• Dollar Ignores Economic Implications of NFPs, Looks for More Risk
• Euro Passes Another Hurdle with Greece Confidence Vote, What Next?
• British Pound: Should We Expect Anything from the BoE Next Week?
• Canadian Dollar’s Reaction to Employment Surprise Doesn’t Stop with Volatility
• Swiss Franc: SNB FX Holdings Unexpectedly Drop in October
• Japanese Yen Decline Lacking Momentum, Risk of Rebound Growing
• Gold Slowing Advancing as ETF, Speculative and Central Bank Holdings Advance

Dollar Ignores Economic Implications of NFPs, Looks for More Risk

Despite the chop through the second half of this past week, the Dow Jones FXCM Dollar Index (ticker =USDollar) closed out its first weekly advance in five. It also happened to be the greenback’s best performance (in a 2.6 percent rally) since the series of swells through October 2008. The comparison in performance should represent an easy bridge to fundamentals. Three years ago, the market was dealing with the worst financial crisis and economic recession the world had seen in generations. The dollar’s safe haven status under extreme conditions once again shows through. However, upon review, the troubles faced this past week didn’t seem to match the sheer panic that had seized the markets during the Lehman Brothers / Subprime fiasco. So, where did this drive come from?

The first consideration (and the source of the Dollar Index’s extreme reading) is manipulation. The Japanese Finance Ministery’s effort to forcibly drive the value of its own currency down led to an incredible 3.2 percent rally for USDJPY. Manipulation (outright in intervention or indirect through policy) is now common place. Efforts by Japan and Switzerland to push their own currencies lower are obvious; but they aren’t necessarily the most influential. Direct intervention rarely meets lasting success because it fights far more elemental demands for yield or safe harbor. Much more problematic is consistent policy efforts. In the comparison between the US, Japanese and Swiss currencies – all safe havens – we note that the greenback is the weakest of the group. Part of the reason is that the Fed has embarked on an unprecedented stimulus program. This in turn offers a nudge to risk appetite global and set’s the requirement for risk aversion to drive the dollar that much higher.

The more active driver for the dollar this past week - which will likely determine the currencies bearing and pace next week and through the rest of this year – was thespread of financial trouble from Euro-area sovereigns to the US shores. The fall of MF Global (once a Fed Primary Dealer) was triggered by a large and bad bet on European government debt. This was an outright speculative move; and the bigger players in the US are unlikely to have extended themselves that far on a speculative position for the troubled region; but there is certainly exposure. Should European banks (who are parking more capital with the ECB and Fed while demanding more dollars) meet another crunch, it could easily spill over to State-side. Should Italian government yields surpass 7 percent and fall, we will see more US banks with exposure issues. There are serious issues in the background; but it is the catalysts that bring it the headlines and speculators’ attention. So that is what we need to watch.

Related:Discuss the Dollar in the DailyFX Forum,John’sVideo:Euro Will React to Greek Vote but Traders Looking to Larger Risks

Euro Passes Another Hurdle with Greece Confidence Vote, What Next?

Well after the close Friday, theGreek Parliament finally tallied up the confidence vote for Prime Minister Papandreou. With a final margin of 153 to 145, the threat of an immediate government dissolution was avoided. This was the outcome that best promotes stability; and was therefore the one that the majority had projected. With these results, it is expected that Papandreou will step down after creating a unity government that can pass the austerity measures that came along with the October 26th pact that delivered a 50 percent haircut on Greek debt among other things. This is far from a long-term solution to Greece’s squeeze between austerity and recession; but it does remove the immediate threat of a Euro-region and currency crisis. We will no doubt see volatility related to this particular issue in the coming week; but it is now seen as a catalyst for December. In the meantime, regional banks, Italian sovereign yields and Irish/Portuguese/Spanish austerity will compete for headlines.

British Pound: Should We Expect Anything from the BoE Next Week?

The sterling gained ground against all its major counterparts except for the US dollar. That is remarkable given the pound’s inherently unfavorable bearing on monetary policy and economic health. We will be reminded of these conditions next week; and with the rest of the market not immediately threatened by larger drivers, this could lead the currency to undermine its own health.Top event risk is without doubt the BoE rate decision – though we shouldn’t expect too much. Fresh off a 75 billion pound hike to its stimulus, they will likely hold; but look for guidance.

Canadian Dollar’s Reaction to Employment Surprise Doesn’t Stop with Volatility

As expected, the Canadian employment report was the most market moving event for the final 24 hours of this past trading week. As a mirror to the September reading, the October figure showed a remarkable 54,000 jobs lost – the biggest monthly drop since February 2009. This reminds thatCanada will not avoid the global tides; but the uptick in unemployment (to 7.3 percent); doesn’t really dent the long-term decline.

Swiss Franc: SNB FX Holdings Unexpectedly Drop in October

With the Swiss National Bank actively holding a floor on EURCHF; we would expect their FX holdings as they actively try to keep the exchange rate elevated (purchasing euros). Yet, we learned from the bank’s monthly report that holdings actually dropped 14 billion francs to 242.7 billion. This suggests that the threat of a floor is enough to keep back the tide. However, the market will continue to test this theory.

Japanese Yen Decline Lacking Momentum, Risk of Rebound Growing

Despite the Japanese Finance Ministry’s remarkable efforts this past Monday to drive its currency lower; theyen recovered most of its ground against the bulk of its counterparts. The one that most interests Japanese officials though is USDJPY. Hovering just above 78, a serious souring of risk appetite threatens to push this pair back to record lows. If that happens, expect more fireworks as officials firefight.

Gold Slowing Advancing as ETF, Speculative and Central Bank Holdings Advance

Gold may have put in a modest performance this past week (rising 0.6 percent); but there is something happening in the backdrop – a steady build in interest. We are seeing news that central banks reported 206 tons of purchases in September, ETF holdings have risen 1.8 percent from September’s three-month low and COT figures show a jump in net speculative interest from near three-year lows. Interesting is building.

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**For a full list of upcoming event risk and past releases, gotowww.dailyfx.com/calendar

ECONOMIC DATA

Next 24 Hours

GMT	Currency	Release	Survey	Previous	Comments
23:01 (Sun)	GBP	Lloyds Employment Confidence (OCT)		-67	Confidence survey could improve on new BoE easing
23:30 (Sun)	AUD	TD Securities Inflation (YoY) (OCT)		2.8%	Inflation expectations may weaken
23:30 (Sun)	AUD	ANZ Job Advertisements (MoM) (OCT)		-2.1%	Gauge of employment fluctuating during change of seasons
(Sun)	JPY	Tokyo Avg Office Vacancies (%)(OCT)		8.64	Demand continues to be sluggish
4:00	JPY	Coincident Index (SEP P)		107.6	May improve on new policies
5:45	CHF	Unemployment Rate (OCT)		2.8%	Swiss labor markets seen stable, not large concern for Swiss National Bank
5:45	CHF	Unemployment Rate s.a. (OCT)		3.0%
7:15	CHF	Consumer Price Index (MoM) (OCT)		0.3%	Swiss consumer prices may remain stable despite SNB peg and intervention
7:15	CHF	Consumer Price Index (YoY) (OCT)		0.5%
7:15	CHF	CPI - EU Harmonised (MoM) (OCT)		0.3%
7:15	CHF	CPI - EU Harmonised (YoY) (OCT)		0.2%
8:30	EUR	Euro-Zone Sentix Investor Confidence (OCT)		-18.5	Lower index could continue
9:00	EUR	Euro-Zone Retail Sales (MoM) (SEP)		-0.3%	Still expanding retail sales creating pressure on ECB to pursue price stability and raise rates
9:00	EUR	Euro-Zone Retail Sales (YoY) (SEP)		-1.0%
10:00	EUR	German Indus Prod n.s.a. and w.d.a. (YoY) (SEP)		7.7%	Industrial production seeing headwinds on lower demand
10:00	EUR	German Indus Prod s.a. (MoM) (SEP)		-1.0%
19:00	USD	Consumer Credit (SEP)		-$9.501B	Weak change seen on low flows
23:01	GBP	BRC Sales Like-For-Like (YoY) (OCT)		0.3%	British retail continues to weaken
23:01	GBP	RICS House Price Balance (OCT)		-23%	House prices may be helped by BoE asset plan, rates pushed lower
23:30	AUD	Trade Balance (Australian dollar) (SEP)		3100M	Trade balance not expected to be market moving during this month
23:30	AUD	NAB Business Confidence (OCT)		-2	Confidence levels trying to find pivot level amidst uncertainty
23:30	AUD	NAB Business Conditions (OCT)		2

SUPPORT AND RESISTANCE LEVELS

CLASSIC SUPPORT AND RESISTANCE - 18:00 GMT

Currency	EUR/USD	GBP/USD	USD/JPY	USD/CHF	USD/CAD	AUD/USD	NZD/USD	EUR/JPY	GBP/JPY
Resist 2	1.4250	1.6445	81.50	0.9300	1.0675	1.1080	0.9020	112.00	131.00
Resist 1	1.4000	1.6100	79.50	0.9150	1.0675	1.0770	0.8750	109.35	128.30
Spot	1.3841	1.6045	78.03	0.8766	1.0076	1.0421	0.7951	108.01	125.21
Support 1	1.3600	1.5900	77.50	0.8500	0.9950	1.0150	0.7500	105.00	122.35
Support 2	1.3350	1.5700	75.50	0.7800	0.9750	1.0000	0.6850	102.00	116.00

CLASSIC SUPPORT AND RESISTANCE

EMERGING MARKETS & SCANDIES CURRENCIES 18:00 GMT

Currency	USD/MXN	USD/TRY	USD/ZAR	USD/HKD	USD/SGD		Currency	USD/SEK	USD/DKK	USD/NOK
Resist 2	16.5000	2.0000	8.5800	7.8165	1.3650		Resist 2	7.5800	5.6625	6.1150
Resist 1	14.3200	1.9000	8.1025	7.8075	1.3250		Resist 1	6.5175	5.3100	5.7075
Spot	13.3895	1.7514	7.8663	7.7677	1.2650		Spot	6.5646	5.3767	5.5830
Support 1	12.6000	1.6500	6.5575	7.7490	1.2000		Support 1	6.0800	5.1050	5.3040
Support 2	11.5200	1.5725	6.4295	7.7450	1.1800		Support 2	5.8085	4.9115	4.9410

INTRA-DAY PIVOT POINTS 18:00 GMT

Currency	EUR/USD	GBP/USD	USD/JPY	USD/CHF	USD/CAD	AUD/USD	NZD/USD	EUR/JPY	GBP/JPY
Resist 2	1.3982	1.6180	78.30	0.8939	1.0278	1.0601	0.8072	109.04	126.21
Resist 1	1.3912	1.6112	78.16	0.8853	1.0177	1.0511	0.8011	108.53	125.71
Pivot	1.3784	1.5995	78.03	0.8807	1.0116	1.0357	0.7909	107.55	124.81
Support 1	1.3714	1.5927	77.89	0.8721	1.0015	1.0267	0.7848	107.04	124.31
Support 2	1.3586	1.5810	77.76	0.8675	0.9954	1.0113	0.7746	106.06	123.42

INTRA-DAY PROBABILITY BANDS 18:00 GMT

\Currency	EUR/USD	GBP/USD	USD/JPY	USD/CHF	USD/CAD	AUD/USD	NZD/USD	EUR/JPY	GBP/JPY
Resist. 3	1.4061	1.6218	78.86	0.8913	1.0210	1.0615	0.8102	109.95	127.11
Resist. 2	1.4006	1.6175	78.65	0.8876	1.0176	1.0567	0.8065	109.47	126.63
Resist. 1	1.3951	1.6131	78.44	0.8840	1.0143	1.0518	0.8027	108.98	126.16
Spot	1.3841	1.6045	78.03	0.8766	1.0076	1.0421	0.7951	108.01	125.21
Support 1	1.3731	1.5959	77.62	0.8692	1.0009	1.0324	0.7875	107.04	124.25
Support 2	1.3676	1.5915	77.41	0.8656	0.9976	1.0275	0.7837	106.55	123.78
Support 3	1.3621	1.5872	77.20	0.8619	0.9942	1.0227	0.7800	106.07	123.30

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---Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com

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