Talking Points

• Euro: EU Fails To Deliver Greek Deal, IMF Says More Needs To Be Done
• British Pound: BoE Votes 8-1 on QE, Curbs Bets For Lower Borrowing Costs
• U.S. Dollar: Continues To Gain Ground Ahead Of Thanksgiving Holiday

Euro: EU Fails To Deliver Greek Deal, IMF Says More Needs To Be Done

The Euro pared the overnight decline to 1.2735 as European policy makers floated different options to save Greece, but the reactionary approach held by the EU continues to encourage a bearish outlook for the EURUSD as the debt crisis dampens the fundamental outlook for the region.

Indeed, the EU unveiled a EUR 10B bond-buyback plan for Greece, which would be financed through the European Financial Stability Facility, while the group is also looking to suspend Greece’s interest payment on the bailout program through 2020 in an effort to keep the periphery country within the monetary union.

As the EU prepares a bundled aid package to avert a Greek default, International Monetary Fund Managing Director Christine Lagarde argued that ‘a bit more’ needs to be done to find a credible solution for Greece, and the ongoing rift within the troika – the EU, ECB, and IMF – may produce further weakness in the EURUSD as European policy makers struggle to restore investor confidence.

As European policy makers increase their pledge to avoid a credit event in Greece, headlines coming out of the region may keep the single currency afloat over the coming days, but we may see the EURUSD struggle to hold above the 23.6% Fibonacci retracement from the 2009 high to the 2010 low around 1.2640-50 as the fundamental outlook for the euro-area turns increasingly bleak.

As the short-term rebound in the EURUSD fails to keep the exchange rate above the 20-Day SMA (1.2820), the pair may consolidate going into the holiday trade, and we will maintain our bearish forecast for the euro-dollar as the weakening outlook for the region is expected to put additional pressure on the European Central Bank to ease monetary policy further.

British Pound: BoE Votes 8-1 on QE, Curbs Bets For Lower Borrowing Costs

The British Pound climbed to a fresh weekly high of 1.5948 as the Bank of England (BoE) Minutes sapped bets for additional monetary support, and the rebound from 1.5822 may continue to gather pace over the near to medium-term as the central bank appears to be slowly moving away from its easing cycle.

Although the Monetary Policy Committee voted 8-1 to keep its asset purchase program at GBP 375B, the board argued against a further reduction in the benchmark interest rate, while a growing number of central bank officials turned their attention to the stickiness in price growth as the central bank warned that ‘above-target inflation in the near term increased the chance that any pick-up in productivity would result in higher wage demands.’

As the BoE strikes a more neutral tone for monetary policy, we’re seeing the relatives strength index on the GBPUSD breakout of the downward trend carried over from September, and the technical development encourages a bullish outlook for the GBPUSD as the pair appears to be carving out a higher low in November.

U.S. Dollar: Continues To Gain Ground Ahead Of Thanksgiving Holiday

The greenback continued to gain ground on Wednesday, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) advancing to a high of 10,059, and the reserve currency may track higher ahead of the holiday trade as the developments coming out of the EU meeting fails to generate an improved landscape for risk-taking behavior.

As U.S. traders go offline ahead of the Thanksgiving holiday, the drop in market participation may produce choppy price action over the next 24-hours of trading, but the bullish sentiment surrounding the reserve currency looks poised to gather pace over the remainder of the year as the Federal Reserve adopts an improved outlook for the world’s largest economy.

FX Upcoming

— Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

To be added to David’s e-mail distribution list, send an e-mail with subject line “Distribution List” to dsong@dailyfx.com.

Will the EUR/USD Resume the Downward Trend From 2011? Join us in the Forum

Related Articles: Weekly Currency Trading Forecast

The prices of precious metals continue seek direction as both metals changed direction and declined yesterday. Precious metals’ fall coincided with the decline in other related markets such as crude oil and stocks. Bernanke’s speech referred to the importance of Congress to tackle the “fiscal cliff” but didn’t refer to the role the Fed will take in case Congress won’t act. EU ministers didn’t reach an agreement on Greek bailout and the IMF also impeded the progress of this issue. Japan’s trade balance report revealed a drop in imports and exports; this report suggests the Japanese economy isn’t expanding. On today’s agenda: China Manufacturing PMI, Minutes of MPC Meeting, Great Britain Net borrowing, and German 10 Year Bond Auction.

On Tuesday, the price of gold declined by 0.62% to $1,723.6; Silver price also decreased by 0.78% to $32.93. During the month, gold rose by 0.26%; silver, by 1.9%.

As seen below, the chart shows the developments in the normalized prices of precious metals during the month (normalized to 100 as of October 31st).

China flash Manufacturing PMI: as of the previous report for October, the Manufacturing PMI increased to 49.1, which means the manufacturing sectors are still contracting; this index indicates the developments in China’s manufacturing sectors growth rate; if the index will increase, this may positively affect commodities;

Minutes of MPC Meeting: in the recent MPC meeting it was announced the rate will continue to be 0.5% and the asset purchase program at £375 billion; the MPC still has concerns regarding GB’s inflation. The minutes of the recent meeting might offer some information behind this decision;

Daily Outlook

The prices of gold and silver changed direction and declined yesterday along with the rest of the market including stocks, and crude oil. This downward trend may continue today as the EU leaders continue to prolong the negotiations with end in sight. This situation is likely to continue pulling down the Euro and other “risk currencies” and consequently bullion prices. The upcoming report regarding China’s manufacturing PMI could have a positive effect if the PMI will pass the 50 point mark. Finally, if the Euro and other “risk currencies” will decline against the USD, then they are likely to pull down precious metals.

For further reading: Gold And Silver Outlook For November 19-23

By: Lior Cohen, M.A. in Economics, Commodities Analyst and Blogger at Trading NRG

Would you like to see more third-party contributors on DailyFX? For questions and comments, please send them to research@dailyfx.com

The Spanish government is discussing a proposal to grant residency to foreign buyers of homes. The idea is to attract capital back into the troubled housing sector, which experienced a huge bubble and no less painful bust.

The idea is that the residency permit will allow home buyers from outside the EU to live in Spain and enjoy the lifestyle Spain offers. However, it will not allow them to work, therefore not competing with the locals. Sounds too good to be true? Indeed, there is a downside potential as well.

For only €160,000 you could get a house in Spain and a right to live there for a very long time (not indefinitely though). Apartments in such prices could be found in many regions in Spain, which is still seeing a slump in prices: some estimate that prices could fall another 30% on top of the 30% they already fell. Foreign capital could also help end Spain’s long second recession.

Spain offers a lot of sunshine, very nice beaches, historical places, good food and good wine. In the mid-2000s, the euro-zone’s fourth largest economy attracted many British pensioners, as well as other people from the EU.

And now, Spain wants to tap into wealthy Chinese and Russian buyers, who can only obtain a 90 day tourist visa at the moment. With an unemployment rate of over 25%, more workers are not exactly needed, so that will not be included in the offer.

Will Spain see decent, wealthy Russian and Chinese pensioners? Perhaps.

However, many fear that this new offer will also open the door to money laundering schemes from individuals in those countries and others. It could also attract criminals of other sorts.

In addition, one house could be used to bring into the country larger quantities of people: the house could be later sold to another family member or a friend. Eventually, this open door could bring more foreigners for every house.

And, even though the residency is not planned to include a right to work, the foreigners entering the country could eventually find themselves working illegally.

So, while this suggestion is definitely creative, it is not flawless. Spain still has a long way until the real estate sector stabilizes.

Further reading: Catalan Elections – one step before a referendum on independence

By Yohay Elam, ForexCrunch

Would you like to see more third-party contributors on DailyFX? For questions and comments, please send them to research@dailyfx.com

The Spanish government is discussing a proposal to grant residency to foreign buyers of homes. The idea is to attract capital back into the troubled housing sector, which experienced a huge bubble and no less painful bust.

The idea is that the residency permit will allow home buyers from outside the EU to live in Spain and enjoy the lifestyle Spain offers. However, it will not allow them to work, therefore not competing with the locals. Sounds too good to be true? Indeed, there is a downside potential as well.

For only €160,000 you could get a house in Spain and a right to live there for a very long time (not indefinitely though). Apartments in such prices could be found in many regions in Spain, which is still seeing a slump in prices: some estimate that prices could fall another 30% on top of the 30% they already fell. Foreign capital could also help end Spain’s long second recession.

Spain offers a lot of sunshine, very nice beaches, historical places, good food and good wine. In the mid-2000s, the euro-zone’s fourth largest economy attracted many British pensioners, as well as other people from the EU.

And now, Spain wants to tap into wealthy Chinese and Russian buyers, who can only obtain a 90 day tourist visa at the moment. With an unemployment rate of over 25%, more workers are not exactly needed, so that will not be included in the offer.

Will Spain see decent, wealthy Russian and Chinese pensioners? Perhaps.

However, many fear that this new offer will also open the door to money laundering schemes from individuals in those countries and others. It could also attract criminals of other sorts.

In addition, one house could be used to bring into the country larger quantities of people: the house could be later sold to another family member or a friend. Eventually, this open door could bring more foreigners for every house.

And, even though the residency is not planned to include a right to work, the foreigners entering the country could eventually find themselves working illegally.

So, while this suggestion is definitely creative, it is not flawless. Spain still has a long way until the real estate sector stabilizes.

Further reading: Catalan Elections – one step before a referendum on independence

By Yohay Elam, ForexCrunch

Different hours of the day are characterized with different market behavior. This depends on the volume and also on the economic indicators that are released in every country.

Here are some better time spans to trade, in hours which see fewer surprises:

Times are GMT, during the winter in the northern hemisphere. For summer times, just subtract one hour.

• 3:15 to 5:00: Unless there is a rate decision in Australia, these hours are quiet. Traders in Tokyo are not as enthusiastic as at the beginning of the session, Australian data is already out and the occasional Chinese data news release is also behind. The only potential risk is a rate decision in Japan, but this usually comes at a later hour. Europe is fast asleep.

• 10:15 to 13:00: Up to 10:00, traders in London are more alert, especially at the beginning of the session. In addition, most UK data is released at 9:30, and European data releases (which are more spread out), are usually released up to 10:00 (ZEW for example). By 10:15, reactions to the data have already been made, and trading remains active, yet without too many surprises. At 13:00, traders in New York are already ready and potential surprises can be seen at 13:30, when the US releases data.

• 23:00 to 1:00: After the US session closes, some caution is warranted. Liquidity is low and this is a good time for rating agencies to surprise markets with credit downgrades. Too often, these publications were made after markets closed in the US, but usually not long afterwards. However, by 23:00, it is reasonable to expect that thing will calm down and remain quiet until data is released in Australia and Japan.

Some traders seek the quiet hours for range trading, while others are looking for action and trading the news. The most liquid and busy hours are usually 13:00 to 16:00, when major US releases are scheduled, and trading volume is at its peak – overlapping of the European and US sessions.

What are your preferred times for trading? Do you prefer surprises or quiet times?

Further reading: 5 Most Predictable Currency Pairs

By Yohay Elam, ForexCrunch

Different hours of the day are characterized with different market behavior. This depends on the volume and also on the economic indicators that are released in every country.

Here are some better time spans to trade, in hours which see fewer surprises:

Times are GMT, during the winter in the northern hemisphere. For summer times, just subtract one hour.

• 3:15 to 5:00: Unless there is a rate decision in Australia, these hours are quiet. Traders in Tokyo are not as enthusiastic as at the beginning of the session, Australian data is already out and the occasional Chinese data news release is also behind. The only potential risk is a rate decision in Japan, but this usually comes at a later hour. Europe is fast asleep.

• 10:15 to 13:00: Up to 10:00, traders in London are more alert, especially at the beginning of the session. In addition, most UK data is released at 9:30, and European data releases (which are more spread out), are usually released up to 10:00 (ZEW for example). By 10:15, reactions to the data have already been made, and trading remains active, yet without too many surprises. At 13:00, traders in New York are already ready and potential surprises can be seen at 13:30, when the US releases data.

• 23:00 to 1:00: After the US session closes, some caution is warranted. Liquidity is low and this is a good time for rating agencies to surprise markets with credit downgrades. Too often, these publications were made after markets closed in the US, but usually not long afterwards. However, by 23:00, it is reasonable to expect that thing will calm down and remain quiet until data is released in Australia and Japan.

Some traders seek the quiet hours for range trading, while others are looking for action and trading the news. The most liquid and busy hours are usually 13:00 to 16:00, when major US releases are scheduled, and trading volume is at its peak – overlapping of the European and US sessions.

What are your preferred times for trading? Do you prefer surprises or quiet times?

Further reading: 5 Most Predictable Currency Pairs

By Yohay Elam, ForexCrunch

Would you like to see more third-party contributors on DailyFX? For questions and comments, please send them to research@dailyfx.com