point lower I suspect that the upside today may be somewhat limited, where short term resistance would be seen at 0.8650 and then again at 0.8685 (100 HMA). Beyond there would head back to 0.8700 (200 HMA) but which looks unlikely today.

The downside remains the favoured trade, but the dailies have yet to really suggest that there is any real momentum behind it, so if we see 0.0.8540 it may be worth lightening up on some short positions, looking to re-sell any decent rally.

Economic data highlights will include:

HSBC China Flash Mfg PMI.

Meta Trader – AxiTrader   AUD/USD: 4 Hour

NZD/USD: 0.7851

As with the Aud, the Kiwi has had a tough session, drifting mostly lower through the day, although we did get a quick short-lived spike following the release of the FOMC Minutes.

The Kiwi is currently sitting close to the 200 HMA/ 38.2% of 0.7660/0.7974 (0.7850) which may continue to be the case, although the 4 hour charts suggest that the downside could come under pressure a bit later, which would see a move towards 0.7820 (minor) and then 0.7800.

If/when the Kiwi does break 0.7800, look for a bids at 0.7780 (61.8% of 0.7660/0.7974) and eventually a run to 0.7700.  A break below 0.7700 (50% of 0.6560/0.8838) would see a retest of the trend low at 0.7660. Under this, there are minor support at 0.7625 and at 0.7600, but not an awful lot to prop it up ahead of 0.7530 (100 Month MA) and then 0.7435 (61.8% of 0.6560/0.8838).

The topside will find sellers at 0.7890 and then at the 100 HMA at 0.7900. I doubt that we are headed up here today, but if wrong look for a run back to 0.7925 and then possibly to 0.7940, which is the base of the daily cloud and has now repelled the topside on two occasions. Back above here, would see another test of 0.7975 and the 29 October at 0.7977 and then 0.7990 (22 Oct) ahead of 0.8000 and 0.8010 (21 Oct) which will see strong sellers, although I don’t think we are going close today.

NZ PPI Coming up, China data later.

Economic data highlights will include:

PPI.

Meta Trader – AxiTrader   NZD/USD: 4 Hour