Market Review - 30/08/2011 22:00 GMTEuro tanks on poor EU data and bond auction in Italy
The single currency tumbled on Tuesday as weak EU data and disappointing demand at Italy's bond auction prompted investors to sell euro.
Although the single currency edged higher to 1.4533 at Asian midday following Monday's rise to a near 2-month high of 1.4550, failure to re-test this resistance caused price to retreat at European open, the pair tumbled sharply to 1.4385 due to weaker-than-expected EU data together with the widening bond yield spread (Italian/German 10-year government bond yield spread rose above 300 basis points, the highest since ECB started buying the bonds) but later pared its losses on rumours the ECB bought significant amount of Italian 10-year bonds. Euro eventually recovered to 1.4465 in NY afternoon after the release of FOMC minutes.
The single currency was pressured as Italy sold 7.7 billion euros ($11.1 billion) of debt, including 3.75 billion euros of 10-year bonds, with the average yield of 5.22%, down from a yield of 5.77% in July. The auction was disappointing as bids for the 10-year supply exceeded the amount on offer by just 1.27 times.
EU economic and consumer sentiment were worse than expected, coming in at 98.3, the lowest since May 2010, and -16.5 vs forecasts of 100.5 and -12.0 respectively whilst EU business climate and industrial sentiment in Aug came in at 0.07 and -2.9 vs forecasts of 0.15 and -1.5 respectively.
FOMC minutes for August showed most members agreed economic outlook had deteriorated enough to warrant a response and some wanted more substantial action. They discussed a range of tools reinforcing forward guidance such as asset purchases and increasing the average maturity of the Fed's balance sheet.
Versus the Japanese yen, the greenback fell sharply from Australian high at 76.97 to 76.66 in European morning due to broad-based selling of yen. Despite dollar's recovery to 76.89, the pair dropped again to 76.61 on the worse-than-expected U.S. consumer confidence (44.5 vs forecast of 52.0 and the previous figure of 59.2) before stabilising.
Although the British pound ratcheted higher to 1.6419 at Asian midday, cable tumbled sharply in tandem with euro to an intra-day low of 1.6255 before rebounding to 1.6318 in NY afternoon on short-covering after the release of FOMC minutes.
Data to be released on Wednesday include:
U.K. Gfk consumer confidence, Japan manufacturing PMI, industrial production, construction orders, housing starts, New Zealand NBNZ business confidence, Australia private-sector credit, Germany retail sales, unemployment rate, Unemployment change, EU HICP flash, unemployment rate, Canada GDP, U.S. ADP unemployment rate, Chicago PMI, factory orders, durable goods.
http://www.acetraderfx.com
Get a feel for live tradingTrade Simulator Download here
BlogsliorOil Prices – Daily Outlook August 29
by on Yesterday at 08:43 AM (20 Views) 
Join DateDec 2010Posts13Blog Entries111Disclaimer: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Any opinions, news, research, analyses, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. Forex Capital Markets LLC. will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. 
Gold & Silver - Daily Outlook August 25 
CME Raised Again Margins on Gold Trading by 27% CME (Chicago Mercantile Exchange), the world’s largest future market, decided to raise the maintenancemargins requirements from $5,500 to $7,000 for trading gold on Wednesday, August 24th by 27% effective after the close of today's business day on August 25th. The initial-margin requirement, or the minimum amount of cash that speculators must keep on deposit, will also incline to $9,450 per 100-ounce contract from $7,425. This is the second time in August that CME raised margins during August: last time, CME raised gold futures trading margins requirements by 22% to $5,500 per contract on Thursday August 11th. This news makes holding gold much less attractive and thus wards off many speculators from the precious metal market. This decision is likely to be one of the prime reasons for the recent sudden shift in gold prices to decline so sharply yesterday. Despite the sharp changes in gold and silver, their correlation of daily percent changes is still strong as seen in the chart below. This also shows that as gold declines silver will soon follow. 
U.S. Durable Goods Report Showed Improvement in July 2011 According to report on US new durable goods manufactures’ shipments and orders for July 2011, there was an increase in orders of durable goods and capital goods compared with June’s. This news might have also brought back some optimism in the progress of US economy. S&P500 / Gold & Silver– August Update The S&P500 inclined again on Wednesday by 1.31%, and thus gained back some of the losses from last week. During August, S&P500 fell by 8.87%. The linear correlation of gold and silver with S&P500 index (daily percent changes) was -0.478 (for gold) and -0.357* (for silver) as of August 24th. If the S&P500 will continue to rise, it may further push down gold and silver. The chart below of the normalized prices of gold, silver and S&P500 index (100= July 29th) show the opposite directions these indexes. 
Gold and Silver Outlook: Gold and silver nearly erased in the past couple of days all the gains they had in August: Gold fell to its level back in August 15th and silver price decreased below its initial price level from the beginning of August. The CME margin hike probably was one of major contributors to push out speculators from holding gold. The speculation around the economic progress of the US and how will it affect the lecture of Bernanke tomorrow in Jackson Hall is high and also may contribute to the changes in gold and silver. The major commodities prices, forex and stock markets indexes are shifting direction as the financial markets are extremely volatile. With such extreme volatility adding a quantitative easing plan might not bring stability to the financial markets. The sharp fall in gold and silver prices might indicate that the market changed its bet that Bernanke won't put the QE3 program on the table tomorrow, but the market has proven to be wrong in the past. Coming tomorrow, it will be much easier to see the direction of gold and silver, if the Federal Reserve chairman will provide a solid answer to his intentions about QE3. In the mean time, gold might lose ground again on the CME margin hike before resuming its slow ascent. Lior Cohen, M.A. commodities analyst and blogger at Trading NRG. http://www.tradingnrg.com/euros-to-us-dollar-u-s-durable-goods-report-rose-in-july-2011/By: Lior Cohen, Energy Analyst for Trading NRG 
Spot Gold (NY Close): 1759.32 // -69.03 // -3.78% Yesterday we discussed the conflict between the fundamental drivers of gold demand against the backdrop of Ben Bernanke’s upcoming speech in Jackson Hole, Wyoming. Indeed, if the Fed chairman announces new stimulus measures, this will be good for risk appetite and should drive gold lower as safety-seeking capital reverses course. However, it will also stoke inflation fears, which ought to underpin the metal as an inflation hedge. Conversely, no further stimulus presents the identical conflict in reverse, with an anchored price growth outlook negating the need for an inflation hedge but a return to risk aversion stoking safe-haven flows into the metal. Faced with the uncertainty of what Mr Bernanke actually unveils, investors appear to have looked upon gold prices hovering near record highs at a dizzying $1900/oz and decided to take some profits lest either of the outcomes to the Jackson Hole speech prove to bode ill in the months ahead. Needless to say, this has produced an aggressive selloff over recent days, mirrored by a dramatic reversal in investor demand as evidenced by a sharp decline in gold ETF holdings. With all this said, asking for follow-through in current conditions is clearly less than wise, and the continuity of the current move is far from assured over the coming 24 hours. Prices are now testing below support at $1746.19 having formed a formidable Bearish Engulfing candlestick pattern, the 38.2% Fibonacci retracement level, with a break below that exposing the 50% level at $1695.05. 
Spot Silver (NY Close): $39.73 // -2.18 // -5.21% In a similar setup to gold, prices put in an aggressive Bearish Engulfing candlestick pattern below Andrew’s Pitchfork resistance and are now testing through support at $39.75, the 61.8% Fibonacci retracement level. The logic at work appears to be the same as that which is driving silver’s more expensive counterpart. Critical support stands at $38.70, the intersection of the pitchfork bottom and the 76.4% Fib, with a break below that changing the near term bias to favor losses. 
For real time news and analysis, please visit http://www.dailyfx.com/real_time_news To receive future articles by email, please contact Ilya at ispivak@dailyfx.com 
The sterling fell by 0.71% against the greenback this week as global equity markets remained in consolidation after last week’s massive swings fueled concerns regarding the health of the global economy. The pound was markedly lower against all its major counterparts save the Swiss franc, which fell more than 2% this week after rumors of an SNB imposed deposit charge saw traders aggressively sell the swissie. The gainers are highlighted by a 3.3% advance in the kiwi which remained remarkably well supported despite the substantial swings in sentiment seen over the past few sessions.