Forexpros Daily Analysis Nov 23, Supplemental

Forexpros Daily Analysis Nov 23, Supplemental


Fundamental Weekly Outlook

EU:
• Monday: France PMI Manufacturing (Previous 55.6, Forecast 55.8) & PMI Services (Previous 57.7, Forecast 57.4). Germany PMI Manufacturing (Previous 51.0, Forecast 51.6) & PMI Services (Previous 50.7, Forecast 51.2). Euro-Zone PMI Manufacturing (Previous 50.7, Forecast 51.2) & PMI Services (Previous 52.6, Forecast 52.9).
• Tuesday: Euro-Zone Industrial New Orders MoM (Previous 2.0%, Forecast 1.0%) & YoY (Previous -23.1%, Forecast -17.1%). Business Confidence Indicator (Previous -1.78, Forecast -1.65). Germany GDP QoQ (Previous 0.7%, Forecast 0.7%) & YoY, (Previous -4.7%, Forecast -4.7%), Private Consumption (Previous 0.7, Forecast -0.4%), Capital Investment (Previous 0.8%, Forecast 0.8%), Imports (Previous -5.1%, Forecast 3.5%), Exports (Previous -1.2%, Forecast 4.1%). IFO - Business Climate (Previous 91.9, Forecast 92.5), IFO - Current Assessment (Previous 87.3, Forecast 88.0), IFO – Expectations (Previous 96.8, Forecast 97.3). France Consumer Spending MoM (Previous 2.3%, Forecast 2.4%) & YoY (Previous 1.0%, Forecast 2.3%). Business Confidence Indicator (Previous 89, Forecast 91).
• Wednesday: Germany GfK Consumer Confidence (Previous 4, Forecast 4).
• Thursday: Germany CPI MoM (Previous 0.1%, Forecast 0.0%) & YoY (Previous 0.0%, Forecast 0.5%).
• Friday: Germany Import Price Index YoY (Previous -11.0%, Forecast -8.7%) & MoM (Previous -0.9%, Forecast 0.4%).. France Consumer Confidence. Business Confidence Indicator (Previous -35, Forecast -35) Euro-Zone Consumer Confidence (Previous -18, Forecast -17).

US:
• Monday: Existing Home Sales MoM (Previous 9.4%, Forecast 2.3%).
• Tuesday: GDP QoQ (Previous 3.5%, Forecast 2.9%), Personal Consumption (Previous 3.4%, Forecast 3.2%), Consumer Confidence (Previous 47.7, Forecast 47.5), House Price Index MoM (Previous -0.3%, Forecast -0.1%). Minutes of Nov. 4 FOMC Meeting (Text Report).
• Wednesday: Personal Income (Previous 0.0%, Forecast 0.2%), Personal Spending (Previous -0.5%, Forecast -0.6%). Durable Goods Orders (Previous 1.0%, Forecast 0.5%), Durable Goods Orders Ex Transportation (Previous -0.9%, Forecast 0.7%). Initial Jobless Claims (Previous 500K, Forecast 505K), University of Michigan Confidence (Previous 66.0, Forecast 67.0), New Home Sales MoM (Previous -3.6%, Forecast 0.8%).

JP:
• Wednesday: Trade Balance (Previous 520.6 B, Forecast 465.5 B).
• Friday: Jobless Rate (Previous 5.3%, Forecast 5.4%), Tokyo CPI YoY (Previous -2.4%, Forecast -2.3%), Tokyo CPI EX Food & Energy YoY (Previous -1.4%, Forecast -1.4%), National CPI YoY (Previous -2.2%, Forecast -2.4%), National CPI EX Food & Energy YoY (Previous -1.0%, Forecast -1.1%). Retail Sales MoM (Previous 0.9%, Forecast -0.9%) & YoY (Previous -1.4%, Forecast -1.6%).

UK:
• Wednesday: GDP QoQ (Previous -0.4%, Forecast -0.3%) & YoY (Previous -5.2%, Forecast -5.1%), Private Consumption (Previous -0.6%, Forecast -0.2%), Exports (Previous -1.4%, Forecast 1.4%), Imports (Previous -2.2%, Forecast 2.0%).

AU:
• Monday: New Motor Vehicle Sales MoM (Previous 2.9%, Forecast N/A) & YoY (Previous -2.0%, Forecast N/A).
• Tuesday: CB Leading Index (Previous 1.8%, Forecast N/A).
• Thursday: Private Capital Expenditure (Previous 3.3%, Forecast 1.0%).

CA:
• Monday: Retail Sales (Previous 0.8%, Forecast 0.6%) & Retail Sales Less Autos (Previous 0.5%, Forecast 0.4%).
• Friday: Current Account (Previous -11.2%, Forecast N/A).



Technical Analysis


Euro Dollar:

The pair has pulled off the low of the range (1.4800), and looks prepared to move back higher to test some former highs. This will either be confirmed or rejected based on movement through the following levels:
A move back above 1.4890 indicates movement back above 1.4900 and a test of recent swing highs at 1.4930-1.4940. We have trendline support above this at 1.4950-1.4965, this will also act as resistance. Beyond is resistance at 1.4980-1.4990.

Keep in mind that old support and resistance become new resistance and support respectively if a level is moved through and then retreats back. Movement through one level indicates movement to the next, and failures are likely to move back to other levels mentioned. Support and resistance does not mean rates will move exactly to the price mentioned, rather they are profit taking opportunities in those areas (or possibly entry prices if moved through) as retracements are more likely around those levels. This is misunderstood by many traders, and I will elaborate on it on an upcoming post on my blog.

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For further in-depth reading on USD/CAD and other major currencies, visit our Technical Analysis section.

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A drop back below 1.4840 is our first indication of a move lower. The trend line this move would break is short term and not of high importance. The closest major level is 1.4800. A break below that would be significant.

A break below 1.4800, if it is legit, will find support at 1.4770, 1.4740-1.4730 then 1.4700. If the break is not legit and just a stop run, it will likely tucker out by 1.4780-1.4770 and then reverse. I say that only we because we all know there are a pile of stops sitting down there.

Keep in mind that since we know stop hunting is a common practice, whether intentional or not, and is a strategy in and of itself. If there is a level that is likely to have many stops it, it seems to create a gravitational pull and can result in a quick surge but often retraces. Watch and see if you see this happening around critical levels. If there is interest I can post a article on how to trade this phenomenon. Have a great day trading everyone!

Forex Analysis written by Cory Mitchell, in conjunction with Forexpros

Disclaimer:
Trading Futures and Options on Futures and Cash Forex transactions involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

$4.8 trillion - Interest on U.S. debt
Unless lawmakers make big changes, the interest Americans will have to pay to keep the country running over the next decade will reach unheard of levels.
NEW YORK (CNNMoney.com) -- Here's a new way to think about the U.S. government's epic borrowing: More than half of the $9 trillion in debt that Uncle Sam is expected to build up over the next decade will be interest.

More than half. In fact, $4.8 trillion.

If that's hard to grasp, here's another way to look at why that's a problem.

In 2015 alone, the estimated interest due - $533 billion - is equal to a third of the federal income taxes expected to be paid that year, said Charles Konigsberg, chief budget counsel of the Concord Coalition, a deficit watchdog group.

On the bright side - such as it is - the record levels of debt issued lately have paid for stimulus and other rescue programs that prevented the economy from falling off a cliff. And the money was borrowed at very low rates.

But accumulating any more interest on what the United States owes at this point is like extreme sport: dangerous.

All the more so because interest rates will rise when private sector borrowers return to the debt market and compete with the government for capital. At that point, the country's interest payments could jack up very fast.

"When interest rates rise even a small amount, the interest payments go up a lot because of the size of the debt," Konigsberg said.

The Congressional Budget Office, which made the $4.8 trillion forecast, already baked some increase in rates into the cake. But there is always a chance those estimates may prove too conservative.

And then it's Vicious Circle 101 - well known to anyone who has gotten too into hock with Visa and MasterCard.

The country depends heavily on borrowing to fund what it wants to do. But the more debt it racks up, the more likely it becomes that creditors could demand a higher interest rate for making new loans to the government.

Higher rates in turn make it harder to pay off the underlying debt because more and more money is going to pay off interest - money, by the way, which is also borrowed.

And as more money goes to interest, creditors may become concerned that the country can't pay down its principal and lawmakers will have less to fund all the things government is supposed to do.

"[P]olicymakers would be less able to pay for other national spending priorities and would have less flexibility to deal with unexpected developments (such as a war or recession). Moreover, rising interest costs would make the economy more vulnerable to a meltdown in financial markets," the CBO wrote in its most recent long-term budget outlook.

So far, that crisis of confidence hasn't happened. And no one can predict with any certainty whether or when it could occur.

But should it occur, the change could be abrupt.

That's because the government frequently rolls over - or refinances - the debt it has issued as it comes due.

In other words, when a Treasury bond or note matures, the government must pay the investor the face value on that debt. In order to do that, the Treasury borrows money to pay back the investor, which means the debt would be refinanced at whatever the going interest rates are at the time.

Just how much churn is there? Of late, a fair bit it seems. A Treasury borrowing advisory committee reported in early November that "approximately 40 percent of the debt will need to be refinanced in less than one year."

Since rates may well stay low over the next year, it's possible that debt could be refinanced at the same or even lower rates. But that situation won't last forever.
So what will Washington do?

To help mitigate the potential risk of rising rates, the Treasury has said it would start increasing the average maturity of the new debt it issues. That way the debt it refinances in the next couple of years will be locked in at lower rates for longer periods of time.

And the Obama administration has promised to produce a deficit-reduction plan that would aim to bring down annual deficits to roughly 3% of GDP over the next several years, below the 4% to 5% currently projected.
If that happens, the $4.8 trillion in interest payments that CBO estimates for the next decade could go down if interest rates don't increase as much as CBO expects.

"There will be less debt outstanding than if we don't get the deficit down. It may also reduce [the average interest rate on the debt] since less debt means less pressure on interest rates," said William Gale, co-director of the Tax Policy Center.

But whether they can do that within a few years of an economic recovery is another matter. "Even under the president's [2010] budget as evaluated by the CBO we do not get anywhere close to that," Gale said.

That could mean the president's 2011 budget proposals would have to make a lot of changes to get closer to the 3% goal. Unpopular changes like tax hikes and spending cuts.

Budget hawks hope the president will push for a deficit-reduction commission to come up with ways to cut the deficit and then propose legislation that lawmakers would only be able to vote for or against. The reason: There is no political will to make the tough calls. Especially in a mid-term election year.