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French and Italian industrial production fell; UK trade deficit narrowed; USDJPY near lows; European sovereign issuance 95% completed. Market turns to import prices and UoM consumer confidence. 1 of 2 EURUSD Premium Insights hit all targets, while oil long stopped out. See more details below.

The common currency has been declining steadily throughout the European session from 1.2785 high to 1.2709 low. Reports disappointed as French industrial production dropped 2.7% in September after growing 1.9% in August and Italian industrial production declined 1.5% from previous 1.7% growth. German CPI was confirmed at 0% m/m and 2.0% y/y.

UK trade deficit narrowed in September to GBP 8.4 bln from previous GBP 10 bln. Smaller gap is attributed to sharply lower oil and fuel imports. GBPUSD trades around 1.5945.

Bond rally that followed after the strong auction yesterday continues as the 10 year yield fell to 1.586% which is the lowest level since the beginning of September. As a result, USDJPY he been under pressure and trades near session lows around 79.20.

Sovereign issuance for this week has been completed and for the next week it is expected to reach EUR 22 bln vs. EUR 11.3 bln this week. According to MNI calculations, EZ issuance so far this year has reached nearly EUR 766 bln which is about 95% of total funding needs. Belgium, Finland and Spain have already completed their long term targets for 2012.

The US session begins at 8:30 am ET with import prices that are expected to remain flat in October after rising 1.1% in September. The University of Michigan consumer confidence is due at 9:55 am and it is seen slightly higher in November at 83.0 from previous 82.6.

Latest Premium Insights trades on EURUSD, USDJPY, GBPUSD, EURJPY, EURGBP, CADJPY, AUDUSD, gold, silver and oil. DIRECT ACCCESS http://ashraflaidi.com/products/sub01/access/?a=693 Nonsubscribers can click here to join http://ashraflaidi.com/products/sub01/

ECB President Mario Draghi hinted he was open to a rate cut in 2013 but said he was done helping Greece at the post-meeting press conference. Sentiment continued to worsen with the S&P 500 falling below the 200-day moving average and the yen rallying. The focus shifts to China with CPI and industrial production on tap. 1 of 2 EURUSD Premium Insights hit all targets, while oil long stopped out. See more details below.

Draghi did not reveal any surprises after leaving rates on hold once again but signaled an openness to lower the main refi rate in early 2013. He said he stands ready to act with standard monetary policy and that growth momentum will be weak in 2013. On Greece, he said no help was forthcoming but a Dow Jones source said a further haircut of Greek debt was on the table. On Spain he said no help will come until there is an official request.

The euro hardly moved in US trading. It bounced around 1.2740 as the stock market fell for a second day. The S&P 500 fell to a five-week low and broke the 200-day moving average for the first time since June. The market fell late in the day after S&P said there is a 15% chance the fiscal cliff pushes the US over the edge.

For the second day, the foreign exchange market was surprisingly insensitive to falling stocks. The Australian dollar even rallied in the early part of the US afternoon before slipping back to 1.04.

The worries about US politics and growth have put the shine back in gold, which has gained $60 this week after falling $40 on Friday.

Asia-Pacific trading will be busy with China continuing its once-in-a-decade political changeover. The early highlight is the RBA statement on monetary policy at 0030 GMT. Its not the RBA decision but will contain some insight about the potential for a rate cut in December.

At 0130 GMT, China releases CPI with no change from the 1.9% y/y rate expected. At 0530 GMT, China releases industrial production and retail sales. Production is the more important release and is expected up 9.4% y/y.

Last nights the Premium Insights trades on EURUSD, USDJPY, GBPUSD, EURJPY, EURGBP, CADJPY, AUDUSD, gold, silver and oil. DIRECT ACCCESS http://ashraflaidi.com/products/sub01/access/?a=693 Nonsubscribers can click here to join http://ashraflaidi.com/products/sub01/

-AB

Whether the US ends up in the outbreak of the fiscal cliff or simply delaying it, the materialization or the threat of a clear deterioration in GDP (F.C. may cause as much as 1% drop in GDP growth) will give no choice to the Fed but to resume (and possibly deepen) its policy of asset purchases. Regardless, Deceember expected to trigger fresh rounds of CenBank stimuli. FULL INTERVIEW here:

http://youtu.be/9T6SsWlfQBo

BOE & ECB unchanged; Spanish 10 year yield rises; AUD labor market data better; German trade surplus narrowed. Up ahead is ECB press conference; US and CAD trade deficit and jobless claims. 1 of 2 EURUSD Premium Insights hit all targets, while oil long stopped out. See more details below.

The enthusiasm from the Greek austerity package faded and EUR along with GBP broke below their yesterday's lows against the USD. The move was attributed to MNI story suggesting that Spain is unlikely to seek ESM rescue this year. As a result, the Spanish 10 year yield rose to 5.842% and consequently the Italian counterpart rose back above 5%.

The Aussie was not able to benefit from labor market data that were above expectations. Employment rose in October by 10.7K and the unemployment rate was steady at 5.4%. AUDUSD rose only to about 1.0420 but quickly lost its gains. Nevertheless, the 1.04 support still holds.

European data was limited to German trade surplus that narrowed to EUR 17 bln in September from previous EUR 18.1 bln

The BOE left rates unchanged at 0.5% and kept the asset purchase facility at GBP 375 bln. The opposition against further QE has risen recently and new data will determine the likelihood of more QE in December.

Today's meeting marks the first anniversary of Mario Draghi's presidency. The ECB will announce its rate decision at 7:45 am ET. Analysts expect the minimum bid rate to remain at 0.75% and the ECB is unlikely to announce any easing program. The focus will be on the press conference that starts at 8:30 am ET.

US Trade deficit is expected to widen only marginally in September to USD 44.9 bln from USD 44.2 bln and jobless claims are seen at 367K from last week's 363K. Canadian trade deficit is anticipated to widen to CAD 1.4 bln from CAD 1.1 bln. All three reports are due at 8:30 am.

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Euro Stabilizes as Greek government secures sufficient votes to pass new round of austerity. US stock markets kicked and screamed at the outcome of the election but foreign exchange remained sanguine. The overall daily moves were less than 50 pips with the euro lagging and yen leading. Asia-Pacific trading features Australian employment. Last nights Premium Insights are in full activation and include the latest weekly and monthly charting on EURUSD See more details below.

It is a challenge to explain the US stock market reaction to the election result. As we said yesterday, this was the most likely result and should not have been a shock to anyone. It is likely an emotional response rather than a rational one.

It isnt the first time markets have thrown a fit after a Democrat won the White House. Its the fifth time since 1932 that the Dow has fallen more than 2.4% on the day after a Democratic win. The most-recent example was 2008 when the Dow fell 5% on the day after Obamas win. It went on to gain more than 60% over Obamas first term.

Cooler heads will likely prevail in the week ahead. The US economy is improving and politicians will eventually hammer out a solution to the fiscal cliff.

FX risk trades seem to be anticipating a rebound. They merely stumbled as stocks tumbled but the euro remains below the 200-day moving average as Greece prepares for a late-night vote on the latest round of austerity.

The Australian dollar held off several attempts to break below 1.04 as buyers accumulate positions after this weeks RBA decision. That bodes well for the pair in the days ahead but first, at 0030 GMT, data on Oct Australian employment is expected unchanged with the unemployment rate ticking up to 5.5% from 5.4%.

Last nights the Premium Insights trades on EURUSD, USDJPY, GBPUSD, EURJPY, EURGBP, CADJPY, AUDUSD, gold, silver and oil. DIRECT ACCCESS http://ashraflaidi.com/products/sub01/access/?a=693 Nonsubscribers can click here to join http://ashraflaidi.com/products/sub01/

-AB

Gold lags behind the sell-off in risk-on instruments (equities, oil and non-USD currencies) as the fear of prolonged budgetary stalemate from the Presidential/Congressional status quo and eventual fiscal cliff threatens to erode 1% from US GDP and give no choice for the Feds but to stay on course into 2014 to the benefit of gold and precious metals. Here's more on EURUSD, China and BoE http://www.cityindex.co.uk/market-analysis/market-news/1889372012/on-euro-fiscal-cliff-boe-china/

USD stabilises after intitial pullback following Obama victory, Fiscal cliff negotiations between democratic senate and republican house set to begin; Eurozone retail sales and German industrial production disappoint; German advisors see GDP at 0.8%. Up ahead is Draghi's speech and by the end of the session NZ labor market data. Direct access to last nights Premium Insights trades on EURUSD, USDJPY, GBPUSD, EURJPY, EURGBP, CADJPY, AUDUSD, gold, silver and oil is found below, as well as the technical and fundamental arguments for why Ashraf is sticking with his 1.35 target for EURUSD.

The buck started to lose ground across the board, except JPY, during the Asian session as polls began to point to president's Obama victory. USD selling intensified further after president Obama reached the necessary electoral college count. Democrats increased their hold of the Senate while republicans will continue to control the House of representatives. Difficult and prolonged fiscal cliff negotiations are set to begin.

With the US election out of the way, markets can start to focus again on fundamentals. Eurozone retail sales disappointed as they declined 0.2% in September from previous 0.2% growth and German industrial production dropped 1.8% in September from previous -0.5%. EURUSD trades about 70 pips below session highs around 1.2800.

The German government's council of economic advisors expects GDP to rise 0.8% both in 2012 and 2013 while the unemployment rate is seen ticking up to 6.9% from 6.8%. The council assumes that the ECB will cut rates to 0.5% before the end of the year and they see EURUSD at 1.27 until the end of 2013.

ECB president Draghi is scheduled to speak on the economy shortly after 8:10 am ET, perhaps providing some clues for the ECB's Thursday decision.

There are no top tier fundamental releases due during the US session. However, markets could respond to crude oil inventories at 10:30 am and to 10 year bond auction at 1:00 pm. By the end of the session at 4:45 pm NZD is likely to experience heightened volatility as New Zealand's statistics office will publish the latest labor market data. Employment is seen rising 0.3% in Q3 from previous -0.1% while the unemployment rate is expected to tick down to 6.7% from 6.8%.

Here are the Premium Insights trades on EURUSD, USDJPY, GBPUSD, EURJPY, EURGBP, CADJPY, AUDUSD, gold, silver and oil. DIRECT ACCCESS http://ashraflaidi.com/products/sub01/access/?a=693 Nonsubscribers can click here to join http://ashraflaidi.com/products/sub01/

President Obama retains the White House, prompting the US dollar lower and a boost in commodities and the euro. Here are the Premium Insights trades on EURUSD, USDJPY, GBPUSD, EURJPY, EURGBP, CADJPY, AUDUSD, gold, silver and oil. DIRECT ACCCESSL http://ashraflaidi.com/products/sub01/access/?a=693 Nonsubscribers can click here to join http://ashraflaidi.com/products/sub01/

US election results are imminent and markets are on edge. The Australian dollar was the top performer while the yen lagged. The Asia-Pacific calendar is virtually vacant but the reaction to the election will dominate markets in any case. Ashraf's Premium Insights will be due out later this evening.

InTrade shows Obama as a 70% favorite and a Romney win would be considered a upset at this point. Gold climbed $31 alongside Obamas chances today, adding credence to Ashrafs scenario analysis suggesting that a Romney win would hurt gold.

The worst case near-term scenario is extremely close or disputed election outcome. If markets awaken tomorrow to the potential for a long, drawn out court battle for the White House, it will assuredly spark a flight to the yen.

If the results is clear-cut, disappointed or elated traders could make knee-jerk trading decision on Wednesday. Such moves are likely unsustainable and will be slowly reversed, especially if Congressional leaders show any willingness to work together.

Technicals are generally favorable to short-term US dollar strength but also showing signs of indecision. The euro climbed to 1.2827 in US trading retesting the 200-day moving average in the process. The Dollar Index is also very close to the 200-DMA.

The first election exit polls will be releases at 2100 GMT as polls close in some Eastern states. It may not be for another 4-5 hours until any clarity emerges.

Other items on the calendar are the Australian AiG construction index and the UK BRC shop index but they will be mere blips on the radar until the election is sorted out.

-AB

Avoid making simplistic "if-then" scenario analysis on the US elections for US equities, solely based on the notion that a Democrat president is negative for stocks and a Republican victory is a positive due the presence of three major elements. See Full Analysis here: http://www.cityindex.co.uk/market-analysis/market-news/1838602012/election-scenario-analysis/

Markets were quiet on ahead of the US election but Australian dollar volatility will ramp up after the RBA decision. The best performer on Monday was the yen while the euro lagged.

Markets were dormant on Monday with US election results just 24 hours away. Polls and betting websites show Obama as a modest favorite but markets will be volatile with any result. Emotional trading is likely to spark wild swings and trading opportunities for the remainder of the week.

The RBA decision may be even more difficult to predict than the US election. Although 20 of 27 economists forecast a cut, the OIS market is pricing just a 51% chance the RBA will lower rates for the second consecutive month.

Even if the RBA holds, it is likely to signal a cut in December, which may minimize the upside for the Australian dollar after a knee-jerk rally above 1.04. In the event of a cut, AUD/USD will quickly retreat toward 1.0330 and the market will look for further rate-cutting clues in the statement.

The RBA decision adds some intrigue to markets that were trapped in 20-pip ranges in US trading. The highlight of the session was the ISM non-manufacturing index which fell to the lowest since June but was close to expectations at 54.2. The bright spot was the employment index, which rose to 54.9 from 51.1.

The market continues to eye Greece where leaders submitted an austerity bill to parliament. Greece is facing a debt payment on Nov 16 and is likely to require some form of bridge financing.

-AB

Spanish unemployment rises; UK services PMI weakened; week full of risk events; gold near lows. Focus turns to ISM non manufacturing. Both of the EURUSD longs were stopped out. The latest on Ashraf's take on EURUSD will be tackled in tonight's Premium Insights.

The greenback gave up a small portion of its Friday's gains during the Asian session. However, when European trading began the USD gained across the board except JPY. European equities are losing about 0.75% and the relative strength winner is JPY while GBP and NZD lag.

MNI reports that market sentiment turned sour on WSJ story that suggests that the ECB was reconsidering EUR 80 bln of held Spanish bills as loan collateral. EURUSD was already trading near session low at 1.2777 when Spanish labor market data was published. The result was far worse than anticipated as unemployment rose by 128.2K in October after rising by 79.6K in September. Nevertheless, the common currency ignored this data and has not weakened further. Later during the session, Eurozone Sentix investor confidence improved to -18.8 for November from previous -22.2.

UK service sector expanded at the slowest pace in 22 months as October PMI index fell to 50.6 from previous 52.2. Employment declined for the second month in a row but the rate of job cutting was relatively slow. New orders expanded albeit at a weaker rate. GBPUSD fell to 1.5961 while EURGBP rose back above the 0.80 figure.

There are numerous event risks this week Tuesday's RBA rate decision and US election, Mario Draghi's speech on Wednesday and the BOE and the ECB decisions on Thursday. G20 meeting in Mexico City concludes today.

Gold has been unable to regain the ground it lost on Friday and continues to trade around 1678. 100 and 200 DMA are just below, between 1663 and 1668.

The US data calendar is limited to ISM non manufacturing that is due at 10:00 am ET and is expected to decline marginally to 54.6 in October from September's 55.1. The index has been increasing steadily for four months back to back.

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The US dollar ripped higher on Friday despite a 180-degree turn in market sentiment after a solid non-farm payrolls report. The Canadian dollar edged out USD as the best performer on Friday. The Australian dollar is strong to begin the new week after the Chinese services PMI rebounded from a 19-month low.

Non-farm payrolls increased 171K compared to 125K expected and the unemployment rate ticked higher to 7.9%, as forecast. The initial reaction to the report was positive sending the S&P 500 more than 10 points higher shortly after the open.

Interestingly, the US dollar rallied after the report, suggesting the risk-on/risk-off may not have the same implications going forward. If the dollar continues to rally on better data, it points to US growth and investment as a driving factor.

An alternative argument would be that the foreign exchange market was a step ahead of stocks. The S&P 500 later reversed and closed the day down nearly 1%. The dollar strengthened in both scenarios.

The euro closed the week a shade above the 200-day moving average at 1.2828 but broke below in early-week trading to as low as 1.2808. Cable remains above 1.6000 despite repeated attempts to break the psychological barrier.

The official China non-manufacturing PMI rose to 55.5 in October from 53.7 the previous month. Combined with the better manufacturing PMI, its an early indication that growth is picking up.

The Australian dollar was boosted by the China PMI and domestic retail sales, which rose 0.5% in September, slightly stronger than the 0.4% expected. With the RBA decision such a close call, the market will be ultra-sensitive to incoming data.

-AB