Forex Trading Discussion Points

11:00 GMT- TRADING SCENARIO: More information on the EURUSD double no-touch (DNT) option at 1.4800 to 1.5100 has come to light. It appears that it is being protected by an Asian central bank and that it matures on Friday. Nevertheless, forex trading seems to becoming back to life today. A BOE three-way split on the latest vote to expand Quantitative Ease came as a surprise to the markets and temporarily weighed on the GBP.

Key data are due today with CPI reports from Canada and the U.S. early in the day. Neither report is likely to impact policy at either central bank. U.S. housing Starts/Permits could impact the psychology of the markets.

It seems hard for market to accept that the economy moves a lot more slowly than markets and that U.S. interest rates will have to stay low for an extended period of time for balance sheets to mend themselves. As for the lead EURUSD relationship, it appears to be anchored below the 1.50 level for now. There is talk now of seasonal EUR demand into the yearend.

The Obama meetings in China concluded with no important agreements. Press reports last week that an agreement to let the yuan appreciate vs. the USD were premature. China operates on its own schedule. For its part, U.S. administration cares about growing the economy, so the weak USD policy is not going to change.

EQUITIES & INTEREST RATES

Far East equity markets closed mixed. Japanese exporter stocks are said to be suffering from the strong JPY. European bourses are higher. U.S. equities are up. Dow 10,000 remains a major psychological support level.

The U.S. 10-yr note is 3.35%, +2 bp. Fed Funds will be low for an extended period of time..

FOREX

EUR/USD is higher. The equity correlation trade has been working only loosely. 1.50 remains pivotal. The EUR is mostly higher on its major crosses.

EUR/CHF is steady. USD/CHF is down. EUR/CHF 1.50-1.53 SNB band. SNB forex policy may be in flux.

USD/JPY is down, and the EUR/JPY is higher. Mixed signals on Japanese forex policy continue.

GBP/USD is steady. EUR/GBP is up. Recent U.K. economic statistics have been mixed to disappointing. The mixed data have been triggering GBP instability. The latest BOE minutes upset the markets.

COMMODITIES and Commodity Currencies

The CAD is better. Lots of interest in buying AUDCAD. Targeting parity.

The AUD and NZD are higher. Risk trades keep going in and out of fashion. The RBA is on offense heading into its December rate decision after strong October employment data. There is no January RBA meeting.

Gold and Oil are higher. Gold, oil, equities and the commodity currencies are all carry trades vs. USD. Gold is another anti-dollar. Gold has been pivoting $1,100.