USD/CAD Forecast Dec. 08, 2011, Fundamental Analysis

The USD/CAD pair rebounded to the upside on Wednesday, where cautious trading continued to dominate markets ahead of the European Central Bank’s meeting on Thursday, where the ECB is widely expected to cut the benchmark interest rates by 25 basis points to 1.00%. Moreover, investors were careful ahead of the EU summit on Friday amid hopes EU leaders will announce strong measures to ease the euro zone debt crisis.

Traders will continue to monitor the developments from Europe regarding the debt crisis, where the focus will turn to the ECB decision on interest rates and the conference that will follow the decision, as investors will be eyeing remarks by the ECB Chairman Mario Draghi and whether the ECB will loosen its monetary policy further in the future.

The USD/CAD pair could drop further on Thursday if the ECB manages to convince markets that it stands ready to help in easing the debt crisis in Europe, but we still expect volatility to continue to dominate trading, as uncertainty remains the dominant theme in markets, and that could also lead to high levels of fluctuations for the USD/CAD pair.

Thursday December 8:

The European Central Bank will start the session with the Interest Rates Decision for December, with expectation the Governing Council could have lowered the key rate to 1.00% from 1.25%.

Canada will release the housing starts for November at 13:15 GMT, which is expected to ease to 200.0K from 207.6K in October.

Canada will release the new housing price index for October at 13:30 GMT, where house prices rose 0.2% in September, while on yearly basis, house prices rose by 2.3% in September.

The United States will join the session at 13:30 GMT with the Initial Jobless Claims (DEC 2), noting that the previous figure was 402 thousand claims.

At 15:00 GMT the United States will provide markets with the Wholesale Inventories for October, which could have expanded by 0.4% from the prior drop of 0.1%.

Natural Gas Forecast Dec. 08, 2011, Fundamental Analysis

Natural gas prices extended the losses on Wednesday, as weather forecasts suggested that temperatures will be at or above their average in the United States, which led to speculations of falling demand for natural gas as a heating fuel, putting prices under negative pressure as a result.

The EIA report for natural gas inventories will be released on Thursday, where the EIA report is expected to show that natural gas stockpiles decreased by 9 billion cubic feet.

Traders will continue to focus on weather developments, where weather forecasts suggest temperatures will be higher than average over the coming period, and that could put natural gas prices under pressure over the coming days. But the EIA report will play a major role in determining the direction of natural gas prices on Thursday.

Thursday December 08:

At 15:30 GMT, The EIA will release the weekly natural gas storage change for the week ending December 02, where the report is expected to show that natural gas stockpiles decreased by 9 billion cubic feet, compared with the prior drop by 1 billion cubic feet.

Gold Forecast Dec. 08, 2011, Fundamental Analysis

Gold prices slightly gained on Wednesday, where cautious trading continued to dominate markets ahead of the European Central Bank’s meeting on Thursday, where the ECB is widely expected to cut the benchmark interest rates by 25 basis points to 1.00%. Moreover, investors were careful ahead of the EU summit on Friday amid hopes EU leaders will announce strong measures to ease the euro zone debt crisis.

Traders will continue to monitor the developments from Europe regarding the debt crisis, where the focus will turn to the ECB decision on interest rates and the conference that will follow the decision, as investors will be eyeing remarks by the ECB Chairman Mario Draghi and whether the ECB will loosen its monetary policy further in the future.

Accordingly, we still expect volatility to continue to dominate gold prices over the course of this week, as investors will be also eyeing the EU summit on Friday. But overall, we could witness more gains for gold over the short term.

Crude Oil Forecast Dec. 08, 2011, Fundamental Analysis

Crude oil prices fell on Wednesday, where cautious trading continued to dominate markets ahead of the European Central Bank’s meeting on Thursday, where the ECB is widely expected to cut the benchmark interest rates by 25 basis points to 1.00%. Moreover, investors were careful ahead of the EU summit on Friday amid hopes EU leaders will announce strong measures to ease the euro zone debt crisis.

Moreover, the EIA report showed that crude oil stockpiles increased by 1.3 million barrels last week, compared with the prior increase of 3.9 million barrels, and above the median estimates of a drop by 1.3 million barrels, which put crude oil prices under negative pressure.

Traders will continue to monitor the developments from Europe regarding the debt crisis, where the focus will turn to the ECB decision on interest rates and the conference that will follow the decision, as investors will be eyeing remarks by the ECB Chairman Mario Draghi and whether the ECB will loosen its monetary policy further in the future.

Our overall outlook for crude oil prices has changed somewhat to the upside, where rising tensions between Iran and the West could provide crude oil prices with bullish momentum, while optimism over the outlook of the European debt crisis could also support crude oil prices. Nonetheless, the prospects of slowing global growth could put negative pressure on crude oil prices. Accordingly, we expect crude oil prices to fluctuate heavily through the rest of this week.

Thursday December 8:

The European Central Bank will start the session with the Interest Rates Decision for December, with expectation the Governing Council could have lowered the key rate to 1.00% from 1.25%.

The United States will join the session at 13:30 GMT with the Initial Jobless Claims (DEC 2), noting that the previous figure was 402 thousand claims.

At 15:00 GMT the United States will provide markets with the Wholesale Inventories for October, which could have expanded by 0.4% from the prior drop of 0.1%.

Cautious Trading Dominates Markets ahead of Thursday’s ECB Rate Decision and Friday’s EU Summit

Cautious trading dominated European and U.S. markets on Wednesday ahead of the European Central Bank meeting on Thursday, where the ECB is expected to cut the benchmark interest rates by 25 basis points to 1.00%, while investors are also eyeing the EU summit at the end of this week on hopes EU leaders will be able to reach an agreement on a plan to ease the European debt crisis.

Accordingly, investors targeted lower yielding assets, as the level of anxiety continues to build in markets amid some doubts that EU leaders will once again fail to reach a resolution to ease the euro zone debt crisis, and we should expect volatility to continue to dominate markets throughout this week until investors have a better idea of how EU leaders intend to tackle the debt crisis.

The U.S. dollar rebounded to the upside against a basket of major currencies on Wednesday, where the U.S. dollar index was trading at 78.60, compared with the opening level at 78.45. The Euro fell against the Dollar, where the EUR/USD pair traded at $1.3387, compared with the opening level at $1.3409, the British Pound rallied against the Dollar, where the GBP/USD pair traded around $1.5677, compared with the opening level at $1.5602, and the U.S. dollar was little changed against the Japanese Yen, where the USD/JPY pair was trading around 77.73, compared with the opening level at 77.75.

Stocks in the United States were lower by opening on Wednesday, as the Dow Jones Industrial Average was down by nearly 0.55% to trade around 12,081, while the S&P 500 index was down by nearly 0.90% to trade around 1246. European stock indexes were also lower before closing on Wednesday, where FTSE 100 was down by nearly 1.20% to trade at 5501 and the DAX was down by nearly 1.50% to close around 5939.

Gold prices were little changed to trade now around $1728 an ounce and crude oil prices fell after the EUA report showed crude oil stockpiles increased above expectations to trade around $99 a barrel.

EUR/CHF Forecast Dec. 08, 2011, Fundamental Analysis

The EUR/CHF is still fluctuating in its tight range and was merely flat on Wednesday with the franc still affected by the flow of weak data and especially the rising deflation risks.

Unemployment in November held at 3.1% as expected yet the overall outlook for the Swiss economy remains under high uncertainty and under downside pressures as the deflation pressures rise and growth slows further. The pair is mostly influenced now by expectations for the SNB movement and other than that it remains tight within a limited range as the euro troubles are not as tempting either to risk holding the euro over the franc.

With the make it or break it summit for the EU it might be even the moment the SNB awaits to take its final decision on the set 1.20 floor, especially as a failure from leaders to address to high market expectations will surely bring the euro under unprecedented downside pressure as it is the last chance now and the risk of not taking strong action is a the key for markets to start pricing the fall of the big guns starting with Italy and Spain and surely S&P will take its action as it warned on the rating, especially take it out on France that is under the spot for now!

The countdown nonetheless is coming to an end and the EU leaders will start with the first meeting on Thursday as they lightly start the hard task set for Friday as eyes turn to the ECB and the awaited decisions from the central bank. The ECB is expected to cut rates for the second time in as many months to support faltering growth as the eurozone is already judged to have entered its mild recession with fourth quarter data very weak and expectations also signal for more liquidity operations to be announced by the bank with longer term tenders to address the market tension and insure the financial system’s stability.

The European Central Bank announce the Interest Rates Decision at 12:45 GMT with expectation the Governing Council will lower the key rate to 1.00% from 1.25% and eyes will surely turn to Draghi’s press conference at 13:30 GMT for more details from the bank.

EUR/USD Forecast Dec. 08, 2011, Fundamental Analysis

The EUR/USD continues to trade with heavy volatility and fluctuations as the mixed signals over what the EU leaders will result to affect the pair ahead of the ECB decision.

Investors are mixed over what to expect from the EU summit and that is reflecting on the euro. The gains were seen on a report from the FT citing that the EU is considering combining the EFSF with the ESM that is due to come into effect mid-2012 and also rely on the IMF for further support and probably even the ECB. This supported the hopes for a breakthrough this summit and helped the rebound which barely lasted after Germany denied the report and said that talks are in private bringing the euro lower again.

This mixed sentiment and high uncertainty is surely affecting the market, especially as a failure again to meet high market expectations will spread the debt crisis faster across the region especially after we started to see some signs of progress and a slight ease in surging yields, nevertheless, they remain high.

The countdown nonetheless is coming to an end and the EU leaders will start with the first meeting Thursday as they lightly start the hard task set for Friday as eyes turn to the ECB and the awaited decisions from the central bank. The ECB is expected to cut rates for the second time in as many months to support faltering growth as the eurozone is already judged to have entered its mild recession with fourth quarter data very weak and expectations also signal for more liquidity operations to be announced by the bank with longer term tenders to address the market tension and insure the financial system’s stability.

The European Central Bank announce the Interest Rates Decision at 12:45 GMT with expectation the Governing Council will lower the key rate to 1.00% from 1.25% and eyes will surely turn to Draghi’s press conference at 13:30 GMT for more details from the bank.

The United States will join the session at 13:30 GMT with the Initial Jobless Claims (DEC 2), noting that the previous figure was 402 thousand claims.

At 15:00 GMT the United States will provide markets with the Wholesale Inventories for October, which could have expanded by 0.4% from the prior drop of 0.1%.

GBP/USD Forecast Dec. 8, 2011, Fundamental Analysis

On Wednesday trading, amid the absence of data from the U.S. economy, the pair showed fluctuations, where the pound pared its earlier advance after a report showing more than expected contraction in U.K. manufacturing on the back of the euro-area debt crisis.

U.K. manufacturing production plunged 0.7% in October compared with the revised 0.1% advance in September.

However, the pair showed fluctuation, tracking the general sentiment which has been following the latest announcements from European leaders before this week’s summit.

The general sentiment in markets remained mixed on hopes European leaders will succeed in this week’s summit in shoring up their economies and calming down markets while concerns after S&P downgrade warning remained to have negative impact on investor’s risk appetite.

Both German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed on a proposal that would put strict budget discipline to be discussed by other members in the summit this week.

On Thursday, the awaited BoE rate decision will be announced at 12:00 GMT; however, forecasts refer to no change in the bank’s monetary policy as policy makers are expected to keep both interest rate and APF quantity at 0.50% and 275 billion pounds.

Investors will track the decision carefully as the BoE to see whether the bank will expand the program or wait till its end in Feb.

On the other hand, at 13:30 GMT, the U.S economy will release initial jobless claims for the week ended Dec. 2 and continuing claims for the week ended Nov. 25 will be available. Then, Wholesale inventories will be out at 15:00 GMT.

The data is expected to affect the pair due its importance, yet it is expected to be also affected by the general sentiment which is tracking the latest developments in the euro region with eyes on the EU summit.

USD/CHF Forecast Dec. 8, 2011, Fundamental Analysis

On Wednesday trading, the Swiss franc declined against the dollar and other majors on mounting speculations the SNB will use negative interest rates to boost the economy and halt the currency’s appreciation.

A report released on Tuesday showed that Swiss consumer prices dropped 0.5% from a year earlier, marking the sharpest drop since Oct. 2009, raising speculations the SNB would intervene again to boost the economy especially as the most recent data showed slowdown in growth along with the fall in inflation.

On Wednesday, Swiss unemployment data could not calm down investors where it showed that Swiss unemployment remained at the lowest level in three years at 3.0% in Nov.

Eyes are on next week’s rate decision especially after Finance Minister Eveline Widmer-Schlumpf said negative interest rates and capital controls “are issues which are being examined.”

Moreover, the general sentiment in markets remained mixed on hopes, amid absence of data from theUnited States, European leaders will succeed in this week’s summit in shoring up their economies and calming down markets while concerns after S&P downgrade warning remained to have negative impact on investor’s risk appetite.

Both German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed on a proposal that would put strict budget discipline to be discussed by other members in the summit this week.

On Thursday, at 13:30 GMT, the U.S economy will release initial jobless claims for the week ended Dec. 2 and continuing claims for the week ended Nov. 25 will be available. Then, Wholesale inventories will be out at 15:00 GMT.

The data is expected to affect the pair due its importance, yet it is expected to be also affected by the general sentiment which is tracking the latest developments in the euro region with eyes on the EU summit.

Improved Sentiment on Believes EU Leaders will Boost Efforts to Solve the Debt Crisis

Optimism was seen spreading through the Asian and European markets today on hopes Europe will boost efforts to cure the debt crisis during Friday’s EU summit, after S&P warned it might downgrade 15 European nations and the EFSF.

Investors are hoping that officials might come up with a convincing plan for solving the debt crisis as pressures are mounting, which is sustaining optimism and increasing demand on higher yielding assets.

Sentiment found additional support from the parliamentary approval to Greek Prime Minister’s 2012 budget, while Australia’s economy grew on a yearly basis more than expected by 2.5% from 1.4% a year earlier.

Yet since investors are anxiously waiting for the European summit, the ECB’s rate decision tomorrow and some key economic data from China later this week, caution will be seen among traders, which could keep trading limited.

Optimism over the outlook of the EU debt crisis brought gains not only in Europe today but in Asia as well, where Nikkei 225 ended 1.71% higher while Hang Seng was up 1.58%. In Europe FTSE 100 rose 0.50% while DAX rose 0.74%.

If EU leaders will be able to find a final solution to the debt crisis then this wave of optimism might continue, increasing demand for riskier higher yielding assets, however if the summit will disappoint, it will weigh down on confidence and demand on safe haven will be reignited.

Markets will be eyeing today Germany’s industrial production expected to weaken in Oct., while in UK the manufacturing production fell more than expected to -0.7% in Oct. The US will be releasing its consumer credit and the EIA crude oil inventories.

The euro is enjoying today some bullish momentum, trading as of this writing around the 1.3410 level, while the pound is trading to the upside around the 1.5615 level. The USD is weakening trading around the 78.47 level. The yen is almost unchanged around the 77.68 level.

As the US dollar weakened amid rising optimism in markets that EU leaders will take strong actions to ease the European debt crisis, commodities managed to find some support, where oil is trading around $101.60 while gold is trading around $1730.10.

NZD/USD Forecast Dec. 08, 2011, Fundamental Analysis

The NZD/USD pair traded in a narrow range early Wednesday near its highest level in three weeks, as the greenback lost momentum against the Kiwi and other majors as the risk appetite strengthens.

The US dollar dropped against the euro as expectations are for the EU leaders to boost the stimulus plan in order to provide more liquidity to the financial system and stem the debt crisis.

The current optimism in the financial market helped the New Zealand dollar to maintain gains against the US dollar, before the RBNZ rate decision which is expected to keep the rate steady at 2.50%.

On Thursday at 21:45 GMT (Wednesday), the New Zealand economy will issue the Manufacturing Activity for the third quarter, where it had a previous reading of 2.1%.

At 23:00 GMT, the annual QV House Prices will be released, where it had a prior reading of 1.2%.

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 402 thousand last week.

The Wholesale Inventories for October will be published at 15:00 GMT, where it’s expected to come at 0.3% compare to the previous reading of –0.1%.

AUD/USD Forecast Dec. 08, 2011, Fundamental Analysis

The AUD/USD pair advanced near its highest level in two weeks, after the Australian economy announced better than expected growth during the third quarter.

The Australian economy released the GDP for the third quarter, which showed that Australia expanded by 2.5% on the year compare with the previous reading of 1.9%.

The cheerful GDP reading helped the Aussie to restore gains against the greenback, after the previous losses due to the interest rate cut by the Reserve Bank of Australia.

On Thursday at 00:30 GMT, the Australian economy will release the Unemployment Rate for November, where it’s expected hold steady at 5.2%.

As for the Employment Change in Australia, it’s expected to come at 10.0 thousand after the previous 10.1 thousand.

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 402 thousand last week.

The Wholesale Inventories for October will be published at 15:00 GMT, where it’s expected to come at 0.3% compare to the previous reading of –0.1%.

USD/JPY Forecast Dec. 08, 2011, Fundamental Analysis

The USD/JPY pair dropped for the third consecutive day as the dollar lost momentum against major currencies, as the current market sentiment indicates some stability before the EU summit in Brussels.

The greenback retreated against the euro and other major currencies, as expectations refer that the EU leaders may boost the stimulus in order to provide more liquidity to the financial market and contain the crisis.

The Japanese currency is considered a parameter for the confidence in the financial market and since the yen is falling against other majors, it considers a sign for confidence before the EU summit yet the gains are still seen against the dollar.

On Thursday at 23:50 GMT (Wednesday), Japan will release the Current Account Total for October, with a previous surplus of 1584.8 billion yen which is expected to retreat to a surplus of 1452.2 billion.

The Adjusted Current Account Total for October is expected to show a surplus of 941.0 billion yen from the prior reading of 1186.6 billion yen, while the Trade Balance is expected to show a surplus of 343.3 billion yen from the previous surplus of 373.2 billion.

At 23:50 GMT the Japanese Machine Orders for October will be published, where it’s expected to come at –7.1% from the prior -8.2%, while the annual Machine Orders is expected to come at 10.6% from the prior 9.8%.

Japan will issue Eco Watchers Survey: Current for November which had a prior reading of 45.9 and its expected to come at 46.5, while the Eco Watchers Survey: Outlook for November had a prior reading of 45.9.

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 402 thousand last week.

The Wholesale Inventories for October will be published at 15:00 GMT, where it’s expected to come at 0.3% compare to the previous reading of –0.1%.

EUR/USD Forecast Dec. 7th, 2011, Technical Analysis

EUR/USD had another back and forth day on Tuesday as the news flow continues to whip the markets around at a relentless pace. The downgrade to “credit watch negative” for 15 EU countries got the pair to enter a selloff mode late Monday into the first half of Tuesday. The pair again had struggled at the 1.35 level for the fourth time. However, the news that there is going to be a second bailout fund in Europe running simultaneously to the EFSF got the market Euro positive yet again. This resulted in a candle that formed as a hammer at 1.34 as traders continue to weigh the likelihood of a possible solution during the Friday EU summit.

The next few days could see even more whippy action as the market will be hanging on every word that the politicians in Europe speak. The meeting will be absolutely vital in importance for the direction going forward. The pair continues to be the epicenter of trading around the world, and the pair is probably one of the most difficult at the moment for traders. The dangers out numerous as the headlines can come out at any time that moves the market in one direction or another.

On Thursday we will see an ECB meeting that should produce a rate cut. This will be Euro negative, but shouldn’t be a big surprise to many traders. The real concern is whether or not the EU summit will produce some kind of solution to the overall debt crisis problem. The pair is volatile to say the least at this point, and over the next few days it will be a bit much to expect major traction in either direction, unless of course it becomes obvious that the summit will or won’t produce something.

The technical analysis suggests that the 1.35 level is going to be massively resistant, and until we can close over that level on a daily close, the market will be more of a downward-biased one. The selling of rallies until we close over that mark is our strategy currently as the headlines keep beating the pair down and the trend certainly has been bearish lately.

EUR/USD Forecast Dec. 7th, 2011, Technical Analysis EUR/USD Forecast Dec. 7th, 2011, Technical Analysis

USD/JPY Forecast Dec. 7th, 2011, Technical Analysis

USD/JPY had a negative session on Tuesday as traders continue to fade rallies in this pair. The 78 level continues to show itself to be resistive, as even the interventions can’t overcome it for any real length of time. The pair is currently being supported by the Bank of Japan in the form of interventions from time to time, even though the correct direction has been to sell over time. The rallies are to be sold, but only down to about 76 as the Bank of Japan gets involved below that level. Buying can’t be done until we close over the 80 mark on a daily chart.

USD/JPY Forecast Dec. 7th, 2011, Technical Analysis USD/JPY Forecast Dec. 7th, 2011, Technical Analysis

GBP/USD Forecast Dec. 7th, 2011, Technical Analysis

GBP/USD fell during the session on Tuesday as traders continue to sell risk in this treacherous environment. The British Pound is currently tied very closely to the Euro’s fate, as the UK exports over 30% of its goods to that region. The fall of the cable pair has been in line with the issues in Europe, and will continue to be so. The fall on Tuesday actually started on Monday as the S&P ratings agencies put incredible pressure on the policy makers in Europe to get a deal done on Friday in the form of some kind of step towards fiscal union.

The UK itself is struggling with some forms of austerity as well. This economy is moving along slowly, and the interest rate outlook for the UK is depressed going forward. The relative safety of the US dollar seems to be the driver of this pair over time.

Looking at the charts, we can see that the Monday session produced a shooting star towards the end of a down move that signaled the 1.57 as being resistive. The breaking below the lows from that session on Tuesday signals that more traders are willing to get short of this pair again, and the 1.55 level underneath looks to support the pair.

The 1.55 level is the beginning of the massive 200 pip thick zone that extends downs to 1.53. This zone is massively supportive, and will give the sellers a real fight. A breaking below the 1.53 level signals a massive break down in the support for this pair. With the trend being decidedly down, we are sellers of rallies in this pair, and would continue to do so until proven wrong by a new high above the 1.57 level. The selling of rallies has been effective since the start of November, and unless the global macroeconomic headwinds sudden disappear, could continue to be so. A break below the 1.53 level would have us massively short of this pair for a longer-term trade as it would then target 1.50 and below as the snowball effect would start.

GBP/USD Forecast Dec. 7th, 2011, Technical AnalysisGBP/USD Forecast Dec. 7th, 2011, Technical Analysis

EUR/GBP Forecast Dec. 7th, 2011, Technical Analysis

EUR/GBP reversed the previous day’s fall on Tuesday as traders continue to push this pair back and forth. The market is a battle between unloved currencies, and the recent consolidation range shows that quite clearly. The 0.8650 level is resistance, and the 0.8500 level is support. This should continue to be the case for the near-term future as the financial situation in the EU will continue to have an adverse affect on both currencies. Since we are in the middle of the range, we see no trades presently.

EUR/GBP Forecast Dec. 7th, 2011, Technical Analysis EUR/GBP Forecast Dec. 7th, 2011, Technical Analysis

USD/CHF Forecast Dec. 7th, 2011, Technical Analysis

USD/CHF continued to grind higher on Tuesday as traders are still running towards the US dollar for safety while the headlines are still poor overall. The Swiss National Bank has been working against the value of the Franc in general, so the Franc is no longer a “safe haven” asset, leaving the natural move to the Dollar as the most obvious choice. The 0.93 level is massive resistance, and should continue to be so. However, if we break above it – the 0.95 level is calling. We don’t sell this pair, rather like buying dips as the SNB will make buying the Franc difficult in general.

USD/CHF Forecast Dec. 7th, 2011, Technical Analysis USD/CHF Forecast Dec. 7th, 2011, Technical Analysis

EUR/CHF Forecast Dec. 7th, 2011, Technical Analysis

EUR/CHF had a strong day on Tuesday as traders got enthusiastic about a possible second EU bailout fund running simultaneously to the EFSF fund. With the Euro being bought, and the Swiss National Bank claiming a “floor” in this pair at 1.20, this pair naturally rose. However, the 1.25 level above is massive resistance, and will continue to push back. The pair looks very unlikely to breakout until there is some kind of resolution in the EU about the debt crisis. The meetings in Europe on Friday could produce the needed solution, but we need to see a daily close above 1.25 in order to consider buying at this point. Selling is possible on weakness, but with the SNB working against you, perhaps avoiding sales altogether might be the way to move forward.

EUR/CHF Forecast Dec. 7th, 2011, Technical Analysis EUR/CHF Forecast Dec. 7th, 2011, Technical Analysis

AUD/USD Forecast Dec. 7th, 2011, Technical Analysis

AUD/USD fell during most of the session on Tuesday as traders continue to sell risk worldwide. Also, the RBA cut rates in the early hours, which of course didn’t help the demand for the Aussie. However, in the later hours it was reported that the EU would have two simultaneous bailout funds running soon, and this got Americans excited for the risk trade again. As a result the Aussie gained in the US afternoon to form a hammer and save itself from breaking through the support that we pointed out as the bottom of the hammer on Thursday.

A break below the 1.0150 level would suggest that this pair is going to fall further as the recent move has been parabolic, and the gap from two weekends ago hasn’t been filled yet. The strength of the move has been impressive, but further upside gains will be a bit more difficult as the move has been simply far too large far too quick.

If we break the 1.0350 area, this would show a break of the resistance over the last few days, but more than likely signal a grind higher. The move up would have to contend with the entirety of a resistance area from 1.03 to 1.05 or so. The news flow has been back and forth, but one thing of note is how quickly the bad news can push this pair down over time. The top of the recent range is the 61.8% Fibonacci retrace from the recent fall, and this will be significant as well. Because of this, we are more apt to sell this pair currently as the negative headlines seem almost unending.

The situation in Europe seems to offer shorting opportunities for risk assets every other day, so because of this, “risk on” trading is short-term at best recently. We like selling rallies of risk assets like the Aussie in general, and would be very interested if we do manage to break up to the 1.05 level which should be massively resistive.

AUD/USD Forecast Dec. 7th, 2011, Technical Analysis AUD/USD Forecast Dec. 7th, 2011, Technical Analysis