Australia Interest Rates Cut by .25%

Today the Reserve Bank of Australia announced an interest rate cut from 4.50% to 4.25%, following their move in November. The RBA cited continued interest rate cuts throughout the Asian markets.

Australia exports 70% of their goods to Asia.Last week the Peoples Bank of China (PBoC) reduced their rates by ¼ point also. China is Australia s largest trading partner.

Financial Experts also see the move as a signal of a lack of confidence in the ability of euro-zone policy makers to extract the region from its sovereign-debt crisis. This came after announcements yesterday from Sarkozy and Merkel assuring investors that they had reached agreements and would have a completely new treaty and plan of action ready for the EU Summit on December 9.

“The likelihood of a further material slowing in global growth has increased,” RBA Governor Glenn Stevens said in a statement. “China’s growth has been slowing, as policy makers there had intended. Trade in Asia is now, however, seeing some effects of a significant slowing in economic activity in Europe.”

Economists said that easing off the policy brake now will provide Australia with insurance against a full-blown disaster in Europe in the two months until the RBA board next meets in early February.

Last week, Australian Treasurer Swan announced cuts to spending and delays to government programs to keep alive his pledge to restore the federal budget to surplus by 2012-13. Mr. Swan said tighter budget settings would take pressure off interest rates.

The RBA’s continued interest-rate cuts followed third-quarter inflation numbers that signaled price pressures have eased sharply, giving the central bank confidence that its 2%-to-3% inflation target is under little threat. With reduced inflation pressures the bank was able to reduce the interest rates.

The Australian dollar (ANZ)was sharply lower after the rate cut. This morning it was trading at US$1.0188, down from US$1.0229 just prior to the announcement.

The OECD in last months report forecast Australia will continue to be one of the fastest-growing developed economies in the world in 2012. Upcoming data to be released Wednesday is expected to show growth of close to 1.0% in the third quarter.

Last week Australia reported a third quarter current-account deficit of A$5.64 billion, the second smallest in 10 years. The deficit would be even smaller if coal exports had recovered fully from floods at the start of 2011. Iron-ore exports continued to boom.

EUR/USD Forecast Dec. 6th, 2011, Technical Analysis

The EUR/USD pair initially had a very positive day during the Monday session as the markets reacted positively to the meeting between Sarkozy and Merkel. The meeting was successful in producing an overall concept of a fiscal union, and would be presented at the EU summit on Friday. The consensus was that this is the first real step towards a solution.

However, during the American afternoon, the entire 15 nations in the Euro currency have been rumored to be put on credit downgrade watch from the ratings agency S&P. The fact that the agency neither confirmed nor denied this is particularly troubling.

Looking at the charts, the 1.35 level still seems to be massive resistance as the day fell just short of breaking it yet again. This is the fourth day in a row where the currency pair attempted to break the level, so the ferocity is well noted. The breaking of that level would be a massively bullish signal, and at that point we would have to be long this pair.

For the downside, we still see the 1.31 level as an area that should continue to put up a fight for the bulls. The selling down to that level looks ready to happen, as the daily candle for Monday looks like another shooting star in this pair, and the next move could very easily be down. The breaking of the lows on Monday would have us selling.

The pair will continue to be choppy at best, and quite frankly – one of the more dangerous ones to be bothered with. The headline risk is simply far too great in both directions at this point. With this in mind, we are looking for further weakness, but in a choppy manner. We see 1.31 as the floor currently, and would be quick to take profits if we approach that level. The trend is down, and we think that it will continue to fall every time it rises. Selling the rallies in the short-term has been the way to go, and we think it shall continue to be.

EUR/USD Forecast Dec. 6th, 2011, Technical Analysis EUR/USD Forecast Dec. 6th, 2011, Technical Analysis

USD/JPY Forecast Dec. 6th, 2011, Technical Analysis

USD/JPY fell during the Monday session as the 78.00 level acted as a massive resistance barrier to the pair. The pair has been decidedly bearish as of late, and unless the Bank of Japan is intervening, this pair is either sideways or down in direction. The pair can’t be bought until we break above the all-important 80.00 level, and as that being the case – we only sell rallies at this point.

There have been several interventions by the Bank of Japan lately, and every time it happens, the market will simply fade those moves. The whole pair is set up as such: to sell any pops in price. The trend has been viciously to the downside since the financial crisis of 2008, and should continue to have massive headwinds to any serious attempt to the upside.

The pair has a definite trading range form the 76 handle up to the 80 handle, and we will continue to trade it as such. The higher we get, the more interested we are in selling this pair as the moves simply do not have the strength to continue above that 80 level. If we ever do, we would become buyers, but that seems to be very far down the road.

We like selling rallies, especially ones that are over 50 pips as it gives us a decent amount of room from which to trade. However, we are not keen to hang onto trades for too long as the 76 level has seen a couple of interventions recently, and we do not want to be on the wrong side of a central bank intervention. There are few things that can wipe your account out quicker than that mistake. Because of this, we sell, but are willing to take 50 – 100 pips at a time, and then wait for another thrust higher form which to sell again. Someday we will be proven wrong as this pair finally gets traction to the upside, but until then – we are willing to continue with this strategy as it has served us so well.

USD/JPY Forecast Dec. 6th, 2011, Technical Analysis USD/JPY Forecast Dec. 6th, 2011, Technical Analysis

GBP/USD Forecast Dec. 6th, 2011, Technical Analysis

GBP/USD had a back and forth session on Monday as traders first bought it up, and then sold it off. The main reason was the fact that the meeting in Europe between Sarkozy and Merkel produced what was called a framework for fiscal union, and a new treaty for the EU. The afternoon in America saw the S&P ratings agency put 15 of the countries in the EU on “Credit Watch Negative”, and this deflated the gains that the Euro saw.

The Pound lost ground simply because of the fact that the two economies are so intertwined. The UK sends 30% of its exports to the EU, and this will impact the GDP of the UK in a strong way if the EU falls into recession, or has a meltdown. The EU is also where a lot of UK banks have their cash parked. The banks in the UK are knee-deep in the mess on the continent.

The GBP/US is also a “risk on” trade, and the Dollar got a bid in the afternoon all around. The resulting candle is a shooting star and the top is sitting right at the 1.57 handle. This shows that perhaps we are seeing more pressure to the downside in this pair as the bounce has just been sold. The 1.55 level underneath is support, and that support runs all the way down to the 1.53 level.

With all of this in mind, we are selling rallies in cable. The breaking below the lowest levels from the Monday session will send more sellers into the market, and should see at least the 1.55 level. The bearishness could continue down to 1.53, but that level has acted as extremely tough support. The breaking below that level would send this pair much lower, and would without a doubt have us looking for 1.50 before it is all said and done.

We won’t buy the pair as there are simply far too many risks involved in selling the safest of all currencies right now, the US dollar. Because of this, we are very patient and willing to wait until the Pound rises in order to keep buying Dollars.

GBP/USD Forecast Dec. 6th, 2011, Technical Analysis GBP/USD Forecast Dec. 6th, 2011, Technical Analysis

EUR/GBP Forecast Dec. 6th, 2011, Technical Analysis

The EUR/GBP pair fell hard on Monday as traders abandoned the Euro in droves. Although there was good news coming out of the meeting between Sarkozy and Merkel in the form of a framework for fiscal union, the afternoon saw a sell off as the S&P ratings agency said at they are putting 15 Euro countries on “Credit Watch Negative”. As this was announced, the Euro got hit across the board.

This pair is essentially an argument of two unloved currencies. The Pound isn’t exactly one that the trading community has been excited about either. The result has been an extremely range bound market that has been stuck between 0.8650 and 0.8500. The range should continue to be the outer limits of this market, and it will take some kind of special move in order to make this pair escape that area. However, once it does – this pair could go onto a larger move overall. The most recent trend has been somewhat negative, but not impressively so. Because of this, we feel that the rallies are to be sold as it seems to take less to push this pair down than it does to lift it up.

The UK economy is heavily exposed to the EU as well, as 30% of the UK’s exports end up in the EU. Because of this, as the Europeans enter recession; this will significantly impact the economy of the UK in the longer-term. With this in mind, this pair will continue to be choppy and range bound, and this pair might have a downward bias – but the truth is that Europe’s pain is also the United Kingdom’s pain. The pair should continue ot be range bound for the foreseeable future, barring any real meltdown in Europe.

EUR/GBP Forecast Dec. 6th, 2011, Technical Analysis EUR/GBP Forecast Dec. 6th, 2011, Technical Analysis

USD/CHF Forecast Dec. 6th, 2011, Technical Analysis

The USD/CHF pair had an extremely quiet session on Monday as traders seem to be waiting for the results of the EU summit at the end of the week. The Franc has traditionally been a “safe haven” currency, but with the recent actions by the Swiss National Bank, the ability for traders to buy the currency has been severely impacted.

The Dollar is the lone “safe haven” at the moment, and as a result it has a bit of a built in bid in these types of markets. Switzerland’s biggest problem right now is Europe, which is by far its largest export market. With your customers not being able to afford your goods, this is bad news to say the least.

The pair has had signs of massive support in the 0.9000 level, and this should continue in our minds as the SNB is willing to get involved when the markets buy far too many Francs. The last couple of sessions have seen green candles, and even a hammer that suggests that the market wants to get long.

A breaking of the recent highs at the 0.93 level would be massively bullish in this pair. The 0.95 level is the next target if we can get through there, and the parity level would be next. The fact that you really can’t buy the Franc without fear of intervention makes this trade a one-way affair. The selling of this pair could be a quick way to find losses in this market, and as a result we continue to buy the dips as long as we can maintain a level above the 0.90 handle. The 0.85 level is roughly where the intervention talk from the Swiss National Bank sent this pair previously and we see that level as the “ultimate bottom”. We will continue to look to the shorter-time frames for dips that we can buy in this pair. If we get above the recent highs, we could see a long-term buy and hold trade form in this pair as the Swiss continue to work against their currency.

USD/CHF Forecast Dec. 6th, 2011, Technical Analysis USD/CHF Forecast Dec. 6th, 2011, Technical Analysis

EUR/CHF Forecast Dec. 6th, 2011, Technical Analysis

EUR/CHF had a whippy day on Monday as traders first reacted to the meeting between Merkel and Sarkozy with relief. The meeting supposedly has formed a framework for fiscal union in the EU, and this is what the markets have been waiting for. With this in mind, the pair rose in value during the earlier part of the session.

However, during the US afternoon, the ratings agency S&P was rumored to be putting all of Europe’s AAA-rated countries on “Credit Watch Negative”, meaning that a downgrade could be coming for some of the region’s strongest economies. The idea of a Germany, Finland, or France losing their rating would weaken the concept of a “super bond” that so many are looking for. This would certainly punish the EU in many unforeseen ways.

The pair has been stagnant over the last couple of months since the Swiss National Bank put in a “floor” of 1.20, and the market has abandoned the once great one-way trade south. The selling of this pair is going to be difficult to do over the long-term as the SNB looks more than willing to get involved. The owning of the Euro is very difficult at the same time, and because of this – we are presently calling this a “scalper’s market”. The recent range of 1.20 – 1.25 should continue to be the boundaries for this pair, with the 1.20 being avoided like the plague. Because of this, we are basically seeing most of the trading in a 200 pip range above that bottom.

The trading of this pair for the long-term will be best served when the EU gets the debt crisis under control. This pair is set to possibly rise again anyway, as it is rumored that the Swiss National Bank is thinking of raising the “floor” form 1.20 to the 1.25 level and then perhaps to 1.30 in the end. The owning of this pair on the buy side could eventually be the trade of your career, but we need to see a reason to own the Euro first.

EUR/CHF Forecast Dec. 6th, 2011, Technical Analysis EUR/CHF Forecast Dec. 6th, 2011, Technical Analysis

AUD/USD Forecast Dec. 6th, 2011, Technical Analysis

AUD/USD rose a bit during the Monday session, but mainly appeared somewhat lost and directionless. The pair has seen strong gains recently, and as a result – this positive day is more impressive than the candle would suggest. The pair is going to be sensitive to the headline risks out there, so sudden moves could be coming.

The 1.03 level continues to work as resistance currently, and as a result we are looking to see if the pair can close above it. If we get weakness in that area, we wouldn’t hesitate to sell at that point as the moves have been overdone recently. The gap from two weekends ago hasn’t been filled yet, and that is something to consider as well if we get bearish momentum.

Until we see a close above 1.05, we won’t be buying this currency as the headline risks will continue to flow and the Chinese economy is starting to slow down. The Aussie are heavy exporters to China, so the two economies are linked very tightly. The trouble in China will certainly hurt the Aussie if it picks up.

The downside sees the parity level as potential support, and if we fall below the hammer from the Thursday session we could see a run to it. The level would have us thinking about taking profits or at least setting stops at breakeven. The breaking below of the parity level would have us even more bearish if we get a close below it.

We prefer selling the rallies, as we just don’t see a scenario that suggests that the “risk on” trade should be piled into. The Aussie will suffer because of the global concerns, and not of their own doing unfortunately. It should be noted that the Aussie has been stronger than its cousin the Kiwi, and we expect that to continue to be the case going forward. With this in mind, when the markets fall strongly, we will prefer looking at selling the Kiwi as a “safety trade”. The Aussie will fall as well, but the recent action suggests that it will put up much more of a fight.

AUD/USD Forecast Dec. 6th, 2011, Technical Analysis AUD/USD Forecast Dec. 6th, 2011, Technical Analysis

USD/CAD Forecast Dec. 6th, 2011, Technical Analysis

USD/CAD had a relatively quiet day on Monday. The pair is highly sensitive to the oil markets as the Canadians export so much to the United States. The pair is often used as a proxy for oil by currency traders and as the oil markets were back and forth – so was this pair.

The biggest problem with trading this pair is that the two economies are so intertwined. The Canadians export over 80% of their goods to the US, and as the US economy goes, so does the Canadian one eventually. However, the pair does move quite suddenly once it breaks out of the common consolidation that this pair sees.

Currently, the 0.99 to parity level is massive support for this pair. As long as this pair can stay above that level, the bias is going to be to the upside over the long run. The US dollar and its “safe haven” status will continue to favor the Dollar as long as the world is so concerned with the situation in Europe, and the job markets continue to be soft in the USA. The trading world will buy Treasuries when the recessions hit, and as a result will be buying Dollars.

There is massive resistance in the 1.05 area, and that is where we will need to break through in order to get a serious rally going in this pair. Although we feel that the pair will have an upward bias, it looks like this pair could be range bound for the foreseeable future. Perhaps we will have to retest that area several more times before escaping the range.

The Monday candle is a hammer, and is sitting just above the 1.01 level, which has shown us some minor support lately. Although we don’t think of it as a major area, the breaking to the upside from the Monday range will be a very bullish sign as the buyers will have clearly been stepping in at that level. We don’t like selling, at least until we break below the 0.99 level, a couple of hundred pips below where we sit presently.

USD/CAD Forecast Dec. 6th, 2011, Technical Analysis USD/CAD Forecast Dec. 6th, 2011, Technical Analysis

NZD/USD Forecast Dec. 6th, 2011, Technical Analysis

NZD/USD had a very, very, very quiet day on Monday. The pair is highly correlated with the commodity markets, and as such reacted very mildly to a fairly quiet day in that trading environment. The Kiwi is presently one of the favorite pairs for the bulls worldwide, and as a result will always have at least some kind of bid under it.

However, the pair has recently made a new swing low, and hasn’t filled the gap from two weekends ago. Because of this, a fall is probably coming soon. The 0.8000 level would have to be broken to the upside for us to be convinced otherwise. The “risk off” environment we find ourselves in has us doubting that this pair will manage that feat in the near future. With this in mind, we are actually bearish this pair, but waiting for some kind of confirmation.

The breaking of the hammer from Thursday to the downside is what we are waiting to see before shorting this pair. The market moving lower than that level would should significant support eroding, and this would more than likely has the pair continuing the downtrend that we have seen over the last several months. The pair is going to be very sensitive to the headline risks out there presently, and as a result it is one of the first pairs we sell when bad news is released. The pair is a fairly illiquid pair, and as a result we could see exaggerated moves considering we are getting closer to the holidays and the volumes in general should be lighter the longer we get into the month of December.

Not until we see a daily close above the 0.8000 level would we consider buying this pair. The global risks are currently far too great to consider it now, and as a result we still prefer to sell rallies as long as we are under that level, or selling the above mentioned breaking of support from the Thursday session. The closing above 0.8000 would have an effect of a short-term trend change again, so anything above there has to be taken seriously.

NZD/USD Forecast Dec. 6th, 2011, Technical Analysis NZD/USD Forecast Dec. 6th, 2011, Technical Analysis

Markets Tumble As Standard & Poor’s Issues Warning

Monday morning, the markets opened with good intentions. The weekend had brought positive progress from the French and German leaders. Monday’s meeting brought good news. The euro, which was predicted to fall after the Friday speeches from Merkel and Sarkozy showed huge disparity in their views for a future eurozone and they were far apart on agreements for a new EU treaty. On Monday morning, Italy’s new Prime Minister Monti, unveiled Italy’s tough austerity plans. Ireland’s leader made a public speech outlining Ireland’s plans to get their finances and debt under control. Greece continued to improve and bond yields were dropping.

The euro, spent most of the day in positive territory. All exchanges and markets in Europe moving upwards.

On Friday the only good news was the US employment drop to 8.6%, not a great number, but compared to the 9.0% that had been reported most of the year, this was good news.

Investors over the weekend, would have bet that Mondays markets would have

EUROPEAN MARKETS DOWN

US MARKET UP

USD STRONG

EUR WEAK

What we ended up with at the close on Monday of US markets

EUROPEAN MARKETS SOARED UP AND CLOSED DOWN

US MARKETS OPEN UP AND THEN DROP DOWN

USD OPENED DOWN AND THEN CLOSED UP

EUR OPENED UP AND CLOSED DOWN

 

What caused this to happen?

Investors are worn to the brink, they are no longer making smart investments, their nerves are frayed and they are reacting to each piece of news. As it drives markets up and down.

Ratings agency Standard & Poor’s warned it might downgrade euro zone countries en masse if European leaders fail to produce a credible plan to solve the region’s debt crisis at a summit later this week.

The unprecedented warning brought to a halt a rally in global equities on Monday, when the leaders of France and Germany agreed a plan aimed at guiding the region out of its two-year-old crisis. S&P said it had told 15 of the 17 euro zone countries, including Germany, France and four others with the top AAA credit rating, that it might downgrade them within 90 days, depending on the outcome of Friday’s summit.

The warning took the sheen off a Franco-German agreement, to be put to other member states on Friday, to impose budget discipline across the currency area through European Union treaty changes.

 

What effect can this have?

Many pension funds mandates of triple-A rated holdings will be forced to sell government issues, which could trigger a surge in yields as prices plummet.

Funds that will be required to divest of non-AAA investments are few and does not expect a huge impact in the market from such sell-offs.

On Monday also federal regulators approved tougher rules on Wall Street risk-taking on adopting the MF Global rule, named after the collapsed brokerage firm that is believed to have improperly used millions of dollars of customer money.

The new rule will limit how the brokerage industry can invest customer money, largely barring firms from using client funds to buy foreign sovereign debt. It also prevents a complex transaction that allowed MF Global, in essence, to borrow money from its own customers.

Oil Forecast Dec. 6th, 2011, Technical Analysis

Light Sweet Crude

The Light Sweet Crude markets rose during the start of the Monday session as traders reacted positively to the meeting in Europe between Sarkozy and Merkel. The market ran up to the $102.50 level, and then fell as the resistance held true. The resulting candle for the session was a shooting star, and it looks like we may see a bit of a fall from this level, and the $100 level will continue to be the start of massive resistance. We see a pullback coming, perhaps to the $95 level. We would be sellers on a break below the lows of Monday, but only for a few Dollars as this market is incredibly buoyant.

We see the $95 level as support, as well as the $90 level underneath. The market is going to find support at one of these points, so we would also be willing to buy in this area once we get a supportive candle such as a hammer or bullish engulfing candle in the area.

Oil Forecast Dec. 6th, 2011, Technical Analysis Oil Forecast Dec. 6th, 2011, Technical Analysis

Brent

The Brent markets actually fell over the session and formed a shooting star like its cousin the Light Sweet Crude market. The recent range looks set to continue, being between the $112.50 and $105 levels. The market looks set to fall from here, but will find limited downside as the grind continues. With all of the uncertainty around the world presently, the market more than likely doesn’t know what to do. Because of this, all we can do in the Brent markets is trade back and forth in a day trading manner as any gains will be short-term in nature. The selling of this market isn’t the easiest thing to do as the market seems to defy gravity with the fundamentals being so weak, but the truth is the grind has been going on for some time now, and there is nothing in this chart to suggest that it is going to change anytime soon. The $110 level seems to be a bit of equilibrium of sorts in this market, so the commodity should continue to be attracted to it.

Natural Gas Forecast Dec. 6th, 2011, Technical Analysis

The natural gas markets fell again on Monday as the trend downward continued. The market has fallen precipitously over the last several months, and there is absolutely no end to this downward spiral in sight. The $3.50 level has put up a nice fight, but the close on Monday suggests that the level is about to give way at this point. The breaking lower of the Monday lows would send this market down and looking for the $3 level eventually.

The buying of this market is almost impossible as catching a falling knife is one of the worst things a trader can attempt. This is the epitome of a strong bear market, and because of this we cannot step in front of it at this point. In fact, the $4 level needs to be broken to the upside in order for us to consider buying this massively downbeat commodity.

The supply in natural gas is far outstripping the demand, and should continue to do so for the foreseeable future. The US has over 14 Trillion Cubic Feet of proven reserves in this commodity, and as a result it will take something extraordinary to drive this market up over the long-term. Because of this fact, we are long-term sellers of natural gas, and would never seriously consider a long-term buy even if we get over the above mentioned $4 mark.

The short-term looks like a sell at $3.43, and at that point we are looking for a dime in profits. The next leg down will be much like the previous one: down, strong, but choppy. The move won’t be sudden as the winter in the US does bring more demand, and traditionally the market likes to rise during this time. (It won’t this year; rather it will keep it from falling too quickly.) Natural gas is a “sell only” market at all times. We are either short of it or flat of it…nothing else at this point in time, and will not be changing that for the foreseeable future as the supply is getting so expanded, that the natural gas suppliers are running out of places to store it.

Natural Gas Forecast Dec. 6th, 2011, Technical Analysis Natural Gas Forecast Dec. 6th, 2011, Technical Analysis

Gold Forecast Dec. 6th, 2011, Technical Analysis

The gold trade has been very good to a lot of traders around the world. It is because of this that it is suffering lately. The gains that traders are seeing lately are often the first ones to be sold off to recover losses from other markets, and the gold market is often one of the first markets they sell when they need to raise cash. With this in mind, it is difficult for the trader to remain bullish at times, but the last ten years have seen large gains and one should remember this when trading gold.

The recent action hasn’t been very encouraging though. The Friday session saw a bearish shooting star form at the $1,750 level and Monday saw the bottom of the range broken to the downside, signaling more selling at this point. The market will certainly have support below though, and as long as those levels are there, we aren’t interested in selling at this point.

The $1,700 level will be the first real supportive area that the market will test soon. It certainly looks very frail at this point, but only in the short-term. The entire area between $1,600 and $1,700 is one massive support level and should be a great area to buy the market going forward. The market has an extremely bullish tone to it in the long run, and we are only willing to buy overall because of this. In order for us to start selling, we would need to see a close below the $1,600 level as this would represent a massive breakdown in an otherwise massively bullish market.

The fiat currencies around the world are not loved at this point, and because of this we think the gold markets will continue to get bid in the long run. The market should find the above mentioned levels very supportive, and we want to find supportive candles in that zone in order to buy. Once this happens, we will not hesitate to buy this market. The next couple of days could still have a negative tone, so we will simply wait for our opportunity.

Gold Forecast Dec. 6th, 2011, Technical Analysis Gold Forecast Dec. 6th, 2011, Technical Analysis

Natural Gas Forecast Dec. 06, 2011, Fundamental Analysis

Natural gas prices dropped on Monday for a second day, as weather forecasts suggested that temperatures will be at or above their average in the Midwest and Northeast of 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.

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.

Crude Oil Forecast Dec. 06, 2011, Fundamental Analysis

Crude oil prices extended the gains on Monday, as mounting tensions between Iran and the west continued to provide support for crude oil prices on concerns of supply disruptions from the world’s fifth largest oil exporter. Moreover, hopes that EU leaders could find a resolution to the debt crisis boosted optimism in markets and encouraged investors to target higher yielding assets including crude oil.

The situation in Iran could still provide more support to crude oil prices, especially if the United States and Israel decided to take military action, although for now that is an improbable scenario, but further unrest in the middle east region could provide more bullish momentum to crude oil prices.

Traders will continue to monitor the developments from Europe regarding the debt crisis, where reports suggest that Germany and France reached an agreement on a plan to ease the European debt crisis. Nonetheless, tensions remain elevated in financial markets, as investors are concerned that EU leaders will fail to reach an agreement again after suffering similar disappointments over the past few months.

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, but the bias has changed to the upside.

Tuesday December 6:

The euro zone will start the session at 10:00 GMT with the GDP figures for the third quarter in a preliminary reading, where the quarterly and annual seasonally adjusted indexes could have lingered at 0.2% and 1.4% respectively.

Gold Forecast Dec. 06, 2011, Fundamental Analysis

Gold prices fell on Monday following the biggest weekly rally in more than a month, where investors were cautious ahead of the ECB meeting and the EU summit, as even the weakened U.S. dollar couldn’t help push gold prices higher.

Traders will continue to monitor the developments from Europe regarding the debt crisis, where reports suggest that Germany and France reached an agreement on a plan to ease the European debt crisis. Nonetheless, tensions remain elevated in financial markets, as investors are concerned that EU leaders will fail to reach an agreement again after suffering similar disappointments over the past few months.

Accordingly, we should expect more fluctuations in prices, especially amid the lack of economic fundamentals from the United States throughout this week, and the main focus accordingly will be the developments in Europe and whether EU leaders can craft a plan to resolve the worsening debt crisis.

USD/CAD Forecast Dec. 06, 2011, Fundamental Analysis

The USD/CAD pair fell to the downside on Monday, where optimism spread through global financial markets ahead of the ECB meeting and the EU summit later this week, where investors were hopeful that EU leaders can craft a plan to ease the worsening debt crisis inEurope.

The USD/CAD pair could fluctuate heavily on Tuesday, where the Bank of Canada will announce its decision on interest rates, as the BOC is expected to leave rates unchanged at 1.00%, yet investors will be eyeing the accompanying statement for clues over the BOC’s monetary policy path.

Traders will continue to monitor the developments from Europe regarding the debt crisis, where reports suggest thatGermanyandFrancereached an agreement on a plan to ease the European debt crisis. Nonetheless, tensions remain elevated in financial markets, as investors are concerned that EU leaders will fail to reach an agreement again after suffering similar disappointments over the past few months.

The USD/CAD pair could still drop if the current wave of optimism continues to dominate markets, 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.

Tuesday December 6:

Canadawill release the building permits index for October at 13:30 GMT, where building permits fell in September by 4.9%, and projections show building permits increased by 1.6% in October.

The Bank of Canada will announce its decision on interest rates, where the BOC is expected to leave the benchmark interest rate unchanged at 1.00%.

The Ivey PMI for November will be released at 15:00 GMT, which is expected to rise to 55.0 from 54.4 in October.

EU Optimism Boosts Demand for Higher Yielding Assets, as USD Falls against Major Currencies

A wave of optimism dominated global financial markets on Monday, where traders were already encouraged by the unexpected drop in U.S. unemployment reported last Friday, while optimism that EU leaders could be able to reach a resolution to the debt crisis in Europe, boosted confidence in markets and supported demand for higher yielding assets, as the U.S. dollar fell against major currencies, while equities, commodities, and major currencies rallied.

Investors are optimistic that EU leaders could reach a plan to ease the euro zone debt crisis at this week’s EU summit, while the ECB is expected to loosen its monetary policy as well in order to help in easing the deepening debt crisis. Moreover, reports signaled that Germany and France have reached an agreement on reforms to solve the debt crisis and prevent another situation in the future, which also supported confidence in markets.

Nonetheless, the U.S. ISM services index signaled that activities in the services sector eased in November below projections, where the ISM services index eased to 52.0, compared with the prior estimate of 52.9 and below median estimates of 53.9. Nevertheless, investors were focused on the developments in Europe, which overshadowed the worse than expected ISM services index.

The U.S. dollar fell sharply against a basket of major currencies on Monday, where the U.S. dollar index was trading at 78.23, compared with the opening level at 78.61. The Euro gained against the Dollar, where the EUR/USD pair traded at $1.3459, compared with the opening level at $1.3416, the British Pound gained strongly against the Dollar, where the GBP/USD pair traded around $1.5699 compared with the opening level at $1.5605, and the U.S. dollar fell against the Japanese Yen, where the USD/JPY pair was trading around 77.82, compared with the opening level at 78.09.

Stocks in the United States rallied by opening on Monday, as the Dow Jones Industrial Average was up by nearly 1.20% to trade around 12,165, while the S&P 500 index was up by nearly 1.60% to trade around 1264. European stock indexes were also higher before closing on Monday, where FTSE 100 was higher by nearly 0.45% to trade at 5577 and the DAX was up by nearly 0.60% to close around 6116.

Gold prices fell to trade now around $1740 an ounce and crude oil prices gained to trade around $101-$102 a barrel.

GBP/USD Forecast Dec. 06, 2011, Fundamental Analysis

The better than expected PMI services from the United Kingdom in November helped sterling sustain further gains against the dollar which was further supported by the prevailing risk appetite in the market.

The data from UK eased the woes over the state of the economy and the extent of damage from the spreading debt crisis that worsened in the past period, where the expansion in the critical sector eased the fears over the recession spreading rapidly to the United Kingdom and further pinned that the BOE will not take action this month on the APF.

We can still see high volatility for the pair as it remains very vulnerable to the market sentiment and on Tuesday we expect sterling to continue to trade inline with the prevailing trend for risky assets and as the sentiment improves the pair will be able to extend the gains, though trading will likely remain choppy.

The lack of data from both the United Kingdom and the U.S. will keep the European debt crisis the main topic and as investors’ sentiment improves further on hope that Europe this week will take decisive action the odds will continue to favor sterling for further gains.

Both economies lack economic fundamentals which propose that there would be calm trading on the pair which is predicted to follow the general trend in market as it will not able to get direction from data.