AUD/USD Fundamental Analysis November 3, 2014 Forecast

The AUD/USD gave up 10 points to trade at 0.8822 after the release of PPI data. Annual PPI missed expectations while Q# met forecasts. The stronger US dollar also weighed on the Aussie after the Federal Reserve decision to halt its QE program and a shift in its assessment of the US economy to a brighter note. Reserve Bank of Australia policy makers, led by Stevens, repeated in minutes of their meeting this month that the Aussie “remained high by historical standards” and “was offering less assistance than would normally be expected in achieving balanced growth.”

The Aussie and kiwi have each tumbled at least 1.4 percent since Fed officials said in a statement yesterday an improving labor market is allowing them to end quantitative easing this month. Prior to the Fed’s move, the antipodean currencies were headed for their biggest monthly gains since June as central bank chiefs Glenn Stevens and Graeme Wheeler reiterated their respective exchange rates were too high and hurting growth.

The odds of a first U.S. rate rise since 2006 by October next year climbed to 76 percent, compared with 66 percent on Oct. 28, based on futures prices. Wagers have fallen from 93 percent at the end of September on mixed economic data and comments from Federal Open Market Committee members that a global slowdown and a stronger dollar could derail a recovery.

NZD/USD Fundamental Analysis November 3, 2014 Forecast

The NZD/USD  reversed gains from late on Thursday to trade at 0.7830 down by 15 points in the morning session. The Federal Open Market Committee dismissed recent turmoil in global markets as it focused instead on “solid” U.S. employment gains. It said the labor market has strengthened enough to withstand an end to its quantitative-easing program and downplayed risks posed by slowing inflation.

RBNZ Governor Wheeler reiterated the kiwi’s level “remains unjustified and unsustainable and continues to constrain growth in the tradable sector.” The currency earlier extended declines as he omitted a comment from his prior statement that the central bank expected some further tightening would be necessary to contain future inflation.

New Zealand building consents fell at the fastest monthly pace in more than two years in September amid uncertainty around that month’s general election.

 New Zealand consumer confidence edged up three index points in the third quarter to a score of 102. The increase of three points from the previous quarter and five points from a year ago (Q3 2013) shows slow and steady progress for the country. The index – which reached its lowest score of 89 in Q2 2009 – is currently 13 points shy of New Zealand’s pre-recession level (115).

The year-on-year increase was driven by the belief of the majority of Kiwis (56%) that the job market would be good or excellent over the next year, an 11 percentage-point increase from Q3 2013. Over the same time period, there were also improvements in respondents rating their personal finances for the upcoming year as good or excellent (up four percentage-points to 61%) and whether it would be a good time to buy things over the next 12 months (up three percentage-points to 42%).

The kiwi may have gained more against the greenback because it dropped the most yesterday following a more upbeat statement about the prospects for the US economy and as economists pulled back their expectations for interest rate rises here after the Reserve Bank removed a sentence in its policy statement referring to the need for further interest rate rises.

USD/JPY Fundamental Analysis November 3, 2014 Forecast

The USD/JPY surged 15 points as the yen weakened farther ahead of the Bank of Japan press conference. The JPY is trading at 109.37. Japan’s economic recovery remained in the doldrums in September, as household spending fell, inflation edged lower and unemployment ticked up.

The data were released Friday as the Bank of Japan held a monetary policy meeting. As the U.S. winds down its own “quantitative easing,” Japan’s central bank faces pressure to increase stimulus to support growth as Prime Minister Shinzo Abe weighs approval of a sales tax hike next year.

Core inflation, excluding volatile food prices, was at 3.0 percent, down from 3.1 percent in August. Unemployment rose to 3.6 percent from 3.5 percent.

With just five months left before Governor Haruhiko Kuroda’s self-imposed deadline for banishing deflation, the Bank of Japan is preparing for failure, and the first casualty could be its facade of board unity.

There is almost no way the central bank can hit the two-year, 2 percent inflation target Kuroda set when he unleashed unprecedented monetary stimulus in April 2013. Economists think it is unlikely to even get close in the foreseeable future.

EUR/JPY Fundamental Analysis November 3, 2014 Forecast

The EUR/JPY gained 3 points to trade at 137.81 after the release of a slew of Japanese data and the Bank of Japan conference.  The board members gave Kuroda’s experiment a one-year moratorium,” said a former central bank board member who still has close contacts with incumbent policymakers. “They decided to wait-and-see for a year. But now it’s time of reckoning.”

A divided board could undermine the public confidence essential to Kuroda’s success in embedding expectations of inflation, and leave markets fretting about how authorities will deal with the central bank’s massively expanded balance sheet.

Japan’s inflation slowed to its lowest pace in half a year, underlining the challenge to central bank chief Haruhiko Kuroda’s efforts to reflate the world’s third-biggest economy. Consumer prices excluding fresh food increased 3.0 percent in September from a year earlier, the statistics bureau said today in Tokyo, in line with a median projection in a Bloomberg News survey of economists. Stripped of the effect of April’s sales-tax increase, core inflation — the Bank of Japan’s key measure — was 1.0 percent.

Weak price gains are a blow to Kuroda, who is targeting 2 percent inflation and said in July there was no possibility that the bank’s price gauge would fall below 1 percent. The BOJ is forecast to maintain its unprecedented easing today, even as oil prices decline and the board considers moderating language on the consumer price outlook.

The USD, the Euro, the Pound and the Yen Could Be Volatile In Today’s Session

The US dollar soared to trade at 86.30 gaining for a third session in Asia on Friday. The greenback is trading at 86.30 and is expected to continue to rally. The greenback reached a three-week high against its major counterparts as the U.S. economy expanded more than forecast in the third quarter to confirm the Federal Reserve’s decision Wednesday to end its bond-buying program. The upgraded assessment of the US economy helped send the dollar on its rally and continued to be supported positive data on Thursday. The dollar gained after data showed that the U.S. economy grew at a 3.5 percent annualized rate in the three months ended September after a 4.6 percent gain in the second quarter. The median forecast of 87 economists surveyed by Bloomberg called for a 3 percent advance. “The combination of the market’s reaction to the Fed policy announcement and now the data is supportive of a shift of focus from the end of quantitative easing to the next policy move.

With the Fed policy meeting and U.S. GDP data out of the way, the focus should now turn to the Bank of Japan, which wraps up its policy review later in the day. It is also due to release its semi-annual report. The BOJ is widely expected to maintain its massive asset buying programme and keep its forecast that inflation will hit its 2 percent target next year, suggesting no further stimulus is on the horizon. Lackluster data earlier this morning showed that Japanese inflation remains at 1% well below the outlook from the Bank of Japan and their objective of 2%. The JPY fell to trade at 109.37.

With the US Fed meeting and GDP behind all eyes are now turning to the growing economic problems in Europe, which seemed to be overshadowed by the ECB bank stress test and the FOMC meeting. In Europe, all eyes will be on the region’s latest inflation reading. Data on Thursday showed annual inflation in Germany unexpectedly slowed in October, while Spanish consumer prices fell; suggesting the risk of deflation in the wider euro zone has not yet abated. The euro is trading at 1.2603 and is forecast to fall to trade at the 1.25 price as the month draws to an end. Consumer prices in the EU rose an annualized 0.4 percent in October, the European Union’s statistics office in Luxembourg will say tomorrow, according to the median estimate of economists in a Bloomberg News survey. The ECB’s stimulus contributed to an 8.2 percent depreciation of the euro against the greenback this year, set for the biggest annual decline since it slumped 13 percent in 2005. The common currency will probably drop to $1.20 in the third quarter of 2015, said CBA’s Dragicevich. HE THREAT of Eurozone-wide deflation and prolonged economic stagnation was heightened by figures out yesterday showing a surprise drop in German inflation. Official data revealed that month-on-month price growth was minus 0.3 per cent from September to October. The number is down from September’s month-on-month growth of minus 0.1 per cent. Annual inflation still remains above zero at 0.7 per cent. But the annual figure also represents a slowdown after September’s 0.8 per cent year-on-year growth. Deflation has become a major worry for the Eurozone. Economists are concerned that it could follow the in the footsteps of Japan.

The pound sterling has been sidelined as of late with big data from the US, Japan, and the Eurozone. Sterling has bounced between small gains and losses holding fairly close to the 1.60 price level, and is holding at 1.5990 this morning after disappointing housing data. The Bank of England said the central bank would need to see more signs of price pressures building before they begin to increase interest rates.

AUD/USD Forecast October 31, 2014, Technical Analysis

The AUD/USD pair bounced during the course of the day on Thursday, but still remains trapped in the basic consolidation that we have seen for some time now. The 0.88 level continues to be a bit of a magnet for price, and as a result we feel that the market will more than likely form another resistive candle here soon, offering yet another short-term selling opportunity. We believe that the market cannot be bought until we clear all of the resistance, which we see going all the way to the 0.9050 handle. With this, we are bearish.

EUR/GBP Forecast October 31, 2014, Technical Analysis

The EUR/GBP pair fell during the course of the day on Thursday, but found enough support below the 0.79 level to bounce and form a nice-looking hammer. However, there have been several shooting stars previously, and as a result it appears of this market is simply wound up far too tight in order to place any significant amount of money into the marketplace, and as a result we are going to stay on the sidelines. We will be looking to longer-term charts for clues as to what to do next. Until we get that, we are on the sidelines.