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FX Weekly

Good News Is Bad News for the Greenback..

Wed, Nov 18 2009, 17:00 GMT
by Alpari (US) Analyst team

Alpari (US), LLC

Market Focus

•AUD home Loans rise (m/m) to 5.1% [vs. -1.9% previous and the 3.1% forecast.]
•German Industrial Production (m/m) rises 2.7%. The Zew Survey fell however, with sentiment dropping to 51.1.
•Chinese Industrial Production for the year increased significantly, printing nearly a full point higher than expected at 16.1%. China’s trade balance also widened to $24B.
•Fitch states that the UK could be the first of the major developed economies to suffer a downgrade from AAA, sending sterling into a tail spin.
•US unemployment claims dropped to 502k from the previous print of 514k, but the good news was offset by a considerable drop in the University of Michigan Consumer Sentiment [66.0 vs. 71.1 forecast]


Market participants continue to key off of a weaker dollar and a passive Fed this week as major stock indices here in the US make fresh 13-month highs. As usual, gold futures continue their grind higher. It should be noted that this is the eight consecutive day of gains for the metal and that the reported move could be linked with strong demand from central banks, adding weight to any bullish argument for a continued rise higher in gold prices. Futures for gold on the NYMEX ranged as high as $1119.10 on Friday. The positive sentiment garnered from the rise in equities and gold carried into crude as well, with oil rising just shy of $80 per barrel. The steady rise of oil imports to China and a weaker dollar paint a solid fundamental picture for continued gains in oil going into year end. Over the weekend, the G-20 held meetings to discuss issues and concerns about the state of the global recovery. They did discuss the fact that keeping stimulus measures in place was a good idea until sustained economic positives were seen on a global level. What they didn’t discuss was the value of the dollar. This lack of attention was effectively a green light for traders looking to short the greenback, with evidence shown on the dollar index, which posted a fresh 15 month low on Monday.


Solid numbers out of the People’s Republic continue to keep China and the dollar- pegged Yuan in the spotlight, with the IMF presumably referring to its relationship with the greenback in a report saying that the dollar has moved closer to “medium-term equilibrium” but “still remaining on the strong side”. China blew away analysts forecasts on their trade balance figures, printing a 24B versus the 19.2B that was expected. China also posted better than previous prints on their exports and imports.

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Published on  Wed, Nov 18 2009, 17:00 GMT