Daily Forex News

Market Movers of the Day

Europe

*Swiss KOF Leading Indicators worse than expected at 1.68

Americas

*US Chicago PMI surprised for the better at 60.0

*US EIA Crude Oil stockpiles dropped 1.5M barrels

The Overall Sentiment

 

Equities

US stock markets ended virtually unchanged in spite of the unexpectedly positive PMI figures for the Chicago region. The unpredicted rise of the Chicago PMI to 60.0, its highest level in about four years, failed to ignite investors’ appetite, which preferred to realize profits rather than open bets at the end of the year. The S&P 500 and the Dow Jones added less than 0.1% each. Profit taking set the tone for the day in European stock markets as well, putting an end to a five-day rally for its main indices. The British FTSE 100 lost 0.7% and the German DAX retreated 0.9%. The Japanese Nikkei 225 dropped 0.9% as rumors of bankruptcy for Japan Airlines sent the company’s shares down a staggering 24%.

 

Forex

In a low-volume day of trading, the Dollar ended with mixed results against the majors. The Euro slightly advanced against the greenback, not before an intraday drop below 1.4275, to end around 1.4340. The Pound was the best performer, rallying for seven hours in a row versus its US counterpart, to close around 1.6075. EUR/GBP topped just above 0.9050 before it dropped sharply to end around 0.8915. Mixed performances for commodity-linked currencies, as the Aussie dollar and the kiwi continued to rally but the Canadian dollar weakened for a second day against its US peer. USD/JPY extended its advance to close around 92.50, amid negative sentiment for the Yen on speculation about Japan Airlines’ bankruptcy and its potential effect on the Japanese economy.

 

Commodities 

Crude Oil advanced about $1, closing around $79.30, as the weekly EIA report showed that US stockpiles decreased by 1.5 million barrels. Gold weakened for a second day, falling to $1092.50, and Silver extended losses as well, declining to $16.75.

 

The Day Ahead

In the last trading day of 2009 the main attraction will be the US Jobless Claims figures due at 13:30 GMT. Initial Jobless Claims are expected to show a rise to 460K in the week that ended on December the 26^th, from a previous 452K the week before.

 

Technical Analysis

EUR/AUD DAILY

 

 

 

 

 

 

 

Bullish Scenario- A daily closing below 1.5950 will trigger heavy selling pressure towards the next reliable support.

Target A- 1.58

Target B- 1.55

 

Bearish scenario- A failure to break below the 1.5950 level will send the cross north in a new bullish cycle.

Target A- 1.63

Target B- 1.6420

 

 

Support/Resistance

 

 

 

Daily Events

 

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Recovery driven by Exports- In the third quarter Japan was able to slowly move into the recovery path with Q3 GDP rising 0.3% QoQ and industrial production stabilizing. The stabilization is mainly attributed to demand for Japanese exports which rebounded strongly. Japanese exports have lately shifted more and more towards Asian partners lead by China which is slowly overtaking demand from Japan’s classic partners the US and the EU. Since Asian emerging economies did not carry the same leverage as their western counterparts Asian economies remained rather resilient to the credit crisis with consumption still growing and with it demand for Goods. However the demand from China and the Asian tigers is only part of the story. It is the Global stimulus unprecedented in size, lifted Japanese exports not only to Asia but also to the US with the Cash for clunkers program supporting demand for Japanese autos. And indeed in December Japanese exports and industry indicators continued to recover with Merchandise trade balance at ¥ 492.4B, vehicle sales rising 36% YoY and Tertiary index rising a modest 0.5% MoM.

So where is the double dip risk coming from? The Japanese economy still faces serious headwinds for growth with negative CPI capping corporate profits and falling capital expenditures restraining job creation, both spurring fears of an unsustainable recovery. The last two quarters are considered to be the climax of the stimulus effect and still in Japan capital expenditures fell -24.8% YoY (for Q3) and CPI fell -1.9% YoY for the month of December. As  the global stimulus programs which led consumer demand so far begin to unwind and their effect  is slowly fading  Japanese exports  which in the last few quarters held the Japanese economy afloat  could fall back again and with it pull  the Japanese economy back into negative territory.

So how should you roll the dice?

Announcement of a large stimulus- The stimulus announced by the Government at the beginning of the month is considered by investors as an appetizer no more. However an announcement of a large scale stimulus could elevate sentiment for the Japanese economy and therefore weaken the Yen as it involves effective money printing and it will encourage Japanese investors to sell the Yen in favor of higher yielding currencies.

Watch out of Negative CPI- If CPI figures will continue surprise for the downside then Japanese bonds which currently yield close to zero will look attractive once again. This could lead Japanese investors to repatriate funds and create demand for the Yen once again. 

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Manufacturing Sector Could Disappoint

The last couple of months have presented a major rebound within the manufacturing sector, as indicators have jumped back to comfortable levels. The Chicago PMI, which is compiled by the Institute of Supply Management Chicago and Kingsbury International, Ltd., jumped to 56.1 from 54.2 in November, the highest level since August 2008. While the overall reading was better than expected last month and showed strength in all manufacturing areas, other parts of the economy are still trying to stay afloat. Although today’s figure might not be market-moving, the result will be scrutinized by investors as a significant move in this regional survey can have predictive value for the ISM index.

Initial Jobless Claims Could Spark Minor Movement

Initial jobless claims could also present minor volatility tomorrow as the Department of Labor should show that 455.00k people filed for unemployment benefits. While the result might not cause massive movement due to the current trading volume in the market, it could weigh on confidence going forward.

Technical Analysis – A Possible Trade Opportunity

USD/CHF- Daily Chart

 

 

 

 

 

 

 

 

Bullish Scenario – After retracing to its 38.2% Fibonacci level, a bullish candle could drive this pair higher confirming the pullback.

Target A – 1.0436      

Target B – 1.0508

Bearish Scenario – A drop below the 38.2% level could lead to a drop to the 50% before the chart finds stability

Target A – 1.0235      

Target B – 1.0170

 

Analysts Expectations

Data	Predicted Result	Last Result
Chicago PMI	55.20	56.1
U.S Initial Jobless Claims	455.00K	452.00K

 

To keep regularly informed about this and other important news releases visit eToro.net to keep a track on all the daily and weekly news.

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Europe

Germany’s CPI came out better than expected at 0.9%
Americas

Consumer confidence improved at a rate of 52.9

House prices increase 0.4%

 

Daily Market Review Dec 30, 09

 It was another quiet session on Wall Street as the major indices bounced back and forth across their opening mark. As mentioned in previous reports, market activity is expected to be minimal this week, due to the holiday season. 
Economic data had a minor affect on the intraday session, as the U.S released its home price index and CB consumer confidence. According to yesterday’s report, house prices increased yet again for the fifth month in a row. The closely watched S&P/CaseShiller home-price index increased 0.4 percent from the previous month on a seasonally adjusted basis, bringing the annualized drop in house prices to 7.3 percent, the smallest year over year decline in 12 months. Even though the numbers came out as expected and hinted towards a recuperating housing market, one must note that the recent bounce-back has been attributed to tax benefits supplied by the government.

Consumer confidence also surprised rising to 52.90, compared to November’s result of 50.6. The number pointed towards optimism among consumers, despite a lower than expected reading of 53.00 points. 

From a technical point of view, the S&P500 finished yesterday’s session in red, the first negative session out of the last six. Energy was the lagging sector of the day, closing with a loss of -0.66%. Consumer Discretionary helped to balance out the session and finished with a 0.33% gain.

 
Forex

 On the Forex market, the Dollar traded steady against its counterparts, with the index finishing the session around 77.9 points. Even though most of the individual pairs presented a lackluster session, the Dollar index dropped to approximately -0.5%, before finishing with a 0.3% gain.

 The EUR/USD lost some strength during the session coming down to prior lows. Dollar strength was characterized during the session despite a better than expected CPI figure from Germany. Preliminary government data released showed that German consumer prices rose at a monthly pace of 0.9% in December, for a gain of 0.8% compared to the same month last year.

 Moving on to other pairs, the USD/CAD took the spot light Tuesday, after presenting a possible reversal pattern. Even though no news came out from the Canadian side, the fundamental data from the U.S was enough to push this pair higher, allowing the pair to bounce off of trend line support. The USD/CAD formed a hammer candlestick yesterday around support, which led to higher levels during Asian hours. Considering the Dollar continues to gain strength the upper trend line could act as a target level.

 

 

 

 

 

 

 

The Day Ahead

 Looking forward, the U.S will take the stage today releasing its Chicago PMI and crude inventory numbers. Economists are expecting a mild decrease to 55.20 from 56.1, while crude numbers should drop by 2 million barrels.

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Housing Prices could be an eye opener

Housing data in the U.S could add to the holiday spirits this week, as house prices are expected to drop by -7.10%, compared to a previous -9.36%. Even though parts of the housing market are now showing minor improvement – housing starts recently increased, showing impressive figures, other results such as New-Home Sales have sharply declined. Single-family homes declined 11.4% in November to a seasonally adjusted annual rate of 355,000 units.

One must note that recent improvement in leading parts of the economy have been fueling the Dollar rally, driving it to higher levels against counterparts, but as mixed signals continue to show a fragile housing market, investors will scrutinize the upcoming data, as a worse than expected figure could put pressure on the Greenback.

Consumer confidence is on the rise

In addition U.S consumer confidence is expected show a 52.7 figure, compared to a previous 49.5. Usually released on the last Tuesday of the month, investors watch this number closely as increasing confidence, often leads to personal consumption. Recent figures have been bouncing around the 50 mark, as Main Street remains dubious about the recent recovery. A higher than expected reading is normally considered to be bullish for the USD.

Technical Analysis – A Possible Trade Opportunity

USD/JPY- Daily Chart

 

 

 

 

 

 

 

 

 Bullish Scenario – A Break above trend line resistance could present the start of a new bullish trend.

Target A – 93.6

Target B – 94.5

Bearish Scenario – A Bounce off resistance could lead to a drop to prior support around

Target A – 89.60

Target B – 88.0

 

Analysts Expectations

Data	Predicted Result	Last Result
U.S Durable Goods	0.5%	-0.6%
U.S Initial Jobless Claims	470.00k	480.00K
Japan’s CPI	-1.8%	-1.9%
Japan’s Unemployment Rate	5.2%	5.1%

 

To keep regularly informed about this and other important news releases visit eToro.net  to keep a track on all the daily and weekly news.

Furthermore, if you like to learn to perform your own Forex analysis and spot valuable trading opportunities as they develop, simply click here to take advantage of our unique e-trading course

Successful Trading!

The eToro Team

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The Christmas rally began a little early with the markets finishing the holiday shortened week on a strong note. The S&P 500 finished the week above resistance closing with a weekly gain of 2.18%.  Global equity markets made new highs for 2009 with the Nasdaq composite leading the charge finishing the week up 3.4%.  The dollar index started the week off on a positive note, but retraced much of its gains on Wednesday and Thursday. 

Movement started on Tuesday as the National Association of Realtors said that sales of existing homes rose 7.4% in November from October to a seasonally adjusted annual rate of 6.54 million units, which is the highest rate since February 2007. Buoyed by a tax credit for buyers and low interest rates, sales were 44% above November 2008’s figure, when fears over bank failures were near their peak.  The median sales price last month was on existing homes was $172,600, up from $172,200 in October, the first monthly increase since June.  Also of note was the release of final 3^rd quarter GDP in the US.   The government revised downward its earlier estimate of the economy’s third-quarter growth rate to a lackluster annualized rate of 2.2% from the earlier estimate of 2.8%. Inventories were drawn down faster than previously believed, could mean more robust growth in the current 4^th quarter. 

Despite the better than expected housing data, one must note that the sector is still showing mixed signals. On one hand, prices have firmed up mainly for middle class homes in areas with short commutes, where investors and first time buyers are scrapping for bargains on foreclosed houses.  On the other hand, prices of higher end homes are likely to keep falling, because of a glut in supply and greater difficulty of getting loans for such properties.

Another closely watched measure of home prices, the S&P/Case-Shiller Home Price Index, also is improving. Its national index rose in the third quarter of 2009 from the prior quarter, its second consecutive quarterly increase. That index is down about 28% from its peak in the second quarter of 2006.

Across the Atlantic, the Office for National Statistics reported that the British economy contracted a greater than expected 0.2% in the third quarter, showing that the economy is still in dire straits. The outcome thwarted expectations of a more favorable revision to the third-quarter output number, and came as a disappointment for Prime Minister Gordon Brown’s government. To date, he is looking for a solid economic bounce to help him at the upcoming elections.  The data also signaled that that the British economy has contracted for six straight quarters, even after most other industrialized economies have returned to growth.  In its final estimate of third quarter gross domestic product, the ONS also said the savings ratio rose to 8.6%, its highest level since the first quarter of 1998 – a clear indication of caution among consumers, who tend to save during a recession.

On Wednesday, the minutes of the  Bank of England’s Monetary Policy Committee showed a unanimous vote to leave interest rates at a record low and press on with its previously announced £200 billion ($319.52 billion) bond-buying program. The results, which were in line with economists’ expectations, suggest there is unlikely to be any change in the bank’s policy stance until February when it presents its next quarterly inflation report.  While the inflation rate would probably rise in the near term, there was a substantial degree of spare capacity in the economy, it said. However, the bank said there were “exceptional uncertainties” over the outlook for inflation and activity growth.  The BOE left its benchmark Bank Rate at 0.5% for a tenth consecutive month on Dec. 10 and said it was sticking to its £200 billion bond-buying target, a process known as quantitative easing. The BOE aims to anchor annual inflation at 2% over the medium term.

Back in the U.S, the Commerce Department reported Wednesday that personal income increased 0.4% while spending last month increased by 0.5%.  A key gauge of prices suggested inflation wasn’t yet threatening.  Also on Wednesday, New home sales plunged to their lowest in seven months during November, a bigger than expected drop and a sign the housing market recovery will be rocky. Sales of single-family homes decreased 11.3% to a seasonally adjusted annual rate of 355,000, according to the Commerce Department.  The level was the lowest since 345,000 in April. The plunge wiped out much of the gain made in the new home market since the January bottom.  Economists surveyed by Dow Jones Newswires estimated a 1.2% drop to a 425,000 annual rate for November.  New home sales, unlike sales of existing homes, are recorded with the signing of a sales contract and not the closing.

Forex

After being pounded, the EUR/USD managed to find stability last week, despite additional news from Greece. Moody’s official noted that “We put Greece under negative outlook, which means that over the next 12 to 18 months, there is a more than 50% probability that we’ll downgrade them again.”    European bonds initially sold off on the downgrade as well as the Euro. Towards the second half of the week, the EUR/USD bounced off its 200 day moving average and began to potentially create a bottom.

 

 

 

 

 

 

 

 

 

New Zealand showed a much weaker GDP figure, coming out at 0.2% q/q, half the expected 0.4%. This underscores the notion that the RBNZ will not be hiking aggressively this year, as the NZ recovery is clearly lagging that of Australia.  From a technical point of view, the NZD/USD is still in correction mode, and is trading above is secondary trend line support.

 

 

 

 

 

 

 

 

 

The week ahead

Next week is a relatively light week, but one must note that historically the markets tend to move 2% on light volume.  On Tuesday market participants with be watching Japanese Industrial Production.  On Wednesday, the main release is U.S Consumer Confidence, and on Thursday traders will keep an eye on Chicago PMI, prior to the New Years Day Holiday on Friday.

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Market Movers of the Day

Asia-Pacific

• Japanese BSI Large Manufacturing down to 13.2 from previous 15.5

Europe

• Bank of England Minutes

Americas

• Canadian GDP lower than expected at 0.2% MoM
• US Personal Consumption Expenditures rose 0.5% vs. 0.6% expected
• US Personal Income rose 0.4%, in line with market forecasts
• US New Home Sales worse than expected at 355K
• US Michigan Consumer Sentiment Index lower than estimations at 72.5
• US EIA Crude Oil stockpiles dropped 4.9M

The Overall Sentiment

Equities

US stock markets advanced in reaction to the rise in consumer spending, even though it came lower than predicted, but gave up gains as the New Home Sales report showed negative numbers for the housing sector. The S&P managed to close up by 0.2% and the Dow added 0.1%. In Europe, the British FTSE 100 continued to advance for a third day gaining 0.8% as the BoE’s policy makers voted unanimously to maintain the magnitude of their Quantitative Easing  program unchanged at 200 billion pounds. The German DAX ended virtually unchanged, gaining less than 0.1%.

Forex

In a relatively quiet day of trading, the Dollar weakened against most majors after the recent rally that lasted over a week. Following the disappointing US economic data market participants felt a correction was due for the greenback. EUR/USD found support slightly above 1.42 and advanced towards 1.4350. The Pound was the worst performer against its US counterpart as the BoE Minutes failed to ignite positive sentiment in the market, which still perceives that the UK economy is lagging behind most countries’ improvements. The Canadian dollar strengthened as the country’s GDP figures showed a 0.2% expansion in October. The growth was lower than the expected 0.3% but the loonie managed to advance, with USD/CAD breaking below 1.05. The Aussie and New Zealand dollars, commodity-linked currencies like the Canadian dollar, climbed versus its US peer as Crude Oil jumped on a larger-than-expected drop in stockpiles.

Commodities

Crude Oil jumped over $2, trading above $76.50, as the weekly EIA report showed that US stockpiles decreased by 4.9 million barrels, when market expectations pointed to a 1.8 million drop. Gold rebounded from $1080 reaching $1092 an ounce as the Dollar weakened for the day. Silver followed, strengthening to $17.15.

Technical Analysis

GBP/JPY DAILY

Bullish Scenario- A daily closing above 147 will signal the continuation of the bullish momentum.

Target A- 149

Target B- 150

Bearish scenario- A failure to break above the 147 level will send the cross south for a correction.

Target A- 144

Target B- 142

Support/Resistance

Daily Events

Time(GMT)	Country	Event
00:00	Japan	BoJ Minutes
13:30	US	Durable Goods Orders (Nov)
13:30	US	Durable Goods Orders Ex. Transportation (Nov)
13:30	US	Initial Jobless Claims
13:30	US	Jobless Rate (Nov)
23:30	Japan	National Consumer Price Index (YoY) (Nov)
23:30	Japan	Tokyo CPI (YoY) (Dec)
23:30	Japan	Overall Household Spending (YoY) (Nov)

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Europe

U.K’s GDP came out worse than expected at -0.2%

Americas

GDP disappointed, coming out at 0.4%

Existing home sales jumped by 6.54m

Daily Market Review Dec 23, 09

It was a GDP day yesterday, as two of the largest economies showed their growth results. The U.K took the stage first, showing negative growth of -0.2%. Even though the result didn’t deviate too much from the expected result of -0.1%, it was still better than the 2^nd quarter’s result of -0.3%. The mild increase in economic growth was attributed to construction, which had increased in the third quarter.

The U.S also grabbed the spot light, prior to the opening bell, releasing their GDP and existing home sales figures. The final estimate for real GDP in the third quarter came in under expectations of at 2.2%, 0.6 percentage points lower than the preliminary estimate and an even more significant 1.3 points below the advance estimate. The details of the report revealed weakness in personal consumption, investments and government consumption. One must note that the two numbers from the U.S and the U.K spooked investors as the results showed that the largest economies are still dealing with a slow recovery.

Furthermore, the U.S released its existing home sales, showing that prices are now on the rise. The numbers jumped by 8.5%, 6.54M, presenting a sizeable increase, similar to October’s increase of 9.5%. It is important to note that when excluding one month of declines the housing market has been recuperating at a steady pace since April.

U.S stocks continued their climb higher despite the worse than expected GDP number and finished the session with gains. AIG increased by over 10% after it decided not to pursue an IPO for Chartis, its property and casualty division. Once again, yesterday’s session was characterized by a bounce at the start of the session, which then led to consolidation. Even though stocks continue to show resilience, gains are due to spikes at the start of the session and not continuous buying throughout the intraday sessions.

This time round, the Technology led the way higher, increasing by over 0.80%, while utilities dragged on the session, closing with a loss of -0.83%. The S&P500 finished the day with a gain of 0.36%.

Forex

On the Forex market, the Dollar index continued to gain strength, as investors saw further strength in the recent Dollar rally. Investors are now beginning to price in a change in the Fed’s policy, which is reflecting a stronger Dollar. Yesterday’s existing home sales number only strengthened recent thoughts, knowing that an improving economy will eventually lead to rate hikes.

On individual pairs, the EUR/USD and the AUD/USD continued their way lower, while the GBP/USD broke support and headed to lower ground. To date the GBP/USD seems to be heading towards its prior support level, located around $1.68.

The NZD also felt pressure as additional Dollar strength and a worse than expected GDP figure, pushed the NZD/USD lower. New Zealand reported that their economy had expanded less than expected at a rate of 0.2%, compared to an expected 0.4%. According to the Financial Times, economists noted there had been a particularly sharp fall in residential building in the latest quarter and that business investment and manufacturing had also been weak.

The Day Ahead

On the data front, further market movers will be released today by different economies; Canada, England and the U.S all taking the stage. The BOE is scheduled to post its minutes and is expected to leave its monetary decisions unchanged. Throughout the session Canada will release its GDP figure while the U.S will release personal spending and new home sales. While investors are expecting a lower GDP rate from Canada, similar to other economies’ recent data, the U.S new home sales could surprise, showing an increasing number of 439.00k.

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The equity market ended in consolidation mode last week, as Monday’s bounce was followed by Thursday’s downdraft.  The S&P 500 index lost 0.36% for the week, as markets participants prepared for this week’s holiday week.

Although the markets received a nice boost on Monday, disappointing economic news quickly followed and weighed on investor’s sentiment.  The slightly worse than expected euro zone industrial production report (-11.1% y/y on a work day adjusted basis vs. -10.8% expected) spooked investors as the news hinted towards a possible downward revision of the Euro zone’s Q4 GDP forecast. This is in contrast to the US, where last week’s retail sales data hinted towards an upward revision to the US’s Q4 GDP forecast. Euro zone employment also accelerated to the downside, falling -2.1% in the third quarter vs. -1.8% in the second quarter.

In Japan, the  Tankan report was also slightly disappointing.  The index increased by 9 points to -24, better than the reading of -27 expected.  Still, despite three consecutive quarters of improvement last week’s figure was the weakest. Furthermore, the outlook for capital spending was much weaker than expected.  Large firms now plan to cut their estimates by -13.8% this fiscal year, worse than the -10.8% drop, forecasted three months ago.  This resulted in the third quarter GDP being slashed to 1.3% from the 4.3% initial estimate because of sharply lower capital spending. Due to recent economic data the Tankan survey now suggests that the gloomy trend will continue something that will weigh on investor’s sentiment during this fragile recovery.

Over in the U.S, the US producer price index rose last week by 1.8 % for November, nearly double economists’ projections, as energy prices soared and light truck prices picked up. Compared to last November’s figure, wholesale prices were up by 2.4%, the first such increase in 12 months.  Core producer prices, which exclude food and energy, rose by 0.5% in November, also exceeding estimates. Prices for light trucks jumped by 4.2% last month, while cigarette prices swelled by 2.2%.  In addition, US consumer prices climbed 0.4% in November, according to government data Wednesday indicating inflation is in check.  Excluding volatile food and energy prices, the “core” inflation index was flat for the month.  The headline index was in line with expectations, while analysts had been looking for a 0.1% rise in the core CPI.  Over the past 12 months, overall prices have increased by 1.8% and core prices have been up by 1.7%.

Inflation data was scrutinized by investors ahead of the rate decision to see if there would be any changes to the wording of the FOMC statement due to the numbers.  The Federal Reserve Statement displayed little change from prior statements and alerted that market that monetary easing would continue for a substantial period of time.  These comments were expected by market participants and the reaction was already baked into the market’s price.

Employment data also grabbed market participant’s attention as Thursday’s first-time jobless claims rose by 7,000 to 480,000, defying expectations of Wall Street’s economists that the number would drop. The less volatile four-week average of new claims, however, fell by 5,250 to 467,500, maintaining a healthier trajectory.

The week ended with the Bank of Japan’s policy meeting. The board voted unanimously to leave its policy rate unchanged at 0.1%, as it studies the effects of a measure announced earlier this month to try to lift demand. One must note that the BOJ offered up to 10 trillion yen ($111.2 billion) in short-term funds to the market. The policy board also said in a statement that it decided to “further disseminate” the BOJ’s thinking on price stability, and made it clear that the board won’t tolerate on-year falls in the consumer price index.

Forex

Dollar strength continued last week pushing the index to higher ground. The dollar index pushed to a high of 78 points, the highest level the index had seen since the beginning of September. On individual pairs, the pound was pushed lower, after an unexpected drop in U.K. November retail sales raised new doubts regarding the U.K’s economic recovery. The Office for National Statistics reported that retail sales fell by 0.3% in November from October, the first month-on-month decline in over six months. On a positive note, UK jobless claims slipped -6.5K (12.5k expected) and average earnings including bonuses were higher than expected at 1.5% (vs. 1.2% expected).  From a technical point of view the pound is closing in on its 200 day moving average at $1.60, currently trading above horizontal support.  A break below these two important levels could see further selling towards support located around at $1.58.

On the other side of the globe the Australian dollar hit its lowest level since late Nov after Australian GDP came in lower than expected and the RBA stated that its policy is now in the normal range. Furthermore, the Australian economy grew at a slower than expected 0.2% q/q pace in Q3 (0.4% expected) vs. 0.6% in Q2. The GDP report revealed that consumer and government spending are still fueling growth, while exports are still declining. The less hawkish outlook may have triggered profit taking. Thursday’s break of support could lead to further selling pressure, should the Dollar continue to gain strength.

The Week Ahead

This week’s trading week should be light on volume ahead of the holidays. Despite that fact one must remain cautious as low priority events this week could take the markets for a spin. Those who are not taking a break this week will be watching the Japanese All Industrial Activity and Canadian Retail Sales on Monday.  On Tuesday UK GDP leads off, and is expected to show a -0.1% q/q contraction compared to an initial forecast for a -0.3% figure. Even though the economy is experiencing major problems, economists are now speculating that the U.k economy is slowly crawling out of its dire straits.  US GDP will follow and is estimated to come in at 2.8% q/q. In addition Existing Home Sales will grab some attention, especially as the housing sector is still weighing on the U.S economy.  On Wednesday EMU New Orders is up first and then US Personal consumption and Spending will follow.  Towards the end of the week US Durable Goods will take the stage and is expected to show a positive 0.4% q/q.

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Market Movers of the Day

Asia-Pacific

• New Zealand Business Confidence down to 38.5 from a previous 43.4
• Japanese Leading Economic Index up to 89.4 from 87.5

Europe

• UK Retail Sales surprised for the worst at -0.3% MoM
• UK CBI Distributive Trades better than expected at 13
• Swiss ZEW Economic Expectations down to 54 from a previous 56.4

Americas

• Canadian CPI higher than expected at 1.0% annualized
• Canadian Core CPI higher than expected at 1.5% annualized
• US Initial Jobless Claims worse than forecasted at 480K
• US Continuing Jobless Claims better than forecasted at 5186K
• US Philadelphia Fed Manufacturing Survey surprised for the better at 20.4

The Overall Sentiment

Equities

US stock markets dropped driven by losses from Citigroup, which sold shares at a discount, and negative sentiment from an increase in Initial Jobless Claims. Yesterday’s hawkish rhetoric from the Fed has also prompted investors to sell equities and turn to the Dollar for safety. At 20:00 GMT, the S&P was down by 0.8% and the Dow had lost 1%. In Europe, the British FTSE 100 dropped 1.9%, its biggest decline in three weeks, as the UK Retail Sales surprisingly fell 0.3% in November. The downgrading of Greece’s credit rating continues to weigh on European markets and financial institutions. The DAX declined 1%, led by losses from Germany’s largest banks.

Forex

The Dollar strongly advanced across the board after the Fed left rates unchanged yesterday but outlined the conclusion of most of its emergency measures by February 2010. EUR/USD reached its lowest level in three months at 1.43. Commodity-linked currencies retreated as investors abandon high-yielders and look for the Dollar and Yen’s safe-haven status. The Australian dollar extended losses below 0.89 against its US counterpart and USD/CAD climbed to the 1.07 level. The Pound dropped on disappointing Retail Sales numbers, with an intraday visit underneath 1.61 against its US peer. The Yen gained versus all majors with USD/JPY still battling around the 90 level.

Commodities

Gold plummeted below $1100 as the Dollar’s strength and the prospects of closer-than-expected rate hikes diminished the demand for the yellow metal. Silver dropped as well, approaching the $17 level. Crude Oil retreated in early trading hours after yesterday’s rally but recovered to sustain trading around $72.50.

The Day Ahead

The day will start with Bank of Japan’s rate decision at the end of a two-day policy meeting, for which market expectations are pointing to an unchanged 0.10% as deflation continues to loom over Japanese economy. Moving to the European session, German PPI is expected to show a 0.2% rise for November, and positive figures are forecasted for both the IFO Expectations and Business Climate, anticipating positive sentiment in the Euro-zone for the short-term. UK Public Sector Net Borrowing and the EU Trade Balance are also due for release. Canada Wholesale Sales is estimated to show a 0.3% increase for October in the only economic piece of data coming for the Americas.

Technical Analysis

EUR/GBP DAILY

Bullish Scenario- The support at 0.8835 holds and the cross bounces back up developing a new bullish cycle.

Target A- 0.8975

Target B- 0.9150

Bearish scenario- A break of 0.8835 downwards generates a strong bearish swing, targeting the 0.87 support.

Target A-0.87

Target B-0.8550

Support/Resistance

Daily Events

This news item was republished from eToro Forex news website

Popularity: 1% [?]