• Dollar Stumble Has as Much Conviction as the S&P 500 Advance, Little
• Euro: Why Would the Italian Prime Minister’s Resignation be Seen as Bullish?
• Japanese Yen Undermines Ministry of Finance, USDJPY Retracing Intervention
• British Pound Finding Temporary Relief in Steady Growth Indicators ahead of BoE
• Swiss Franc Losing Rumor Momentum, SNB Officials Try to Keep it Moving
• Australian Dollar Refuses to Provide Direction against Data, Risk, Chinese Updates
• Gold Pauses but Reversal Requires True Relief in Financial Backdrop

Dollar Stumble Has as Much Conviction as the S&P 500 Advance, Little

Volatility can be addictive for traders - and in few circumstances is addiction considered a good thing. A high level of activity can be good for trading the FX markets; but it must be exploited properly. Recently, we have the markets retain much of the exceptional level of volatility that was incited by last week’s sharp, bearish risk reversal; but critically missing since that aggressive decline is a meaningful trend. For the greenback, the absence of a strong fundamental or speculative catalyst has left it to drift. In the meantime, the quiet, bullish bearing on our favored risk barometer - the S&P 500 - has taken the helm on guiding the dollar lower. The benchmark equity index managed another low volume, advance Tuesday to further retrace the losses from Monday and Tuesday of last week. Yet, it is worth nothing that while the S&P 500 has recovered nearly 90 percent of the ground it lost over that two-day period, the Dow Jones FXCM Dollar Index (ticker =USDollar) hasn’t yet lost a third of the safe haven rally that occurred over that period.

Dominant themes tighten the correlation between otherwise very different assets; but when that common link dissipates, it leads to divergence. That is what we are seeing between the dollar and S&P 500. While there is no doubt a common market push away from safe haven assets and towards higher return alternatives, theabsence of conviction in this sentiment move undermines momentum and distends the connection between the benchmarks on the opposing ends of the risk spectrum. Nevertheless, the shade of volatility remains; and this directionless movement is drawing many traders into believing that breakouts or trends are gaining traction. Over the past week, this would have led to frustration for those trading the majors or risk sensitive currency pairs.

When activity levels are high but direction is absence, a trading approach that looks to short-term setups with reasonable (read nearby) stops and targets is the ideal trading approach. To return the greenback to a sustainable trend (bullish or bearish) we need another market-wide shift in confidence. Many believed the Italian political developments through the previous session (more on that below) could have met that requirement; but offering resolution to or leveraging turmoil behind the European financial crisis requires something more definitive. Going forward, we can perhaps see swells in volatility through Fed officials’ comments, Euro-area developments, credit market troubles or a number of other ‘headline’ events; but a sustainable drive will remain elusive until there is another seismic shift in confidence and/or liquidity needs.

Related:Discuss the Dollar in the DailyFX Forum,John’sVideo:USDJPY Moves Against Intervention, No EURUSD Direction on Italy

Euro: Why Would the Italian Prime Minister’s Resignation be Seen as Bullish?

The euro was once again the most fundamentally active currency over the past 24 hours - and it will likely retain that title over the coming 24 hours. The top headline in the past session was the announcement that Italian Prime Minister Berlusconi would resign after the recently proposed austerity measures were approved by Parliament. The vote is scheduled for next week. Though, thisbegs the question: why would dissolving a government in the midst of economic and financial uncertain be construed as a bullish outcome for equities and the Euro? Considering this transition comes under the conditions that austerity is passed, this is seen as a move that boosts its passage. In turn, efforts to cut the deficit could curb the Italian 10 year government bond’s yield before it hits the bailout threshold of 7 percent. Yet, this outcome was largely expected – hence the reserved optimism. In the meantime, funding costs are rising, deposits are declining and downgrade fears grow.

Japanese Yen Undermines Ministry of Finance, USDJPY Retracing Intervention

After carving out a second, exceptionally narrow range; USDJPY would finally show a little life. When looking for volatility from this major though, the market will naturally look for a bearish resolution in the absence of intervention. Other yen crosses retraced last Monday’s MoF manipulation long ago; but USDJPY was the target of their effort so there was greater hesitation here. If the BoJ or Finance Ministry doesn’t follow up quickly (or a dramatic need for liquidity popup), this pair can continue trending lower. Yet, the further it goes, the greater the risk of more intervention.

British Pound Finding Temporary Relief in Steady Growth Indicators ahead of BoE

We are closing in on the Bank of England rate decision (due Thursday); and most standard fundamental updates from the UK are colored against this event. In the data we have seen this past 24 hours, the deteriorating economic scenario that many would expect leads to further stimulus from the BoE hasn’t gained much traction. While retail sales and home price figures were softer, the NIESR GDP estimate was solid.

Swiss Franc Losing Rumor Momentum, SNB Officials Try to Keep it Moving

Swiss National Bank officials must have been happy with the performance of their currency Friday into Monday, with its meaningful drop against the Euro and dollar suggesting speculative interests may preclude further intervention on their part. Yet, considering risk trends are still fragile and capital measures continue to show an outflow from Europe, the franc will constantly threaten advance – unless the SNB interjects again…

Australian Dollar Refuses to Provide Direction against Data, Risk, Chinese Updates

Without a definitive direction on risk trends, the Australian dollar will naturally struggle to find its way to a clear drive. The rate outlook (the market is still certain of a 25bp cut next month) offers negative pressure; but the slow drift on the S&P 500 helps to curb the influence. Data has done little on its own despite strong consumer sentiment figures andChinese inflation numbers easing the way for government stimulus.

Gold Pauses but Reversal Requires True Relief in Financial Backdrop

Volume behind the gold (futures) advance has been proportionate to the S&P 500’s – in other words, it has been rather unconvincing. Yet, market turnover is starting to increase and the uncertainty in political turmoil for Greece and Italy (and its negative overall influence on European financial conditions) is a constant reminder of why there is a need for an alternative store of wealth that avoid government intervention.

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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
0:01	GBP	BRC Shop Price Index (YoY) (OCT)		2.7%	Early retails gauge may fall on lower spending
0:30	AUD	Home Loans (SEP)	1.5%	1.2%	Credit in September expected to grow, expected to be helped in future months by lower rate
0:30	AUD	Investment Lending (SEP)		1.8%
0:30	AUD	Value of Loans (MoM) (SEP)		0.6%
2:00	CNY	Consumer Price Index (YoY) (OCT)	5.4%	6.1%	Major data of the day: will be double edged sword as higher rates means more tightening likely, but lower will be economy slowing down
2:00	CNY	Producer Price Index (YoY) (OCT)	5.8%	6.5%
4:30	JPY	Bankruptcies (YoY) (OCT)		-9.2%	May rise as credit slows
5:00	JPY	Eco Watchers Survey: Current (OCT)	46.5	45.3	Survey expected to rise on expectations for new administration to act, though slowly
5:00	JPY	Eco Watchers Survey: Outlook (OCT)		46.4
7:30	EUR	Bank of France Business Sentiment (OCT)	96	97	Sentiment continues to drop
7:45	EUR	French Central Gov Balance (euros) (SEP)	-101.0B	-102.8B	Debt expected to narrow, with further austerity expected
9:30	GBP	Visible Trade Balance (Pounds) (SEP)	-8000	-7768	British trade deficit expected to widen further as EU demand drops
9:30	GBP	Trade Balance Non EU (Pounds) (SEP)	-4975	-4867
9:30	GBP	Total Trade Balance (Pounds) (SEP)	-2150	-1877
12:00	USD	MBA Mortgage Applications (NOV 4)		0.2%	Weekly data stagnant
13:30	CAD	New Housing Price Index (MoM) (SEP)	0.2%	0.1%	Expected higher, though downside risks increasing following previously weaker construction data
13:30	CAD	New Housing Price Index (YoY) (SEP)	2.3%	2.3%
15:00	USD	Wholesale Inventories (SEP)	0.6%	0.4%	Businesses seen stocking up
15:30	USD	DOE U.S. Crude Oil Inventories (NOV 4)		1826K	Weekly crude inventory reports may not largely move prices as Greece remains focus on risk, markets
15:30	USD	DOE U.S. Distillate Inventory (NOV 4)		-3575K
15:30	USD	DOE U.S. Gasoline Inventories (NOV 4)		1356K
15:30	USD	DOE Cushing OK Crude Inventory (NOV 4)		560K
21:30	NZD	Business NZ Perf of Manuf Index (OCT)		50.8	Index near stalling levels
23:50	JPY	Japan Money Stock M2+CD (YoY) (OCT)	2.7%	2.7%	Stagnant money supply causes further urging of BoJ, government action, though both so far slow to act
23:50	JPY	Japan Money Stock M3 (YoY) (OCT)	2.3%	2.3%
23:50	JPY	Machine Orders (MoM) (SEP)	-7.1%	11.0%	YoY figure expected stronger as domestic demand continues growing
23:50	JPY	Machine Orders (YoY) (SEP)	10.6%	2.1%
	CNY	Industrial Production YTD (YoY) (OCT)	14.0%	14.2%	Major data following earlier CPI, PPI data may confirm a slowdown in China as data all expected lower
	CNY	Industrial Production (YoY) (OCT)	13.4%	13.8%
	CNY	Retail Sales YTD (YoY) (OCT)	17.0%	17.0%
	CNY	Retail Sales (YoY) (OCT)	17.6%	17.7%
	CNY	Fixed Assets Inv Excl. Rural YTD (YoY) (OCT)	24.7%	24.9%

GMT	Currency	Upcoming Events & Speeches
7:45	EUR	French Survey of Industrial Investments
14:30	USD	Bernanke Speaks at Fed Conference on Small Business

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	1.3835	1.6116	77.70	0.8946	1.0102	1.0383	0.7978	107.50	125.22
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	13.3570	1.7702	7.8321	7.7701	1.2656		Spot	6.5302	5.3811	5.5948
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	1.3924	1.6189	78.30	0.9124	1.0216	1.0462	0.8030	107.96	125.92
Resist 1	1.3880	1.6153	78.00	0.9035	1.0159	1.0423	0.8004	107.73	125.57
Pivot	1.3802	1.6094	77.80	0.8979	1.0125	1.0352	0.7964	107.42	125.28
Support 1	1.3758	1.6058	77.50	0.8890	1.0068	1.0313	0.7938	107.19	124.93
Support 2	1.3680	1.5999	77.30	0.8834	1.0034	1.0242	0.7898	106.88	124.63

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	1.4047	1.6283	78.49	0.9098	1.0235	1.0569	0.8124	109.31	126.91
Resist. 2	1.3994	1.6241	78.29	0.9060	1.0202	1.0523	0.8088	108.86	126.49
Resist. 1	1.3941	1.6200	78.09	0.9022	1.0168	1.0476	0.8051	108.41	126.07
Spot	1.3835	1.6116	77.70	0.8946	1.0102	1.0383	0.7978	107.50	125.22
Support 1	1.3729	1.6032	77.31	0.8870	1.0036	1.0290	0.7905	106.59	124.38
Support 2	1.3676	1.5991	77.11	0.8832	1.0002	1.0243	0.7868	106.14	123.95
Support 3	1.3623	1.5949	76.91	0.8794	0.9969	1.0197	0.7832	105.69	123.53

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

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