Market Rumours

The dollar may be set up for a corrective rally. The index, near 74.98, is virtually testing the low for this year's downtrend. In other words, the index is testing potentially important interim support on the charts. The weekly chart in particular suggests that the index may be set up for a rally to 76.41. New downtrend lows, on the other hand, would be the signal for a move down to 73.68. Take profit at 74.09. A higher move of the index may be accompanied by a failed test of $1113.20 resistance by the Comex Dec gold contract.

With few surprises out of G-20, the IMF saying the USD is still on the strong side [albeit on a trade-weighted basis] and Moody's raising China's A1 rating to positive from stable, the market has a green light for the broader bearish USD trade, says BNP Paribas. The bank looks for EUR/USD to break through its recent 1.5060 highs and head toward 1.54, while for GBP/USD it says the break of key resistance at 1.6740 has a target of 1.7040. GBP/USD now at 1.6787, EUR/USD at 1.4965

The main European stock bourses start the week on a strong note, adding 1% or more in early trade. With all the big risk events, like central bank rate meetings, payrolls and G20 out of the way, and no first tier data on offer Monday there seems little to stand in the way of the risk rally and fresh lows for the greenback.

A busy week for Fed speakers could spell danger for the USD. UBS says the market will be looking for any suggestion that last Friday's poor payrolls release means rates will stay down for longer. "Any signals that the weaker data could prolong the period over which the policy rate remains 'exceptionally low' could heap further pressure on the dollar," the bank says. The list of speakers includes Lockhart, Yellen, Rosengreen, Tarullo, Fisher and Evans.

Friday's USD/JPY close below 90.00 has added to the bearish momentum, and with the dollar not oversold it's time to sell again, says Mizuho Corporate Bank's Nicole Elliott. She favors shorts at market with a stop above 90.95, targeting 89.65 and 89.25. USD/JPY now at 90.13. (GST)

USD/JPY (last 90.08) is likely to trade with a negative bias this week as the daily MACD and stochastic indicators are bearish. Support is at the Nov. 2 reaction low of 89.17, and then at the Oct. 14 reaction low of 88.81; a breach would target the Oct. 7 trough of 88.00. Resistance is at Friday's high of 90.85; a breach would temper the near-term negative bias, targeting the 55-day moving average, coming in now at 91.01, and then Wednesday's reaction high of 91.32. A breach of the 91.32 resistance would expose the upside to the Oct. 27 reaction high of 92.32, and then to the Sept. 21 reaction high of 92.53. USD/JPY medium-term outlook is consolidative as long as the pair stays above the 88.00 support.The weekly MACD and stochastic indicators are bearish, but the 5-week moving average is meandering sideways. A fall below 88.00 would target the Dec. 17 & Jan. 21 lows of 87.11; a breach would expose the downside to the April 19, 1995 bottom of 79.70 in coming weeks.

EUR/USD (last 1.4890) is likely to trade with a bullish bias this week as long as the pair stays above Thursday's low of 1.4807. The daily chart is positive-biased as the slow stochastic measure is rising, but the negative MACD histogram bars are contracting. Immediate resistance is at Thursday's high of 1.4917; a breach would expose the upside with no significant resistance until 1.5061, the 14-month high hit on Oct. 26. But a fall below the 1.4807 support would temper the near-term positive bias, exposing the downside to the base of the ascending channel formed with the July 1 high of 1.4201 and the Aug. 17 low of 1.4044, coming in now at 1.4673 and just above the 55-day moving average. An extension of the fall would target Tuesday's reaction low of 1.4623, and then the Oct. 2 reaction low of 1.4479. EUR/USD medium-term outlook remains positive as the weekly MACD indicator is bullish, and the five- and 15-week moving averages are rising, while the weekly stochastic measure stays elevated at the overbought level. The pair in coming weeks may revisit 1.6039, the record high hit on July 15, 2008. But a fall below the 1.4479 support would temper the positive medium-term outlook, exposing the downside to the Aug. 17 reaction low of 1.4044.

GBP/USD (last 1.6665) is likely to trade with an upside bias this week as the daily chart is positive: the MACD and stochastic indicators are bullish, and the five- and 15-day moving averages are rising, while a bullish parabolic stop-and-reverse signal was hit at 1.6636 this morning. Resistance is at the Oct. 23 reaction high of 1.6693, and then at the Sept. 11 reaction high of 1.6742; a breach would expose the upside with no significant resistance until 1.7042, the Aug. 5 peak. Support is at Thursday's low of 1.6465; a breach would temper the near-term positive bias, exposing the downside to Tuesday's reaction low of 1.6260, and the Oct. 26 reaction low of 1.6249. An extension of the fall would target the previous cap of 1.6120 set on Oct. 8, and then to the psychological 1.6000 level. In the medium-term, GBP/USD is likely to consolidate between the Oct. 13 trough of 1.5705 and the 1.7042 resistance. A sustained rise above 1.7042 would reinstate the positive medium-term bias, paving the way to 1.7330, the 50% Fibonacci retracement level of the decline from the Nov. 9, 2007 high of 2.1160 to the Jan. 23, 2009 low of 1.3500, and then to 1.8234, the 61.8% retracement level, in coming weeks.

EUR/USD, EUR/JPY rise as higher Nikkei (last +0.3%) fueling players' risk appetite; markets remain a go for risk-taking moves even after worse-than expected U.S. jobless rate Friday, says Shinkin Central Bank senior dealer Shinichi Hayashi. "Although the U.S. October jobless rate was worse than expected, the number of employed in the data wasn't that bad, with September's figure revised up. My impression of the data is a bit positive, so I think markets remain willing to take risks." Tips EUR/USD may rise to 1.4950 vs last 1.4883; EUR/JPY may rise to 135.00 vs last 133.80.