Gold Forecast December 14, 2011, Technical Analysis

Gold markets were hit again on Tuesday as the Federal Reserve’s minutes didn’t mention anything about quantitative easing. The weakening of the Dollar would drive demand for gold as it always has. However, the overall economic picture is poor, and we think the uptrend should continue at one point or another.

We currently have the $1,600 level as the bottom of an area where we want to buy. We need to see a supportive daily close in order to go long of this market, and have yet to so far. Because of this, we are willing to step away from this market regardless for a few days or more. The end of the year makes for illiquid conditions in this market, and we think the downward pressure could continue for a while, albeit not as strong.

The market could be ripe for a pullback. However, we think next year the demand for gold instead of fiat currencies should continue and it should also be noted that gold only seems to be having trouble when it is priced in Dollars, not when it is priced in Pounds or Euros. Because of this, we believe this move is less about gold and more about the strength of the US dollar currently. The two can rise at the same time, and that is exactly what we think will happen in the relatively near future.

However, as it is the end of the year – we could also be seeing some profit taking as funds close out their positions in order to record larger gains for investors. The markets will be volatile until the start of next year, and even then there is no real guarantee that it will calm down overall. As long as there are issues in Europe, there will be demand for gold overall. However, we aren’t in as big of a rush to buy as we once were, given the time of year and severity of the move recently.

If the $1,600 level gives way, we will be watching the $1,500 below that for our next potential buying area. We need to see a supportive daily candle in order to buy, and until then – we are on the sidelines in this market.

Gold Forecast December 14, 2011, Technical Analysis
Gold Forecast December 14, 2011, Technical Analysis

Crude Oil Forecast Dec. 14, 2011, Fundamental Analysis

Crude Oil Forecast Dec. 14, 2011, Fundamental Analysis
Crude Oil Forecast Dec. 14, 2011, Fundamental Analysis
, after the International Energy Agency (IEA) confirmed that oil demand will grow next year despite the expected economic slowdown. While crude oil prices received support from the unconfirmed reports, which signaled thatIranwill close theStrait of Hormuzfor military practice.

Traders will be eyeing the FOMC rate decision later on Tuesday, where the majority of analysts expect the FOMC to leave the current monetary policy unchanged, while on Wednesday, traders will be following the Import Price Index from theUnited States.

Nonetheless, traders will also continue to monitor the developments from the 17-bloc euro nation and the European leader’ latest moves to contain the debt crisis, where we expect volatility to persist through the sessions this week.

The EIA report is expected to show on Wednesday that crude oil stockpiles decreased by 2.5 million barrels, which could provide crude oil prices with some bullish support.

The outlook for crude oil though has become highly uncertain, since under the current pessimism wave that is dominating markets, we should expect crude oil prices to extend the losses. Nevertheless, we see overall economic conditions as still being weak, and that should put negative pressure on crude oil prices as well, so we advise traders to be extremely cautious, especially since the EIA report for crude oil inventories will be released on Wednesday.

We should take in mind that the general outlook for crude oil prices is still bearish, where expectations of slowing global growth, in addition to uncertainty that continue to surround the outlook the European debt crisis and its impact on growth in Europe are likely to weigh down on crude oil prices over the coming period.

Wednesday December 14:

TheUnited Stateswill join the session at 13:30 GMT with the import price index for November, where the monthly index is expected to expand by 1.0% from the previous drop of 0.6%, while the annual index previous reading was 11.0%.

At 15:30 GMT, the EIA report for crude oil inventories will be released for the week ending December 09, where last week crude oil inventories increased by 1.3 million barrels, and crude oil inventories are expected to decrease by 2.5 million barrels.

USD/CAD Forecast Dec. 14, 2011, Fundamental Analysis

The USD/CAD pair rebounded to the upside on Tuesday, as pessimism dominated markets once again after reports suggested that German Chancellor Angela Merkel rejected increasing the bailout fund for European sovereign debt. Moreover, the worse than expected U.S. retail sales put more negative pressure on confidence, as retail sales rose in November but well below median estimates, retail sales increased by 0.2% in November, worse than median estimates of 0.5%., and accordingly, investors targeted lower yielding assets including the U.S. dollar, which pushed USD/CAD pair higher.

Traders will be eyeing the FOMC rate decision later on Tuesday, where the majority of analysts expect the FOMC to leave the current monetary policy unchanged, while on Wednesday, traders will be following the Import Price Index from the United States, and the leading indicators from Canada.

Nonetheless, traders will also continue to monitor the developments from the 17-bloc euro nation and the European leader’ latest moves to contain the debt crisis, where we expect volatility to persist through the sessions this week.

The USD/CAD pair could still rise if the pessimism continues to dominate markets, but we still expect volatility to hold the steer for now, as uncertainty remains the main theme in markets, and that could also lead to deep fluctuations for the USD/CAD pair.

Wednesday December 14:

Canada will release the leading indicators for November at 13:30 GMT, which is expected to rise by 0.3% following the prior rise of 0.2% in October.

The United States will join the session at 13:30 GMT with the import price index for November, where the monthly index is expected to expand by 1.0% from the previous drop of 0.6%, while the annual index previous reading was 11.0%.

Gold Forecast Dec. 14, 2011, Fundamental Analysis

Gold Forecast Dec. 14, 2011, Fundamental Analysis
Gold Forecast Dec. 14, 2011, Fundamental Analysis
, where traders will be eyeing the FOMC rate decision later on Tuesday, which weighed down on gold prices, knowing that the majority of analysts expect the FOMC to leave the current monetary policy unchanged, while on Wednesday, traders will be following the Import Price Index from the United States.

Traders will continue to monitor the developments from the 17-bloc euro nation and the European leader’ latest moves to contain the debt crisis, where we expect volatility to persist this week.

Accordingly, we should expect more fluctuations for gold, but should the current pessimism persist, we should expect gold prices to extend the rallies, however, the level of uncertainty is very high, and investors are ought to remain cautious.

Natural Gas Forecast Dec. 14, 2011, Fundamental Analysis

Natural gas prices fluctuated on Tuesday, as the weather forecasts suggested temperatures will be above the average in the Eastern and Central of the United States, fueling speculations of falling demand for natural gas as a heating fuel and putting prices under negative pressure as a result.

Traders will continue to focus on weather developments, where weather forecasts suggest temperatures will be likely higher than average over the coming period, and that could put natural gas prices under pressure next week.

EUR/USD Forecast Dec. 14, 2011, Fundamental Analysis

EUR/USD Forecast Dec. 14, 2011, Fundamental Analysis
EUR/USD Forecast Dec. 14, 2011, Fundamental Analysis
most of Tuesday and fluctuated heavily especially with the debt sales in focus and ahead of the FOMC decision.

The pair is still governed by the worsening outlook for the euro area and with the alarm raised from rating agencies since the start of the week that nations are under the spotlight as Brussels failed to produce a strong plan, where Moody’s warning was followed late Monday by Fitch.

The selloff nonetheless eased on Tuesday after the heavy decline seen on Monday where the economic sentiment improved slightly and more importantly a strong bond sale from Spain with falling yields and surging demand alongside the good first auction for EFSF short term bills eased the pressure on the euro.

Overall, the market is still wary over the euro outlook especially as Brussels delivered nothing to solve the now problems which leaves the speculation again that only the ECB can solve the crisis and with its reluctance to move and the lack of other developments means that the negative view will be dominant in the market.

On Wednesday the pair will surely reflect anything from the late FOMC decision that will linger in reaction on European markets if the feds signal any move as they are expected to keep their monetary policy unchanged late Tuesday.

We also have more debt sales from Italy and Germany on Wednesday and both remain critical and not just Italy and its high yields, its Germany and its low yields considering the rising risk over the outlook and especially with the rating agencies warnings for all the EU and especially from S&P that put the major 6 triple-A rated euro nations under its review.

The euro zone will start the session at 10:00 GMT with the industrial production index for October, where the annual working-day adjusted index previous reading was 2.2%, while the seasonally-adjusted monthly index is expected to drop by 0.3% from the previous drop of 2.0%.

The United States will join the session at 13:30 GMT with the import price index for November, where the monthly index is expected to expand by 1.0% from the previous drop of 0.6%, while the annual index previous reading was 11.0%.

EUR/CHF Forecast Dec. 14, 2011, Fundamental Analysis

The pair was mainly stable on Tuesday as the euro remains fragile and the market is still holding still ahead of more inflation figures and the SNB decision.

Investors are just waiting for the final straw to drag the pair higher on expected SNB action especially after the Swiss government cut its growth forecasts for next year to 0.5% from 0.9% due to the worsening outlook for the European economy. Nevertheless, the expectations are not for a very deep downturn as far as the dent crisis does not worsen.

The data come ahead of more inflation figures on Wednesday that will be the last indicator ahead of the SNB decision on Thursday where growing deflation threats will affect the franc and bias trading more to the upside as investors will increase their bets on action from the SNB.

Switzerland will start the day at 08:15 GMT with the Producer & Import Prices for November which is expected to add more fears over the deflation pressures in the nation. The index is expected with 0.3% drop on the month following 0.2% decline and on the year to fall 1.9% after 1.8% drop the previous month.

The euro area will release the Industrial Production for October at 10:00 GMT with expectations for a slight 0.3% drop on the month after 2.0% drop.

GBP/USD Forecast Dec. 14, 2011, Fundamental Analysis

Before the FOMC meeting, the pair showed some fluctuations with more downside tendency amid mixed vibes in the market ahead of the year-end holidays.

The Fed is expected to keep interest rate at its low level of 0.25%, while, on the other hand, the BoE kept interest rate at 0.50% and APF at 275 billion pounds last week.

In the market, the sentiment was mixed with more downside tendency after Fitch raised concerns that debt woes in the euro area would continue in 2012 as it said on Monday the decisions announced in last week’s EU summit, which Fitch described as incomprehensive, are not enough to ease pressure on the euro zone nations.

On the other hand, a successful bond selling by the EFSF and the Spanish government made some improvement in the sentiment.

The ESFS sold 1.97 billion euros of 91-day notes with an average yield of 0.2222%, while the Spanish government also saw a successful bond selling which witnessed higher demand and lower yield. The Treasury sold 4.94 billion euros of 12-month notes with an interest of 4.050% from 5.022% the previous auction. The demand climbed to 3.14 times compared with 2.13 in the prior auction.

Data from the U.K. did not have much impact on the pair’s movement. U.K. inflation rate slowed down to 4.8% in November, according to the consumer price index annual gauge.

The data came in line with expectations and the latest BoE forecasts which noted that inflation will retreat sharply within the course of 2012 and continue its fall till it approaches the target by the end of 2012.

Thus, amid the current slowdown in growth and receding inflation, the BoE may increase stimulus at the beginning of 2012 to boost the economy.

Probably, the BoE will announce further stimuli after in February with the end of the 75 asset purchase program and with the release of the coming inflation report that will provide an update about the latest growth and inflation outlooks.

USD/CHF Forecast Dec. 14, 2011, Fundamental Analysis

On Tuesday trading, the pair showed some fluctuations before the FOMC meeting with the main concentration remained on the latest developments from the euro area after last week’s EU summit.

The Fed is expected to keep interest rate at its low level of 0.25%, while, on the other hand, later in the week the SNB may lower interest rates to negative to boost the economy and halt prices drop.

Last week, that Swiss consumer prices dropped 0.5% from a year earlier, marking the sharpest drop since Oct. 2009, while Finance Minister Eveline Widmer-Schlumpf said negative interest rates and capital controls “are issues which are being examined.”

The Swiss government lowered 2012 growth forecasts on Tuesday, where the economy is expected now to grow 0.5% compared with the previous forecast of 0.9% as the escalating debt crisis forced downside pressures onSwitzerland, yet Swiss authorities explained that growth will be stable next year as long as the European debt crisis doesn’t worsen further.

The State Secretariat for Economics (SECO) said in a statement “assuming that a further escalation of the debt crisis in the euro zone can be avoided, the economic weakness in Switzerland should be limited and of relative short duration.”

The SNB is under pressure to intervene to halt price drop and boost the economy through depreciating the franc further.

In the market, the sentiment was mixed with more downside tendency after Fitch raised concerns that debt woes in the euro area would continue in 2012 as it said on Monday the decisions announced in last week’s EU summit, which Fitch described as incomprehensive, are not enough to ease pressure on the euro zone nations.

On the other hand, a successful bond selling by the EFSF and the Spanish government made some improvement in the sentiment.

The ESFS sold 1.97 billion euros of 91-day notes with an average yield of 0.2222%, while the Spanish government also saw a successful bond selling which witnessed higher demand and lower yield. The Treasury sold 4.94 billion euros of 12-month notes with an interest of 4.050% from 5.022% the previous auction. The demand climbed to 3.14 times compared with 2.13 in the prior auction.

USD/JPY Forecast Dec. 14, 2011, Fundamental Analysis

USD/JPY Forecast Dec. 14, 2011, Fundamental Analysis
USD/JPY Forecast Dec. 14, 2011, Fundamental Analysis
early Tuesday as the strong yen forced the pair to cover the previous gains, in which the pair reached its highest level in six days.

On the other hand, the US dollar was able to keep its previous gains against the euro and other major currencies, where the current market sentiment remains weak with the deepening debt crisis.

Moody’s Investors Service said it may put the ratings of eight Spanish banks on review for possible downgrade, which fueled concerns about the spreading debt crisis in the region.

On Wednesday at 04:30 GMT, the Japanese economy will issue the Industrial Production for October, where the previous reading was 2.4%, as for the annual reading it was up by 0.4%. The Japanese Capacity Utilization had a prior reading of –3.6%.

At 13:30 GMT, the U.S. economy will release the Import Price Index for November, which had a previous reading of –0.6% and expected to come at 0.9%.

NZD/USD Forecast Dec. 14, 2011, Fundamental Analysis

The NZD/USD pair advanced slightly early Tuesday after it reached its lowest level in ten days, where the US dollar retreated against the euro and other major currencies.

The Kiwi advanced in a correction movement against greenback, where the current sentiment supported the lower-yielding currencies which in roll may end this correction quickly.

On Wednesday at 21:30 GMT, the New Zealand economy will issue the Business NZ PMI for November, where it had a prior reading of 46.5.

At 13:30 GMT, the U.S. economy will release the Import Price Index for November, which had a previous reading of –0.6% and expected to come at 0.9%.

AUD/USD Forecast Dec. 14, 2011, Fundamental Analysis

The AUD/USD pair covered some of its previous losses, as the US dollar retreated slightly against other majors after in a correctional movement after its prior gains.

Moody’s Investors Service announced it may put the ratings of eight Spanish banks on review for possible downgrades, which fueled concerns about the spread of the sovereign debt crisis in the EU region.

The current market sentiment added more pressure on the higher-yielding assets, as investors preferred the safest assets in the current unstably financial market, which increase demand for the US dollar and the Japanese yen as safe haven currencies over the short term.

On the other hand, the Asian shares dropped on the bets that the EU summit’s measures may fail to solve the EU sovereign debt crisis, which increased pressure on the Australian dollar and prevent it from recording more gains.

On Wednesday at 23:30 GMT (Tuesday), Australia will release Westpac Consumer Confidence for December, where it had a previous reading of 6.3%, while the Westpac Consumer Confidence Index had a prior reading of 103.4.

At 13:30 GMT, the U.S. economy will release the Import Price Index for November, which had a previous reading of –0.6% and expected to come at 0.9%.

EUR/USD Forecast December 13, 2011, Technical Analysis

EUR/USD fell hard on Monday as traders worried about the possibility of Moody’s downgrading the EU countries on top of the S&P threat. This will continue to weigh on the ability to own the Euro. The pair has made another run at the September bottom, and if that area gives way – this pair could fall much further. However, the 1.31 to 1.30 area is a massively supportive area and could cause problems for bears. The breaking of the 1.30 level would be massively bearish and get us massively short of this pair. At this point though – we like the idea of selling rallies going forward, and of course that break below 1.30 or so.

EUR/USD Forecast December 13, 2011, Technical Analysis
EUR/USD Forecast December 13, 2011, Technical Analysis

USD/JPY Forecast December 13th, 2011, Technical Analysis

USD/JPY rose during the Monday session as the Dollar caught a bid against almost everything in the markets. The pair continues to have massive pressure on it though, and as long as the 80 level still seems too strong – we don’t like buying unless we are much lower. This is mainly because of the Bank of Japan and its intervention near the 76 level. The pair looks to have made a higher low now, and with that in mind, we are looking to short this pair at higher levels. However, we will have to see the market show us weakness at higher levels in order to start selling again.

USD/JPY Forecast December 13th, 2011, Technical Analysis
USD/JPY Forecast December 13th, 2011, Technical Analysis

GBP/USD Forecast December 13th, 2011, Technical Analysis

GBP/USD fell hard on Monday as the markets continue to trade with a “risk off” attitude. The crisis in the EU continues to weigh upon any currency that is farther out on the risk spectrum, and with this in mind the falling of cable makes total sense. Because of this we like selling rallies going forward, and will continue to do so unless we close above the 1.57 level. The 1.55 level below is support, and that goes as low as 1.53 as far as we can see. The pair looks weak, and if we can break below that level – this pair falls much, much further.

GBP/USD Forecast December 13th, 2011, Technical Analysis
GBP/USD Forecast December 13th, 2011, Technical Analysis

EUR/GBP Forecast December 13, 2011, Technical Analysis

EUR/GBP fell hard on Monday as the 0.8500 level finally gave way as support. The breaking of this level suggests that we are going to see much lower levels, not only because of the breakdown, but the fact that we closed at the very bottom of the range. The breakdown is significant, and because of this – we will sell rallies as long as we are above the 0.85 level or selling a break below the Monday low. The pair looks very weak at this point, and we are not buying because of it.

EUR/GBP Forecast December 13, 2011, Technical Analysis
EUR/GBP Forecast December 13, 2011, Technical Analysis

USD/CHF Forecast December 13, 2011, Technical Analysis

The USD/CHF pair skyrocketed through the 0.93 level on Monday as the “risk off” trade crushed the Euro, and caused a run to the Dollar. The Swiss National Bank is willing to fight Franc appreciation, and the USD is the “safety play”. The rising of this pair has made sense for quite some time, and the market continues to look healthy for this pair. In fact, we feel that the 0.95 level is the next target, and if we get above that – we are going to parity. A severe crisis in Europe would push the market to that parity level rather quickly as Switzerland would certainly be hurt by massive problems in its largest export market.

The breakout is significant as the level has been tested over and over. The 0.93 level could be thought of as a potential floor now if this breakout is to be believed. The continued concerns of the markets in general will continue to price a bid for the US Dollar, and the Swiss franc, although a traditional safe haven, cannot be bought as long as the SNB is actively working against it.

The talk of a potential higher “floor” in the EUR/CHF continues to pressure the value of the Franc as well, and this could have an impact on all XXX/CHF related pairs. Almost all of them will move in concert and a sudden spike in that pair will certainly move this one. The pair continues to be a buy above the 0.9000 level, and we will be buying dips as long as that area holds true. The recent action around 0.9250 suggests that the support could be continuing and even more impressive as it is so close to the recent resistance area.

Until the EU gets a handle on the problems, a country like Switzerland will continue to hurt as the export market is so big for them. The Europeans are certainly going into recession and something worse than that hasn’t exactly been ruled out at this point. With that in mind, we feel this pair is a nice long-term buy and hold proposition.

USD/CHF Forecast December 13, 2011, Technical Analysis
USD/CHF Forecast December 13, 2011, Technical Analysis

EUR/CHF Forecast December 13, 2011, Technical Analysis

EUR/CHF continues to grind sideways over in a very tight range. The pair is kept lower by the 1.25 resistance area, and the “floor” below at the 1.20 level as announced by the Swiss National Bank. The pair looks like it wants to break out, but the problems in the EU continue to plague the viability of owning the Euro in general. Because of this – we are avoiding this pair altogether.

EUR/CHF Forecast December 13, 2011, Technical Analysis
EUR/CHF Forecast December 13, 2011, Technical Analysis

AUD/USD Forecast December 13, 2011, Technical Analysis

AUD/USD got absolutely hammered on Monday as traders sold off most commodities. With the backdrop of a weakening EU and Chinese growth seemingly slowing down – the commodities markets got hit hard during the session. The Aussies supply the Chinese with much of their commodities that are used in construction and the like, and as a result it is often the Chinese economy that moves the Aussie more so than the Australian one.

The deleveraging of hedge funds and large traders could continue to push this pair lower over time as the worries seem to only compound over time. The rising bond rates all over the EU continue to punish anything risk related as well, and we should see that most rallies in this pair will fall going forward.

The parity level is just below, and should be massively supportive. The area has been violated several times, but a bounce isn’t exactly out of the question at this point. The level being broken to the downside could be a catalyst to fill the gap from a couple of weekends ago and push price down to about 0.97 or so. The upside seems to be capped by the 1.04 level as the most recent top saw a serious struggle to break it, and consequent failure. The level now will be the start of the resistance band all the way back to the 1.05 handle.

Because of these factors, we are willing to sell all rallies on weakness and will not buy the pair at this time. There are simply far too many problems around the world to consider going too far out on the risk spectrum and with this in mind, the pair will continue to struggle going forward. The events in Europe and China simply aren’t positive enough right now to consider such risky trading. The US Treasury notes should continue to attract bidders, and because of this the US Dollar continues to be in demand going forward. Until there is a clear and concise solution for the EU issues, we are sellers of rallies in this pair.

AUD/USD Forecast December 13, 2011, Technical AnalysisAUD/USD Forecast December 13, 2011, Technical Analysis

USD/CAD Forecast December 13, 2011, Technical Analysis

USD/CAD rose on Monday as the markets sold off risk in general. The oil markets fell uniformly across all grades, and as a result, the Canadian dollar got hit because of the oil export relationship. The 1.03 area still acted as resistance though, and as a result – we like buying, but want to see a pullback at this point so we aren’t buying right into the resistance level. The selling of this pair doesn’t interest us at the moment as the “risk off” trade seems to be the norm these days.

USD/CAD Forecast December 13, 2011, Technical Analysis
USD/CAD Forecast December 13, 2011, Technical Analysis