US$ slides after making new trend highs against major counterparts.

Early dollar strength which saw new trend highs against all the majors, dissipated and then reversed, led by profit taking in US$Jpy which headed sharply lower in making the first decent correction in quite a while. In the absence of any major data today, it could be a session of general consolidation, although Asia gets the Australian Business Confidence/Conditions. Later on sees the German Current Account, Trade Balance and US Wholesale Inventories, and from the UK, the Industrial & Manufacturing Production and the NIESR GDP Estimate.

EUR/USD: 1.2318

The first half of the Monday session saw the Euro traded heavily as traders continued to buy dollars following Friday’s US jobs report. The Euro was also pressured by the soft German production data and some dovish remarks by ECB’s Nowotny, who spoke of a massive weakening of the EU economy, lower inflation in Q1 2015 and the need to increase the ECB’s balance sheet. Things turned around in the second half of the session, with the dollar coming under some downside pressure of its own as traders locked in some profits after the recent strong run higher.

Technically the Euro virtually reached the 200 Month MA today (1.2225), while the DXY (high 89.55) also came close to its own 200 Month MA (89.83) and caused some short covering. I would be a bit surprised to see us return to the session lows today and doubt that the momentum currently exists to drive the dollar higher. Eventually it will give way though, and we will then be in for a move towards major rising trend support at 1.2140, and then to 1.2100 which is the 50% pivot of the rally from the Euro Oct 2000 low to the July 2008 high and should also provide decent support. Under that we have the July 2012 low at 1.2041 and the June 2010 low 1.1876, which both come ahead of 1.1743, where the Euro was initially pegged to the dollar in January 1999. Further out I suspect we are heading for parity and lower.

On the topside, the session high of 1.2342 will see sellers ahead of 1.2350. A break higher, which the 1 and 4 hour momentum indicators suggest may be possible, will return to 1.2375 and possibly to 1.2400, above which, the descending trend resistance currently sits at around 1.2440.

We have squared up the bulk of our short Euro positions below 1.2300 and are looking to rebuild our short position into any possible Euro strength over the next day or so. The chance of further short covering exists as there are no major data points out of the US or EZ until later in the week and the charts suggest that a lift is due. A test of the 1.2505/35 area cannot be ruled out as we head into Nov CPI reports out of the EZ, the US Retail Sales and then the ECB’s TLTRO report on Thursday.

Use 1.2285/1.2385 as a guide today.

Economic data highlights will include:

Eco FinMin Meeting, German Current Account, Trade Balance, US Wholesale Inventories..

Meta Trader – AxiTrader    EUR/USD: 4 Hour

USD/JPY: 120.55

The dollar took advantage of the disappointing Japanese Q3 GDP and registered a new 7 year peak of 121.84 on Monday, before reversing sharply as Yen strength came to the for as profit taking set in, and also, possibly on some safe haven demand due to the lower equity markets, with the dollar heading to a low of 120.20, before bouncing to close the US session at 120.50.

This is the first decent correction that we have seen in a while and with the market overwhelmingly short of Yen it may be that there is  more downside for the dollar to come. The dailies are at overbought extremes and look to be rolling over, while the 4 hourlies now have a negative look to them as well. If 102.20 gives way, expect stops below 120.00 to be given a workout, potentially driving the dollar back to the spike 4 Dec low at 119.35 and then to the 20 Nov at 118.98. The first Fibo level to watch is at 117.91 (23.6% of 105.18/121.84), which is unlikely to be visited today, but would be a good opportunity to start to rebuild a long dollar position.

I would not be too involved right now, although out of preference would err on the short side. In the longer term though, buying dips remains the gameplan. Once the charts have eased their overbought condition and regained the trend highs, the dollar may find the legs to continue towards the 15 July 2007 high at 122.42 and eventually towards the target of 124.13 (17 June 2007 high) .

Meta Trader – AxiTrader    USD/JPY: 4 Hour

GBP/USD: 1.5653

Cable bounced strongly off the early European session 15 month low of 1.5541 to a high of 1.5679 (200 HMA), a touch below Fridays 1.5696 high’ on the back of some talk of year end demand and some M&A chatter.

In the short term, further gains look possible and above today’s high would head to 1.5700 beyond which would hint at further gains towards 1.5726 (4 Dec high) and then to 1.5763 (1 Dec high). If seen I think this would present a decent sell opportunity, with a SL placed above the descending trend resistance, currently at 1.5785, for an eventual resumption of the downtrend.

While it looks as though the choppy consolidation could continue in the coming session, the support levels to watch are at 1.5640 (100 HMA), 1.5600, 1.5585 and at the trend low at 1.5540. Under there would head towards 1.5500, below which there is not an awful lot to hold it up until the August 2013 low at 1.5426  and then the next major Fibo level at 1.5375 (76.4% of 1.4812/1.7191), but we are not going there yet.

For today, look for 1.5620/1.5700 to cover it.

Economic data highlights will include:

Industrial, Manufacturing Production, NIESR GDP Estimate.

Meta Trader – AxiTrader    GBP/USD: 4 Hour

USD/CHF: 0.9759

US$Chf reached a new trend high of 0.9817, before reversing amidst the general dollar weakness seen during  the second half of the day’s session as the divergence on the daily charts that we mentioned yesterday, began to take effect.

The current weakness could take the dollar a bit lower yet, although the 100 HMA at 0.9750 is currently trying to prop the dollar up. A break of the session low of 0.9737 would then suggest a run back to the 200 HMA at 0.9700, below which could run towards 0.9650 and the rising trend support, currently at 0.9625.

Although currently square, if we get below 0.9700, I would be looking to rebuild a long dollar position as eventually I think today’s session high will be taken out, in advance of a move higher towards 0.9838 (22 May 2013 high), beyond which will see an acceleration towards 0.9971 (22 July 2012 high) and eventually to parity and above.

Economic data highlights will include:

Unemployment.

Meta Trader – AxiTrader    USD/CHF: 4 Hour

AUD/USD: 0.8297

The Aud, having opened the week on a soft note, on the back of the Government financial industry report and the soft Chinese trade data, pushed to a trend low of 0.8260 before bouncing back later in the day, to 0.8315, as the weakness in the US$ came to the fore. Todays focus will be on the NAB Business Confidence Survey, where a soft reading would see the pressure return to the downside.

Technically, minor support is seen at around 0.8285 ahead of the session low of 0.8260. A break of this would see acceleration lower, albeit possibly not today, but there is not a great deal of support to be seen until the May 2010 lows at 0.8066. Before then 0.8200 and 0.8100 would provide obvious psychological levels where buyers will congregate but they will not be bothered today.

As I have been harping on about for the last couple of months, I think we are eventually heading a fair bit lower than 0.8000 (see long term outlook from update of Nov 24) and still look for 0.6000, albeit a couple of years down the track. A monthly close back above the neckline, now at 0.8800 would invalidate that view, although this is beginning to look increasingly distant.

On the topside, above the session high of 0.8322, will see minor resistance at 0.8350, beyond which could head back to 0.8365 (100 HMA), 0.8385 (23.6% of 0.8795/0.8260) and then to 0.8400 although this looks doubtful in the short term.

If wrong, above, 0.8400 would see sellers ahead at last Thursday’s 0.8428 high, which ties in nicely with the descending trend resistance, currently at around and lies just ahead of the 200 HMA at 0.8445  and would also provide resistance although I cannot see them coming under pressure. Look to sell into the strength with a SL placed above 0.0.8480.

Overall look for another choppy session at close to 0.8300, with a mild bias to slightly higher levels, but with the medium term view of selling into strength for an eventual move below 0.8260. Unless tomorrow’s Nov employment report presents a big topside surprise, it seems likely that the bears will continue to fade the rallies as the chances of a 2015 RBA rate cut increase.

Economic data highlights will include:

NAB Business Confidence Survey.

Meta Trader – AxiTrader     AUD/USD: 4 Hour

NZD/USD: 0.7663

The Kiwi has bounced off new trend lows of 0.7622 and in the short term  it may look to squeeze a bit higher to where sellers will gather at 0.7681 and then at the session high of 0.7703. Beyond there would head to the 100 HMA, currently at 0.7740, although if so, it would be a good selling opportunity.

In the medium term, it would appear that the downside may again come into focus as the market looks to Thursday’s  RBNZ meeting, where the Governor Wheeler will most likely talk the Kiwi down again.

Support levels to watch are at 0.7620 and then at 0.7600. Having now broken below the 50% pivot of 0.6560/0.8842 at 0.7695  the kiwi could begin to accelerate towards the next major Fibo support at 0.7430 (61.8%), although unlikely before Thursday I suspect.

Economic data highlights will include:

Electronic retail sales.

Meta Trader – AxiTrader    NZD/USD: 4 Hour