Forex - Fed Members See Decline In The Dollar As ‘Orderly’

Forex News and Events: The details of the FOMC minutes released yesterday provided very few surprises; but for the first time there was the acknowledgement that low US rates could spur excessive risk-taking. Although this could have been seen as an argument for paring back USD shorts, the committee mitigated their remarks by adding that they saw the likelihood of such risk-taking as low. Instead, the really important revelation for FX markets was the Fed members’ assessment of recent declines in the USD being ‘orderly’; a reference that the market has since taken as carte blanche to continue selling USD against all major currency pairs. It seems structural USD weakness is now firmly secured into the end of the year, and investors will be able to continue the recent trend supported by the assurance that US policy makers are extremely unlikely to intervene either verbally or physically in favour of USD strength.   EURUSD has since taken out the first upside hurdle at 1.5000 and is now eyeing a re-test of 1.5063 highs from 26th October. Gold shows no signs of fatigue from its recent surge, and has struck new all-time highs above $1180; however although silver has followed the broader rally higher to $18.75, it is still some way off the $18.92 levels seen in the last month, and well off all-time highs.   The main data release of the morning so far has been the revision to UK Q3 GDP, and although the slight upward revision to -0.3% QoQ was exactly in line with consensus, GBPUSD experienced a quick sell-off from 1.6720 to 1.6675 as speculators hoping for a more positive surprise quickly exited GBP longs. This afternoon’s slew of second tier US data includes Durable Goods Orders, Claims figures, U.Mich Consumer Confidence and New Home Sales, but we feel that even upside surprises in US data from here are unlikely to stem the tide of USD weakness, and indeed any rallies should provide good opportunities to sell more. The impending Thanksgiving holiday in the US is likely to yield higher volatility heading into the end of the week; and we expect any moves to be exaggerated in patchy liquidity.

Today's Key Issues (time in GMT): 13:30 USD Durable goods orders, % m/m (y/y) Oct exp: 0.5 prev: 1.4 13:30 USD PCE price index y/y Oct exp: 0.1 prev: -0.5 13:30 USD Core PCE price index, % m/m (y/y) Oct exp: 0.1 (1.4) prev: 0.1 (1.3) 13:30 USD Initial jobless claims, thous 21-Nov exp: 500 prev: 505 13:30 USD Continuing claims, thous 14-Nov exp: 5565 prev: 5611 14:55 USD U/M consumer sentiment index Nov f exp: 67.0 prev: 66.0 14:55 USD New home sales, % m/m Oct exp: 0.4 prev: -3.6

The Risk Today: EurUsd 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. Think there's a decent chance of stop-hunters looking to trigger buy-orders just above the 1.5060 level, while the approaching US Thanksgiving Day holiday may mean thin liquidity ahead. GbpUsd The spate of USD weakness has sent GBPUSD back above 1.6680 pivot levels to touch a high of 1.6727, but only a break back above 1.6750 will negate the bearish bias from here. If realized, the next major supply comes in around 1.6840 levels.1.6680 level now provides near-term support ahead of Friday’s 1.6459 lows; a break below that leaves very little technical support until 1.6272 downside support. UsdJpy The long term downtrend remains the dominant bias, and having emphatically taken out 88.00 support, stops triggered a move all the way to 87.56. The next downside level is 87.15 major support (and year's lows), but if we get down there expect good bids to support the pair on the first visit. UsdChf USDCHF has breach immediate support around 1.0075, and looks to have also negated support at previous lows around 1.0030 (1.0026 the low so far). Any rallies should be capped at 1.0150 levels and a closing break of 1.0000 targets 0.9630 (2008 lows).

Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.5100 1.6900 90.05 1.0200 1.5063 1.6880 89.10 1.0150 1.5049 1.6840 88.20 1.0075 1.5040 1.6700 87.60 1.0035 1.4800 1.6680 87.50 1.0000 1.4700 1.6459 87.15 0.9890 1.4626 1.6272 87.15 0.9630 S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot