Investors’ Appetite for Risk Strengthens After the German and U.S. Data

Glimmer of hope returned  to the markest following the release of German and U.S. data today, where Germany issued the IFO Business Climate index which came above expectations, which boosted risk appetite among traders, furthermore, the U.S housing data showed a rise in housing starts and building permits higher than forecasted.

Moreover, Spain managed to sell as much as 3.7 billion euros of 3-month bills on 1.735% yields, down from 5.11% an auction earlier, while demand for the Spanish debt was 2.9 times the quantity offered compared with the previous of 2.8%.

In addition, Spain also sold 1.92 billion euros of 6-month bills, producing yields of 2.435% compared with the prior of 5.227%, while the bid-to-cover ratio was 4.1 times down from 4.9 times recorded in the November auction, and with easing fears over North Korea, it gave support to the higher yielding assets which limited demand on the safe haven USD.

Noting that Asian stocks recovered some of the losses today following the sell-off witnessed yesterday on North Korean leader Kim Jong il’s death, fueling fears from a regional instability, where the MSCI Asian Pacific Index rose 0.2%.

Same thing in Europe, where DAX rose nearly 1.4% while CAC 40 gained 1.4%, while the euro gained visibly as risk appetite widened, trading around the 1.3125, dragging the pound higher to trade as of this writing around the 1.5675 level.

The yen is trading around the 77.86 level. The AUD managed to trim some losses by the opening of the US session trading around the 0.9957 level. The CHF is stronger today as the USD weakened, trading around 0.9360 level.

The USD lost some of yesterday’s strength trading around the 79.65 level, while the yen declined slightly trading around the 77.78 level. As demand on safe haven eased, the AUD gained trading around the 1.0075 as of this writing.

As markets overshadowed the concerns over the euro zone debt crisis and the USD experienced losses, commodities are enjoying some gains where gold is trading around the $1614.00 level from the opening at $1593.62, while oil is trading around the $97.07 per barrel level.

Markets Rebounding on German Data and Easing Fears Over North Korea

Risk appetite improved among traders after a strong Spanish bond sale, a better than expected business confidence in Germany and the easing fears over North Korea, giving support to the higher yielding assets which limited de4mand on the safe haven USD.

Asian stocks recover some of the losses today following the sell-off witnessed yesterday on news North Korean leader Kim Jong il died, fueling fears from a regional instability, with the MSCI Asian Pacific Index rose 0.2%.

Confidence improved since this morning as theUSis expected to release stronger data from the housing sector, whileAustralia’s central bank said through its minutes that despite Europe’s crisis its trading partners are still expanding which is supporting growth domestically.

Yet the biggest upside support to confidence was given today by the strong demand on Spanish bonds which pushed the yields on 6-month bills to 2.435% from 5.227%, and the yields on 3-month bills to 1.735% from 5.11% in Nov. InGermany, Dec.’s business confidence rose to 107.2 from 106.00 expected.

Sentiment however may remain fragile on continued fears over Europe’s debt crisis since ECB’s President Mario Draghi made no hints of buying bonds in a speech to the European Parliament yesterday, yet he confirmed that downside risks to the economy will persist.

In Europe stocks found support from Germany’s Ifo business confidence report, where DAX rose 0.73% while CAC 40 gained 0.87%, while the euro gained visibly as risk appetite widened, trading around the 1.3085, dragging the pound higher to trade as of this writing around the 1.5625 level.

The USD is trading with bearish momentum around the 79.85 level, while the yen is almost unchanged around the 77.95. As demand on safe haven eased, the AUD gained trading around the 0.9995 as of this writing.

As markets overshadowed the concerns over the euro zone debt crisis and the USD experienced losses, commodities are enjoying some gains where gold is trading around the $1605.70 level from the opening at $1593.62, while oil is trading around the $93.85 per barrel level.

AUD/USD Forecast Dec. 21, 2011, Fundamental Analysis

AUD/USD Forecast Dec. 21, 2011, Fundamental Analysis
AUD/USD Forecast Dec. 21, 2011, Fundamental Analysis
The AUD/USD pair advanced early Tuesday as the RBA’s December meeting minutes supported the Aussie and opened the way for more gains for the pair.

The minutes were less dovish than expected which cut expectations of another rate cut during the next meeting, supporting the Australian dollar got supported to cover some of its previous losses against the dollar.

The Reserve Bank of Australia showed that the global economy is still growing despite the current EU crisis, while eased worries over the outlook for Korea supported Asian stocks to cover its prior losses and accordingly buoyed Aussie’s gains.

On Wednesday at 23:30 GMT (Tuesday), Australia will release the Westpac Leading Index for October, where the previous reading was down by 0.3%.

The U.S. economy will release the Existing Home Sales for November at 15:00 GMT and it’s expected to advance 2.4% to 5.09 million from 4.97 million.

AUD/USD Forecast December 20, 2011, Technical Analysis

AUD/USD fell hard on Monday as the commodity trade was hit fairly hard. The “risk off” trade came back into vogue during the session, and the afternoon in the US saw an acceleration of this move. The Aussie will often suffer at the hands of a “risk off” trade, and as a result it was no real surprise we saw this pair fall.

The breaking of the lows on Thursday signals a move down to the 0.97 level to fill the gap from a couple of weekends back, and we think this is what happens next. We are selling rallies, and a breakdown to fill the gap for a quick profitable short trade.

AUD/USD Forecast December 20, 2011, Technical Analysis
AUD/USD Forecast December 20, 2011, Technical Analysis

Caution Still Hovering While US Stocks Managed to Rise

Concerns continue to spread within the broad markets since this morning persisting till the opening of the US session, since investors are heading towards the low yielding assets after the announcement of the North Korean Leader’s death.

Asian markets faced huge losses during today’s session, as Kim Jong’s death created fears regarding the global growth, noting that the Japanese relations may be affected after his death. Furthermore, the European finance ministers didn’t reach till now to a final solution on the issue of deficit.

Still, markets are facing escalating challenges due to the debt crises in Euro Zone which became a plague spreading all over Europe, and Fitch warned again of possible downgrades for some European nations, but eyes still focused on the finance ministers’ meeting, hoping that they will announce an additional aid.

On the other hand, US stocks managed to rise, as some reports showed that the holiday season’s online sales jumped 15%, noting that investors’ hopes regarding the European ministers’ meeting helped US stocks to incline at the opening of today’s session.

The euro is trading with some bearish momentum around the 1.3022, while the pound is trading around the 1.5521 level as investors were avoiding risks throughout today’s trading sessions.

The yen is trading around the 77.86 level. The AUD managed to trim some losses by the opening of US session trading around the 0.9957 level. The CHF is stronger today as demand on safe haven widened, trading around 0.9360 level.

As the USD was stronger and euro weaker commodities are mixed with gold loosing some of its gains and is trading as of this writing around the $1599.20 per ounce, while oil inclined trading around the $94.20 per barrel level.

Kim Jong-il Death Trigger Caution

Risk aversion was seen across the global financial markets today after North Korean leader Kim Jong-il, 70, died on Dec. 17 of a sudden illness. Demand on safe haven intensified on fears of regional instability.

Sharp losses were seen across Asia today while in Seoul Kospi Index fell by 3.43% as Kim Jong-il death triggered worries about global growth and muted hopes for nuclear talks with theUS.

In South Korea alert levels were raised while the central bank was asked to step in if needed to stabilize financial markets, since the future of this communist country is uncertain and the impact on the region is unknown.

Kim Jong-il death brings an end to a 17-year reign during whichNorth Koreabuilt nuclear weapons, and the young and inexperienced Kim Jong Un, is believed to take overNorth Koreafrom his father, extending his family’s dynasty.

More downside pressures were seen today after Fitch warned of possible downgrades for 7 European nations, while the Euro-area finance ministers will meet today to talk about additional aid through the IMF.

Franceis set to sell 7 billion euros of bills today after Fitch reduced its credit outlook to negative from stable, saying the “country is more exposed to the region’s debt crisis than others”.

The US will lack fundamental data today, yet a report showed that the holiday season’s online sales jumped 15%.Europehowever released a disappointing construction output and positive current account report for Oct.

The euro is trading with some bearish momentum around the 1.3025, while the pound is trading around the 1.5495 level after the USD rose slightly trading now around the 80.20 level as cautions is prevailing.

The yen is trading around the 77.90 level. The AUD fell as investors were avoiding the high yielding assets trading around the 0.9950 level. The CHF is stringer today as demand on safe haven widened, trading around 0.9350.

As the USD was stronger and euro weaker commodities are mixed with gold loosing some of its gains and is trading as of this writing around the $1595.55 per ounce, while oil is trading around the $94.10 per barrel level.

AUD/USD Forecast Dec. 20, 2011, Fundamental Analysis

AUD/USD Forecast Dec. 20, 2011, Fundamental Analysis
AUD/USD Forecast Dec. 20, 2011, Fundamental Analysis
The AUD/USD pair retreated early Monday, as the US dollar gained momentum with the uncertainty regarding the global outlook, while demand dropped for the Aussie with the RBA’s dovish stance.

The current market sentiment pushed the higher-yielding currencies down, as risk aversion controlled the FX market and supported the US dollar especially after the announcement of the death of North Korea’s leader Kim Jon-il.

The latest RBA decision to cut the interest rate to 4.25% reduced demand for the Australian dollar. While the RBA will release its Board meeting minutes for December, which will show officials’ reasons behind cutting the interest rate.

On Tuesday at 23:30 GMT (Monday), the Australian economy will issue the Conference Board Leading Index for October which had a previous reading of 0.1%.

At 00:30 GMT, the Reserve Bank of Australia will release the Board’s December meeting minutes, where the central bank will announce its reasons behind its last rate cut.

The U.S. economy will release the Housing Starts for November at 13:30 GMT, where it’s expected to show a rise of 0.3% to 630 thousand compare to the prior drop of 0.3%.

As for the U.S. Building Permits it’s expected to drop 1.4% to 635 thousand from 653 thousand.

AUD/USD Forecast December 19, 2011, Technical Analysis

AUD/USD fell below the parity level a few sessions ago, and Friday saw a very bearish candle as the day saw an attempt to rally above that parity level, only to form a shooting star at the close. The failure to rally above that parity level shows just how difficult it will be for the bulls to get back above that mark. The market looks very likely to continue lower to fill that gap form a couple of weekends ago, and we are selling weakness in order to join that move. We are not buying the Aussie at all in this environment of fear.

AUD/USD Forecast December 19, 2011, Technical Analysis
AUD/USD Forecast December 19, 2011, Technical Analysis

AUD/USD Forecast for the Week of December 19, 2011

AUD/USD had a bearish week during the week as the markets continue to run from risk in general. The pair is a risk sensitive pair, and anytime there is massive concern in the markets this pair will often fall. The parity level giving way is a sign of just how many traders are concerned about global growth presently.

The Chinese economy is presently slowing down, and as it is Australia’s number one export market, it makes sense that this will hurt the Australian economy over time. The demand for the Aussie dollar will decline, and the pair should fall. However, the 0.95 to parity level looks massively supportive, so the fall won’t exactly be easy for the bears. The support actually goes all the way back down to the 0.93 level, and a break below that would be massive in its implications for a market crash in general. However, a slow grind downward could be the more likely scenario, and we think this is the case.

The upside seems to be limited by the 1.0350 area, and as a result we think this pair will be sideways with a downward bias over the next few months. The “risk off” nature of the markets isn’t very supportive to commodity currencies at the moment, and the Dollar is the currency everyone wants to won. Both of these facts are big reasons not to buy in general. We prefer to sell rallies in this pair as the highs are grinding lower, and the base looks like it is being pressed over and over. The breaking below that massive support block would more than likely signal something akin to that 2088 meltdown, and to be honest – that scenario isn’t exactly out of the question.

While the AUD/USD isn’t always going to be tradable in the near future, it will be a massive barometer on global trade in general. If this pair falls – everything else will as well. The bounces look likely to be opportunities to sell now, and this is exactly what we are doing.

AUD/USD Forecast for the Week of December 19, 2011
AUD/USD Forecast for the Week of December 19, 2011

AUD/USD Weekly Forecast Dec. 19-23, 2011, Fundamental Analysis

AUD/USD Weekly Forecast Dec. 19-23, 2011, Fundamental Analysis
AUD/USD Weekly Forecast Dec. 19-23, 2011, Fundamental Analysis
The AUD/USD pair dropped heavily last week reaching its lowest level in two weeks, where the US dollar advanced sharply against higher-yielding currencies such as the Aussie with the risk aversion dominating the FX market.

The latest RBA decision to cut the interest rate to 4.25% reduced demand for the Australian dollar. While the RBA will release its Board meeting minutes for December, which will show the reasons behind cutting the interest rate.

The RBA’s meeting minutes will affect Aussie which mainly will continue its downside movement against the US dollar, as the current policy makers’ vision for the Australian economy is comfortable with the current interest rate levels.

On the other hand, the U.S. economy will release its GDP numbers for the third quarter, where expectations refer to steady growth at 2.0%, while the US dollar remains the main focus in the FX market nowadays due to the high levels of uncertainty regarding the global outlook.

The EU sovereign debt crisis is still in the picture, where the latest development from the ECB and EU summit did not reflect any acceptance from investors, who still expect the worst to come for the EU region.

Major highlights for this week that will affect the AUD/USD pair’s trading:

Monday December 19:

Both economies are not due to release any major fundamentals leaving the focus on the market sentiment.

Tuesday December 20:

On Tuesday at 23:30 GMT (Monday), the Australian economy will issue the Conference Board Leading Index for October which had a previous reading of 0.1%.

At 00:30 GMT, the Reserve Bank of Australia will release the Board’s December meeting minutes, where the central bank will announce its reasons behind its last rate cut.

The U.S. economy will release the Housing Starts for November at 13:30 GMT, where it’s expected to show a rise of 0.3% to 630 thousand compare to the prior drop of 0.3%.

As for the U.S. Building Permits it’s expected to drop 1.4% to 635 thousand from 653 thousand.

Wednesday December 21:

On Wednesday at 23:30 GMT (Tuesday), Australia will release the Westpac Leading Index for October, where the previous reading was down by 0.3%.

The U.S. economy will release the Existing Home Sales for November at 15:00 GMT and it’s expected to advance 2.4% to 5.09 million from 4.97 million.

Thursday December 22:

The U.S. economy will release the final GDP reading for the third quarter at 13:30 GMT, the annualized Gross Domestic Product for the third quarter is expected to remain unrevised at 2.0%.

The Personal Consumption for the third quarter is also expected steady at 2.3% as well as the Core Personal Consumption Expenditure to hold at 2.0%.

The U.S. economy will also issue its weekly initial claims, where the number of people filing for first-time claims for the state unemployment insurance dropped to 366 thousand last week.

At 14:55 GMT, the United States will issue the University of Michigan Confidence for December, where the previous reading was 67.7 and it’s expected to rise to 68.2.

The U.S. leading index for November will be released at 15:00 GMT and expected to slow to 0.3% from 0.9%.

Friday December 23:

On Friday at 13:30 GMT, the U.S. economy will release the Durable Goods Orders for November with a previous reading of –0.7% and it’s expected to come at 2.1%.

The Personal Income for November is expected to slow to 0.3% from 0.4%, while the Personal Spending is expected to come at 0.4% from the previous 0.1%.

The core Personal Consumption Expenditure for November is expected in line with the previous rise of 0.1% on the month and 1.7% on the year.

At 15:00 GMT, the U.S. economy will issue the New Home Sales for November, where it’s expected to rise 1.8% to 313 thousand from 307 thousand.

AUD/USD Forecast Dec. 19, 2011, Fundamental Analysis

AUD/USD Forecast Dec. 19, 2011, Fundamental Analysis
AUD/USD Forecast Dec. 19, 2011, Fundamental Analysis
The AUD/USD pair reached its lowest level in two weeks due to the strong US dollar which dominated the market, as the risk aversion controlled investors.

The latest RBA decision to cut the interest rate to 4.25% reduced demand for the Australian dollar. The RBA will release its Board meeting minutes for December which will show the reasons behind cutting interest rates.

The EU sovereign debt crisis is still in the picture, where the latest developments from the ECB and EU leaders’ were not convincing for investors, who still expecting further worsening in the EU region that might affect the global financial and economic stability.

On Monday both economies are not due to release any major fundamentals leaving the focus on the market sentiment.

Risk Appetite Boosted by Improved US Data

Risk appetite improved among traders today after the better than expected labor and manufacturing data from the United States yesterday, boosting demand for risky assets.

Sentiment also improved after a strong Spanish bond sale on Thursday, yet gains are believed to be limited as fears from the impact of the European debt crisis may persist.

Fitch downgraded the long-term ratings for several banks in the U.S. and Europe including Bank of America, Citigroup, and Goldman Sachs, and this weigh down on confidence today.

Economic data will be light today with only the European trade balance and the US CPI index for Nov. on schedule. Yet markets may still react to the fall in the US jobless claims to the lowest since May 2008.

The lack of a resolution toEurope’s debt crisis and the uncertainties over the outlook for global growth, may continue to provide the USD with more bullish momentum over the coming period.

In Asia the MSCI Asian pacific Index rose 1% at 16:29 in Tokyo yet the index is set for a 2.2% loss this week as investors were worried fromEurope’s possible downgrade.

In Europe, stocks opened higher, where FTSE 100 gained 0.57% while DAX rose 0.08% as of this writing, yet CAC 40 fell 0.17% over continued concerns over the euro zone debt crisis.

The euro is trading with some bullish momentum around the 1.3005, while the pound is trading around the 1.5535 level after the USD fell slightly, trading now around the 80.15 level.

The yen is almost unchanged trading around the 77.87 level. The AUD gained, and is trading as of this writing around the 0.9998 level after finding support from improved risk appetite.

As the USD weakened and the stocks and the euro gained, gold managed to recover some of yesterday’s losses trading as of this writing around the $1590.50 level, while oil is trading around $94.15 level.

AUD/USD Forecast December 16, 2011, Technical Analysis

AUD/USD rose during the session on Thursday to retest the parity level as resistance. As the level was former support, this is very common from a technical perspective. The resulting daily candle was a shooting star, and this shows a failure to rally at this point. The parity level has held up as resistance, and the market is looking weak yet again.

The gap from two weekends ago goes all the way down to the 0.97 level, and this is where the market looks to be heading next. The real question now is whether or not that level holds as support, or if it gives way. It is does give way, this would be a massively bearish signal in this pair going forward.

A breaking of the bottom of the Thursday session would be a sell signal, and we are willing to sell short-term rallies as well. We won’t buy the Aussie it simply looks far too vulnerable at the moment. The commodity trade has been getting hit hard, and the Aussie has been suffering as a result. The recent sessions have seen a harsh selloff in this pair, the kind that never happens in a vacuum. With this mind, we are very bearish of this pair at the moment.

The failure to break above parity a second time would only embolden our shorting bias, and have us adding to our sell positions. The pair may continue to struggle going forward as well as the global demand for many raw materials appears to be cooling. With the Chinese economy slowing down, Australian miners are seeing less demand from their number one customer. The trend looks likely to continue as the Chinese are seeing their number one customer, Europe, fall into recession. All of this adds up to potentially slower growth around the world, and this should continue to plague the high-flying Aussie. Until the EU gets the debt problems under control, it is very likely that all rallies in this pair will simply be selling opportunities in the long run. The pair is to be sold only at this point.

AUD/USD Forecast December 16, 2011, Technical Analysis
AUD/USD Forecast December 16, 2011, Technical Analysis

Unstable Markets as Sentiment is Fragile and Data Disappoint

Markets remain under pressures although some correction was seen this morning following the sharp losses suffered yesterday. Concerns over the outlook of the European debt crisis will persist today after Fitch downgraded five major European banks.

Yesterday yields on Italian 2-year bonds rose to a record high of 6.47%, the highest since 1997, while German yields fell to 0.29% highlighting that traders are heavily targeting safer investments as the global economic growth is being further damaged by the European debt crisis.

Investors may continue to avoid riskier assets and head towards the safe haven USD and treasuries, whereSpainsold today 6 billion euros of bonds far surpassing a target of 3.5 billion euros as demand proved to be very solid. The bonds were sold at a lower average yields than the previous auction.

Fitch downgraded yesterday five major European banks including Banque Federative du Credit Mutuel, Credit Agricole, Danske Bank, OP Pohjola Group and Rabobank Group, and warned of a “broader phenomenon of stronger headwinds facing the banking industry as a whole”.

AsEurope’s economy is likely to slip back into a recession while downgrade risks by major rating agencies remain high, sentiment continues to be fragile. Thereby Asian stocks dropped further today with the MSCI Asian pacific Index falling 1.8% at 16:20 inTokyo.

In Europe stocks opened higher, where FTSE 100 gained 0.62% while DAX rose 1.11% mainly as a technical correction, after the sharp losses seen since Monday. Yet this rally is likely to be short-lived since European leaders failed to adopt a last solution to the debt crisis.

Economic data confirms the slowdown seen in global growth; in Japan the Tankan index of sentiment among large manufacturers fell more than expected; in China the foreign direct investment dropped for the first time since 2009 and the preliminary PMI manufacturing showed the sector may contract a 2nd month.

In Europe and Germany the services and manufacturing PMI improved slightly in Dec., yet employment fell during Q3 inEuropeby -0.1%. InU.K.retail sales dropped considerably in Nov. from the previous month. Switzerland held the interest rate steady at 0.0%, while the industrial production fell by -1.4%.

Markets are eyeing today important economic data from theU.S., including the weekly jobless claims, the industrial production, the Net TIC flows, the current account, the PPI, NY empire manufacturing, as well asPhiladelphiafed index and finally the EIA natural gas storage change.

The euro is trading with some bullish momentum around the 1.3005 after Dec.’s manufacturing and services PMI rose in Germany and Europe. The pound also found some upside support, and is trading now around the 1.5520 level after the USDIX fell today towards the 80.30 level.

The yen is trading around the 77.85 level while the CHF is trading around the 0.9435 since demand on safe havens is still strong. The AUD is moving in a tight range around the 0.9915 as investors are still worries over the outlook of the European debt crisis.

Commodity markets were severely hit by the pessimism spread among traders this week. Oil fell below the $95.00 per barrel level after OPEC decided yesterday to increase daily production to 30 million barrels in order to avoid shortage of supplies and stabilize prices. Crude is now trading around $95.80 level.

Gold broke the $1600.00 level as inflation risks are easing while investors head for the safe haven USD. Yet commodities recovered some of the losses where gold is trading around the $1590.00 level, yet pressures may continue to be bearish as concerns over the outlook of the global economy persist.

AUD/USD Forecast Dec. 16, 2011, Fundamental Analysis

AUD/USD Forecast Dec. 16, 2011, Fundamental Analysis
AUD/USD Forecast Dec. 16, 2011, Fundamental Analysis
, as Aussie lost more ground against the U.S. dollar due to risk aversion that controlled the FX market during the latest period.

The U.S. dollar is the main focus in the FX market as a safe haven currency, after the latest decisions from the EU leaders did not provide confidence in the financial market, which opened the way for lower-yielding currencies to record more gains.

The AUD/USD pair is expected to drop further, as the risk aversion reduced demand for the higher-yielding currencies opening the way for the pair to drop, while the latest Australian fundamentals did not offer any support for the Aussie, which continued to decline versus the dollar.

On Friday, the U.S. economy will release the Consumer Price Index for November at 13:30 GMT, where the prior reading was down by 0.1% and expected to come at 0.1%. As for the annual reading it’s expected to remain steady at 3.5%.

AUD/USD Forecast December 15, 2011, Technical Analysis

AUD/USD fell on Wednesday as the risk off trade came back into vogue again. The parity level has been broken though, and the gap from two weekends ago looks set to be filled. The 0.97 level looks to be the target and knowing this we are willing to sell rallies and a break below the Wednesday low. The pair cannot be bought at this point in time as the commodities markets are falling apart presently. The Aussie will continue to get punished in this “risk off” environment.

AUD/USD Forecast December 15, 2011, Technical Analysis
AUD/USD Forecast December 15, 2011, Technical Analysis

Central Bank Actions Dec 14, 2011

Norway’s central bank cut its key policy rate by half a percentage point, to 1.75%, in a bid to dampen the effects of financial market turbulence. Norges Bank said market funding for Norwegian banks has also “become more expensive and less accessible.”

International Monetary Fund, Xinhua Zhu Min, said here today that the European debt crisis by drag, slowing world economic growth, this will make the world’s estimated 27 million people into extreme poverty.

Zhu said, the past five, a series of low-income countries suffer from food crisis, financial crisis, and debt crisis in Europe as well as attacks. Face of the first two crises, as 10 to try to build “policy barriers” reduce the budget deficit, current account deficit and foreign debt, low-income country’s economy is still strong growth in sub-Saharan African countries such as 2010 the average economic growth rate reached 5.4%, the performance is quite good.

The Bank of England director Adam Posen said, the bank may need to expand the size of bond purchase program up to 100 billion pounds (about $ 158 billion) to the UK to support the economic recovery process.

Director Posen said in a speech today: “We should be in the next three years on the secondary market to buy at least 50 billion pounds (about $ 79 billion) debt, mainly tend to buy long term the national debt. In view of the future situation is likely to be due to external developments is expected to become worse, I propose a more ‘quantitative easing’ measures, the amount should be 750 million pounds (about 118.5 billion U.S. dollars), or 100 billion pounds. “

The Reserve Bank of Australia released a report today stating that, Central bank intervention in foreign exchange markets has only short-lived results that are of limited value, according to a report from.

The report reviews each period of intervention by the Reserve Bank of Australia since the nation’s currency was floated in 1983. It says the foreign-exchange market has evolved to where participants are now better equipped to manage their own risk. As a result, intervention has become less frequent and more targeted, and should be reserved chiefly for periods of market dysfunction.

The bank, using regression analysis, also gauges the effectiveness of its past interventions, concluding that the results illustrate the inherent limitations of intervention, which it says policymakers need to be aware of.

The Peoples Bank of China may continue to lower the reserve requirement ratio for banks and even cut interest rates next year, as the government shifts its policy priority toward stabilizing economic growth, the state-run China Securities Journal said in a front-page editorial Thursday.

“The growth rate of its money supply and the new Yuan loans issued by Chinese lenders in 2012 will likely increase moderately from 2011,” the influential financial newspaper wrote.

The editorial was in response to the conclusion Wednesday of the Central Economic Work Conference, a key annual policy setting meeting, during which the country’s top leaders pledged to maintain economic growth and social stability next year amid a deteriorating global economic climate.

The Reserve Bank of India, facing mounting evidence of slowing growth and risks of a spillover from the crisis in Europe, is widely expected to pause its monetary-tightening campaign on Friday.

But the rupee’s slide to record lows and persistent inflation pressures mean that unlike most emerging-markets central banks, the RBI isn’t expected to start cutting interest rates any time soon.

US Federal Reserve reiterated that the fed funds rate at zero to 0.25 percent level at least until mid-2013 the same, in order to stimulate employment and economic recovery in the United States.Announcing that they will continue to sell U.S. short-term government bonds, and buying mortgage-backed securities and reinvest the principal policies to buy more Fannie Mae, Freddie Mac and other institutions to issue agency mortgage-backed securities to help depressed real estate market.

European Central Bankpolicymaker Christian Noyer said on Thursday that a downgrade of France’s AAA credit rating would not be justified and ratings agencies are making decisions based more on politics than economics. may n$

AUD/USD Forecast Dec. 15, 2011, Fundamental Analysis

The AUD/USD pair tried to cover some of its previous losses with slight gains early Wednesday, where the pair is trading near its lowest level in two weeks as the greenback soared against other major currencies.

The Strong US dollar was supported by two factors: the risk aversion which dominated the FX market and increased demand for the safe haven dollar, and the other factor is the FOMC decision which did not carry any surprise to the market, keeping the greenback on the upside track.

Aussie was able to record some gains against the greenback before the FOMC meeting, in a correctional move and supported by slight relief after a successful bond sale from Spain and the EFSF but the effect did not last as the overall debt woes remain strong.

On Thursday at 23:30 GMT (Wednesday) Australia will release the Consumer Inflation Expectation for December, which had a previous reading of 2.5%.

The U.S. economy will release the Producer Price Index for November at 13:30 GMT where it’s expected to come at 0.2% from the previous reading of -0.3%. The annual Producer Price Index is expected to rise to 6.0% from the previous reading of 5.9%.

The U.S. Current Account Balance for the third quarter will be up at 13:30 GMT and the deficit is expected to narrow to $107.7 billion from the previous deficit of $118.0 billion.

The Empire Manufacturing Index for December will be released at 13:30 GMT where it’s expected to come at 2 from the prior reading of 0.61.

At 13:30 GMT, U.S. economy will issue its weekly initial claims numbers, where the number of people filing for first-time claims for the state unemployment insurance increased 381 thousand last week.

The Net Long-term TIC Flows for October will be up at 14:00 GMT, where the previous reading was $68.6 billion, as for the Total Net TIC Flows it had a previous reading of $57.4 billion.

The U.S. Industrial Production for November will be released at 14:15 GMT, where it’s expected to come at 0.2% from the previous of 0.7%. The Capacity Utilization for November is expected to come at 77.9% from the prior 77.8%.

The Philadelphia Fed index is due at 15:00 GMT for December and expected to rise to 5.0 from 3.6.

Pessimism Dominate Markets as the Feds Refrained From Offering New Stimulus

As concerns about the European debt crisis are deepening while the Feds offered no new stimulus to boost the economy yesterday, demand for safe haven is still high as investors are avoiding the riskier higher yielding assets.

The Feds offered no new measures to stimulate the economy although growth is modest, yet they warned from the downside risks from Europe’s debt crisis. More downside pressures were imposed by the weak U.S. retail sales report yesterday.

Today German Chancellor Angela Merkel is expected to give a statement to the German parliament about last week’s summit, while OPEC will meet to discuss oil production targets, with projections to keep oil output at current levels.

Markets will follow today a bond auction from Italy and Germany worth a combined 8 billion euros, and later in the day the U.S. will release its EIA crude oil inventories report and its import prices index.

IMF said that Greek GDP will contract 6% in 2011 compared to a Greek projection of a 3% contraction, while the German IFO institute cut its 2012 growth forecast for Germany to 0.4% from 2.3%, confirming the depth of the crisis in the region.

As the economic environment continues to deteriorate Asian stocks dropped today as risk aversion is still fueled by caution, Nikkei 225 fell 0.39% while Hang Seng was down 0.50%. In Europe DAX fell 0.51%, and CAC 40 fell 1.01%.

Today inflation slowed to the lowest in a year in India, in Japan the industrial production fell to 2.2% in Oct., in China the money supply growth was the weakest in 10 years, in UK unemployment hovered around the highest level in 17 years, while in Europe the industrial production fell to -0.1% in Oct.

Such disappointing results highlight the risks of a deeper slowdown in the global economy, while Europe’s possible downgrade continue to weigh on sentiment leaving currency markets moving in tight ranges.

Caution is keeping the euro and the dollar index moving in tight ranges today, where the USD is trading around the 80.25 level, while the euro is trading around the 1.3035 level, while the yen is trading around the 77.95.

The pound however gained slightly, trading now around the 1.5500 level as the unemployment report matched expectations. The AUD is almost unchanged and is currently trading at 1.0015 while the CHF is trading in a tight range around the 0.9460.

Today’s light trading is keeping the commodities in a tight range, yet with mixed results, where oil is trading with bearish momentum around the $99.60 level, while gold is recovering some of the losses, trading now around the $1635.30.

AUD/USD Forecast December 14, 2011, Technical Analysis

AUD/USD initially tried to rally on Tuesday but found itself selling off later in the session. The resulting candle is a shooting star that sits just above the parity level, an ominous sign in and of itself. The breaking below the parity level signals that the market is ready to fill the gap from two weekends ago, and that would see this pair go down to the 0.97 handle at least.

We aren’t buyers of this pair currently at all. The global “risk off” scenario should continue to be the stronger attitude, and with that in mind, we are not willing to buy the commodity currencies at all, Aussie included. A break below the parity level for more than an hour has us selling for 0.97 or so.

AUD/USD Forecast December 14, 2011, Technical Analysis
AUD/USD Forecast December 14, 2011, Technical Analysis