Forex Daily Outlook Nov 30 and Why Thursday Key for the EUR |
FOREX Daily Outlook Monday To Midday Tuesday Nov. 30th GMT:
Clear bias to safety fx again, for the same reasons as yesterday, fueled by concerns about Ireland, spiking Portuguese and Spanish bond rates that threaten to force these nations to seek EU/IMF funds (currently insufficient to help Spain), China tightening, Korean military tensions too. Poor German jobs data doesn’t help as German prosperity is central for any EU bailout efforts.
Strongest over the past 24 hours: JPY, CHF, USD. Weakest: EUR, AUD, NZD, CAD, GBP in that order, almost perfect correlation with the forex risk hierarchy, except that the CHF and USD trade places on a minor technical adjustment after recent days’ USD strength. Longer term as long as the EU crisis is boiling the CHF should be under some pressure given that most of Swiss exports go to the EU.
US Dollar Daily Outlook: Up vs. all except down vs. the JPY and CHF as the drive to safety on EU, China fears boosts the safe haven currencies, which appear to be rotating as the market favorite of the day.
Euro Daily Outlook: Down vs. all, struggling to hold the 1.3000 level, as Spanish, Italian, and other EU sovereign bond rates continue higher, feeding fears that the crisis is spreading and that rising borrowing costs will Portugal and possibly Spain to seek EU/IMF aid. No one believes the EU/IMF has enough cash to aid Spain, the default of which could well bring the end of the EZ as we know it. Spain can currently afford to access the bond markets but its rates have risen so fast (over 1% for benchmark 10 year bond within just the past weeks) that they are rapidly approaching the level at which Spain will be effectively shut out of bond markets and dependent on the ECB. That level is believed to be just over the 6% rate for the 10 year bond.
Poor German jobs data doesn’t help as German prosperity is critical to its ability and political will to continue funding its weaker neighbors for the sake of the Euro-zone and EUR. Thursday becomes a key day with both the Spanish bond auction and ECB press conference. Speculation is growing that the ECB may decide to launch its own huge version of the Fed’s QE in order to stimulate growth and/or confidence and bring down PIIGS bond yields.
The EUR is down especially hard vs. the CHF and JPY, and has been in a downtrend essentially since the Fed’s QE announcement at the beginning of November.
Yen Daily Outlook: Up vs. all over the past 24 hours and continuing into today as expected for the #1 safe haven currency on an overall risk-off day.
British Pound Daily Outlook: Up vs. the EUR and commodity dollars down vs. the safe haven USD JPY and CHF, exactly as expected per its place in the risk currency hierarchy on a risk-off day. Note that Wednesday brings major housing price data and manufacturing PMI.
Australian Dollar Daily Outlook: Down vs. all except up vs. the EUR, exactly as expected on a risk-off day due to EU fears.
New Zealand Dollar Daily Outlook: Down vs. all except up vs. the EUR, AUD, as per its place in the risk hierarchy on this risk aversion day.
Canadian Dollar Daily Outlook: Down vs. all except up vs. the EUR and other commodity dollars.
Swiss Franc Daily Outlook: Up vs. all except down vs. the JPY. Note however that during the last EU crisis the CHF tended to follow the EUR lower because the EU is the destination for about 60% of Swiss exports, so we question the longer term strength of the CHF as long as this second chapter in the EU crisis remains in focus.
About the author: Ava FX Analysts Department
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