EUR/USD Forecast Dec. 2nd, 2011, Technical Analysis

EUR/USD had a positive day on Thursday as traders continue to see potential movement in the crisis by leaders of the EU. The pair again struggled with the 1.35 level as resistive, and the pair looks a little heavy at this point. The daily candle is a shooting star, and looks very bearish. However, the breaking of the bottom needs to happen in order to confirm a sell signal. Also, one has to be aware of the Non-Farm Payroll announcement later today, and that the announcement can move the market in very unpredictable ways.

EUR/USD Forecast Dec. 2nd, 2011, Technical Analysis EUR/USD Forecast Dec. 2nd, 2011, Technical Analysis

EUR/GBP Forecast Dec. 2nd, 2011, Technical Analysis

EUR/GBP rose during the session on Thursday as the markets were fairly quiet all around. The pair remains in the middle of a consolidative area from 0.85 to 0.8650. The candle for the day had a decent range to go with the gains, but as it is in the middle of the overall range, it isn’t playable at this point. The pair should continue to consolidate as both economies are struggling at this point, and there are a lot of headline risks involved in both the EU, and the UK via the banks.

EUR/GBP Forecast Dec. 2nd, 2011, Technical Analysis EUR/GBP Forecast Dec. 2nd, 2011, Technical Analysis

EUR/CHF Forecast Dec. 2nd, 2011, Technical Analysis

EUR/CHF had a good day for the bulls on Thursday, but managed to give back some of the gains late in the session. The Swiss National Bank is rumored to be considering negative interest rates, and as a result this could curb demand for the Franc even further. However, the EU is still a mess, and this pair will only see minimal upside until the Europeans get their act together. Once a debt crisis solution is finally implemented, this pair will become a great buy-and-hold trade for the long term. We are looking for a close above the 1.25 level on the daily chart in order to buy.

EUR/CHF Forecast Dec. 2nd, 2011, Technical Analysis EUR/CHF Forecast Dec. 2nd, 2011, Technical Analysis

AUD/USD Forecast Dec. 2, 2011, Technical Analysis

AUD/USD fell during the session, but bounced back to form a hammer by the end of the day. This shows that the pair still wants to rise, and that the majority of traders think that the pair should rise. However, with the Non-Farm Payroll numbers set to be released during the US morning session, this pair could move again in a rapid manner today. We prefer selling if the bottom of the hammer gets violated as it shows a “hanging man”. The breaking of the highs would run into resistance, and could perhaps struggle.

AUD/USD Forecast Dec. 2, 2011, Technical Analysis AUD/USD Forecast Dec. 2, 2011, Technical Analysis

Convergence – Divergence and Insurgents

Christine Lagarde, President of the IMF, indicated yesterday that the G-20 countries we willing to come to the aid of the EU to increase the funding to the IMF. Currently, the IMF has 390 billion euros available in their emergency fund, which would most likely not be enough to assist the ailing economies of EU regardless of the leveraging power of the EFSF. Lagarde, indicated that the BRIC nations, which are made up of Brazil, Russia, India and China were willing to increase their funding to the IMF. The BRIC nations have been updated to become BRICS, which now includes South Africa. Lagarde, also noted that Latin America, specifically Mexico were also willing to increase funds. Lagarde, did not indicate the amounts promised or discussed. She is currently in meeting throughout South America. This is the first mention during the turmoil of aid from Russia.

While Lagarde, is pushing the G20 and the IMF to develop plans to assist Europe. The Europe leaders met with their counterpart from England yesterday, where David Cameron told the EU leaders that it was time for some direct action and final commitment and plans.

At the same time that Cameron was meeting with Sarkozy and Merkel, BoE director King, was admonishing UK bankers, to increase capital and to reduce their bonuses. King is trying to keep a tight rein on the bankers.

Recently, economists and financial experts as well as investors have been reviewing the tentative plans for the EFSF, and many have drawn the conclusion that although these European Bonds will help raise the funds necessary to assist the ailing economies of the EU, that the final effect will be an increase in borrowing costs for countries such as Germany and France who have low bond rates and will reduce the interest paid by countries such as Italy, Spain, and Greece. It will end up being a weighted average bond. This will help those with high borrowing rates but cause a damaging effect to those with strong economies. Investors have been playing the game, buying up high yield bonds in the hopes that they will not have to take a haircut and will have the bonds backed by the EU or the economies saved by the EU and therefore make huge profits.

The markets have adjusted to the reality that they were reacting to news and not improvements in business and economics. News can only sustain markets for a short period of time, between the Ups and Downs, but news alone cannot drive the markets without the achieving real economic improvement. This past week has demonstrated just how much rumor and news can move markets. The week started off with Black Friday, moved to Cyber Monday, moved to rumor Tuesday (IMF assistance to Italy) and continued on to Central Banks Coordinated Effort Wednesday. By Thursday, investors were exhausted and stressed from chasing markets and news. Markets retracted slightly, while they took the time to digest the week’s news.

Friday is still to play out.

Gold Forecast Dec. 02, 2011, Fundamental Analysis

Gold prices slightly gained on Thursday, as the U.S. dollar settled against major currencies, where gold managed to hold on to its Wednesday’s gains after major central banks around the globe announced a joint effort to boost liquidity within the financial system, which supported confidence and boosted demand for higher yielding assets including gold.

Nonetheless, gains were limited on Thursday after the jobless claims rose unexpectedly last week worse than median estimates, as jobless claims rose to 402K, compared with median estimates of 390K. Nonetheless, gold prices received some bullish momentum after the U.S. ISM manufacturing index expanded in November to 52.7, better than median estimates of 51.8.

Traders will continue to monitor the developments from Europe regarding the debt crisis, where rising yields in Europe, especially in Italy suggest investors are concerned amid the uncertainty that is surrounding the outlook of the EU debt crisis, especially since investors are still skeptic even after EU finance ministers agreed to increase the firepower of the EFSF, and proposed expanding the funding for the IMF to help countries in Europe to withstand the debt crisis.

Traders will be eyeing the jobs report on Friday, where the nonfarm payrolls are expected to rise by 125,000 jobs in November, while unemployment is expected to remain unchanged at 9.0%. We should expect markets to turn their attention to the jobs report, since it will provide a better picture over the recent developments in the world’s largest economy.

Accordingly, we should expect more fluctuations in prices, but if the current wave of optimism prevails, we should expect gold prices to extend their gains, but we should note that the level of uncertainty is very high, and investors are ought to remain cautious, especially since the jobs report is likely to have a strong impact on markets on Friday.

USD/CAD Forecast Dec. 02, 2011, Fundamental Analysis

The USD/CAD pair extended its losses on Thursday, as the U.S. dollar remained weak after major central banks around the globe announced a joint effort to boost liquidity within the financial system, which supported confidence and boosted demand for higher yielding assets Including the Canadian dollar, which pushed the USD/CAD pair further to the downside.

Nonetheless, the losses were limited on Thursday after the jobless claims rose unexpectedly last week worse than median estimates, as jobless claims rose to 402K, compared with median estimates of 390K. Yet, the Canadian dollar received some bullish momentum after the U.S. ISM manufacturing index expanded in November to 52.7, better than median estimates of 51.8, which boosted risk appetite in markets and supported demand for higher yielding assets.

Traders will continue to monitor the developments from Europe regarding the debt crisis, where rising yields in Europe, especially in Italy suggest investors are concerned amid the uncertainty that is surrounding the outlook of the EU debt crisis, especially since investors are still skeptic even after EU finance ministers agreed to increase the firepower of the EFSF, and proposed expanding the funding for the IMF to help countries in Europe to withstand the debt crisis.

Traders will be eyeing the jobs report on Friday, where the nonfarm payrolls are expected to rise by 125,000 jobs in November, while unemployment is expected to remain unchanged at 9.0%. We should expect markets to turn their attention to the jobs report, since it will provide a better picture over the recent developments in the world’s largest economy.

Also, traders will be eyeing the jobs report from Canada, which is expected to show that Canadian employers added 11.0K jobs in November, compared with 54.0K jobs lost back in October, while unemployment is expected to remain unchanged at 7.3%.

The USD/CAD pair should still be able to extend its losses 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.

Friday December 02:

Canada will release the jobs report for November at 12:00 GMT, where the unemployment rate is expected to remain unchanged at 7.3%, while the net change in employment is expected to show that 20.0K jobs were added, compared with the prior 54.0K lost jobs in October.

The United States will join the session at 13:30 GMT with the closely watched jobs report for November, where the public sector could have added 125 thousand jobs to the economy compared with the previous addition of 80 thousand jobs in October, while the unemployment rate is expected to linger at 9.0%.

Shifts in the USA… Oil Exporter, Increased Factory Orders, Slow Jobs Growth

Data released by the U.S. Energy Information Administration this week shows the U.S. sent exported 753.4 million barrels of everything from gasoline to jet fuel in the first nine months of this year, while it imported 689.4 million barrels. The US is slowly becoming an energy exporter, the recession and high unemployment have kept a lot of cars off the roads and factories have been using less fuel. Lower airline travels has reduced the amount of jet fuel and reduced manufacturing has aided the reduction in gasoline and diesel usage.

With America becoming green, and conserving and a slow shift to alternative energy sources, the USA is consuming less fossil fuel and with increased exploration and production, the States are exporting more than they are importing.

This helps the US economy in many ways, the US will no longer be subject to oil price hikes and dependant on foreign suppliers, moving to an exporter this will help the US balance of payments and the GDP.

U.S. exports of fossil fuel are soaring, putting the nation on track to be a net exporter of petroleum products in 2011 for the first time in 62 years.

U.S. factories grew last month at the fastest pace since June, helped by a jump in new orders and production. Manufacturing has grown for 28 straight months, according to the index. Factories were among the first businesses to start growing after the recession officially ended in June 2009.

Factories added workers last month, but at a slower pace than the previous month.

U.S. factories are benefiting from higher auto sales. That has boosted output by automakers and companies that supply parts and raw materials, such as steel. Still, manufacturers could face strains overseas in key export markets. Europe is struggling with its financial crisis and China’s growth has slowed.

The Labor Department said the number of people who applied for unemployment benefits last week rose above 400,000 for the first time in four weeks. The figures suggest the hiring market is recovering at a slow and uneven pace. The projected job growth in November would be an improvement from the previous month, when the economy added just 80,000 jobs. Still, 125,000 new jobs are barely enough to keep pace with population growth.

Some economists are more optimistic after payroll provider ADP said Wednesday that companies added 206,000 workers last month, the most this year. That survey doesn’t include government agencies, which have been cutting jobs.

 

The EU turns to the IMF

In a surprise turn around, EU finance ministers are turning to the IMF for assistance with the growing debt problems throughout the eurozone.

EU leaders have been meeting and are in discussion on how to use the European Financial Stability Facility. The massive amount of money needed to bail out Italy, Spain, Greece and possibly Belgium is a staggering sum which cannot be raised by the 17 eurozone countries without using leverage to extend the reach of the facility. This also exposes the EU to much larger losses and the fears that it might not be enough to stop the contagion or leave a cushion if other countries need bailouts. European leaders said the fund could be increased to as much as €1 trillion as a result of the leverage scheme, which involves partially insuring government bonds and creating special investment vehicles to attract capital from private sector investors.

Analysts say the amount is closer to €750 billion, since the EFSF has only about €250 billion that is not already earmarked. The International Monetary Fund which measures its funds in a basket of currencies and has about $390 billion to work with.

That compares with an estimated €2 trillion in funding needs for the most troubled euro area economies, including Italy and Spain.

Beyond the lack of sufficient funds, there are serious questions about how much risk the IMF would assume if it began intervening in the sovereign debt market.

Central Bank Directors and National Leaders all agree that a plan is necessary and not a bandage. The news keeps saying the plan has to be a bazooka otherwise the markets will crash.

The EU has been dragging this on for way to long and Investors are at their wits end. The next announcement needs to be a complete and all inclusive plan, without speculation and guestimates. The markets are looking for a complete roadmap, ready to roll out immediately.

The Central bank scheme announced yesterday is a stopgap measure designed to help for only a short term it is not a fix or a roadmap. The EU leaders have promised to have a complete plan ready for their December 9th meeting.

The question the markets are asking, is where the funds would come from to meet a need of 2 trillion dollars, even with support and assistance from the US, China and the UK, there is a shortfall and not enough money. Each country is facing their own economic and debt crisis and cannot offer all the assistance that maybe needed.

In the meantime the markets wait.

 

 

Oil Forecast Dec. 1st, 2011, Technical Analysis

Light Sweet Crude

CL rose quite strongly during the session on Wednesday as markets around the world rallied. The oil contracts all had a positive showing for the first part of the session, but like all others, the CL gave up quite a bit of its gains. The $100 level started to push back, and as a result – the daily candle is a shooting star. If the lows of the Wednesday session get violated – this could be the start of a down move. With this in mind, we are willing to pass on any longs at the moment.

Oil Forecast Dec. 1st, 2011, Technical Analysis Oil Forecast Dec. 1st, 2011, Technical Analysis

Brent

If the CL had a questionable day, the Brent market should leave no questions at all – it completely fell apart in the later hours of the session to form a prefect shooting star. The top of it is at the $112.50 level, and that resistance has been strong. With this in mind, we think consolidation should continue and are ready to sell on a break of the lows form the Wednesday session.

Natural Gas Forecast Dec. 1st, 2011, Technical Analysis

Natural gas fell again on Wednesday as the trend just keeps punishing the market. The downward pressure is intense, and doesn’t seem to be abating at all. The recent struggle with breaking below the $3.50 has been retried over and over, and as a result it seems that it is only a matter of time before it gives way. The market is one we sell on bounces, and we will continue to do so going forward. $4 would have to give way for us to consider a long position.

Natural Gas Forecast Dec. 1st, 2011, Technical AnalysisNatural Gas Forecast Dec. 1st, 2011, Technical Analysis

Gold Forecast Dec. 1st, 2011, Technical Analysis

The gold markets shot straight up during the Wednesday session as the major central banks around the world have agreed to reduce the cost of Dollar swaps. Essentially this “floods the market” with Dollars if needed, and this will always push the price of gold higher. The trend is up, so this move was ready to happen. We have been calling the $1,700 level as a bit of a floor at the moment, and continue to think it to be. The $1,800 level is the next stop. We buy dips, and we buy a break of the highs from Wednesday.

Gold Forecast Dec. 1st, 2011, Technical Analysis Gold Forecast Dec. 1st, 2011, Technical Analysis

USD/JPY Forecast Dec. 1st, 2011, Technical Analysis

The USD/JPY pair fell on Wednesday as the central banks of the world have struck a coordinated play on driving the cost of borrowing Dollars down for some of the larger banks. The flooding of Dollars into the market drove this pair down, and the trend would have suggested it was going to fall to begin with. Of course, the Bank of Japan is below, so we would sell on a break of the lows for the day, but would also be quick to take profits as there will certainly be high risk for intervention in the lower part of the previous consolidation area – roughly at 76.

USD/JPY Forecast Dec. 1st, 2011, Technical Analysis USD/JPY Forecast Dec. 1st, 2011, Technical Analysis

USD/CHF Forecast Dec. 1st, 2011, Technical Analysis

USD/CHF fell during the session on Wednesday as traders dumped the US Dollar around the markets. The pair fell fairly close to the 0.9000 level, and then found buyers stepping into the market. The resulting candle looks a bit like a hammer, but the body is a bit longer than we like to see. It does suggest that the pair is trying to find its footing, and as a result we are looking to buy on strength when we get it. A break of the highs from Wednesday will have us buying.

USD/CHF Forecast Dec. 1st, 2011, Technical Analysis USD/CHF Forecast Dec. 1st, 2011, Technical Analysis

USD/CAD Forecast Dec. 1st, 2011, Technical Analysis

The USD/CAD pair fell apart during the session as the central banks of the major economies around the world have agreed to cut the cost of swapping Dollars in order to fund banks. The end of the day produced a bit of a bounce, and showed that the 1.02 wants to push the pair back up. The pair has reentered the consolidation area between the 0.99 and 1.03 levels, and as a result we aren’t trading it at the moment. A break above 1.03 would have us buying, while a break below the 0.99 handle would have us selling.

USD/CAD Forecast Dec. 1st, 2011, Technical Analysis USD/CAD Forecast Dec. 1st, 2011, Technical Analysis

NZD/USD Forecast Dec. 1st, 2011, Technical Analysis

NZD/USD absolutely skyrocketed on the news of the major central banks of the world working to lower swap costs for Dollars. This should help alleviate any real chance of another Lehman Brothers style meltdown, and the markets have gone wild because of it. The commodity trade is back on, and the Kiwi reacted positively as a result. The pair sailed to the 0.78 level, where is meets resistance. The move has been parabolic, so we are currently looking for shorter-term candles to short this overdone rally. The 0.8000 level should continue to be very resistive, and will need to be overcome if the bullish action is to continue.

NZD/USD Forecast Dec. 1st, 2011, Technical Analysis NZD/USD Forecast Dec. 1st, 2011, Technical Analysis

GBP/USD Forecast Dec. 1st, 2011, Technical Analysis

GBP/USD shot straight up on Wednesday as traders reacted to the major central banks of the world working on lower Dollar swap costs. Essentially, this can help alleviate the potential of European banks being frozen out of the credit market. (In theory.) The pair shot straight to the 1.58 handle, which is also the 61.8% retracement form the recent fall. It did pair gains though, and looks like the initial reaction was a little overdone. We still like shorting this pair, but not at this point – we want to see a continuation of the weakness we saw in the US afternoon session.

GBP/USD Forecast Dec. 1st, 2011, Technical Analysis GBP/USD Forecast Dec. 1st, 2011, Technical Analysis

Markets Over React to the Central Bank Annoucement.

Strategists said Europe’s sovereign debt problems will continue to be the key driver for the euro. The EU and IMF must now do something positive to help the debt crisis and protect the euro.

Markets Over React to the Central Bank Annoucement.

The news today can be best interpreted from what investors and analysts are saying this morning.

“As Europe dithered, monetary policy makers acted, even if their ‘actions’ have more symbolism than significance,” said strategists at RBC Capital Markets. “Markets breathed a huge sigh of relief.”

Yesterdays move by the Central Banks signaled leadership and direction. This is what the markets are looking for. Investors jumped head first into the markets.

The move is an attempt to “ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity,” the banks said in a statement.

“It’s the first time we’ve seen this type of global coordination since November 2008,” said Michael James, a senior equity trader at Wedbush Morgan. “The degree of coordination sends a message to the markets that global leaders are going to do whatever they need to do to instill confidence in the markets.”

“The fundamentals just keep marching forward despite the market turmoil,” said Doug Cote, chief investment strategist at ING. “The real economy seems indifferent to the EU debt headlines.”

Central banks are “hoping the rate is so attractive that hitting the swap line makes business sense as opposed to signalling vulnerability,” he said. “They hope if they draw enough institutions, the stigma will decline, stresses on the liquidity front will ease and that will ease some of the bearish demeanor towards the euro.”

“The price action was because the market was short, not being bought by people entering new long positions in euros and equities,” he said. “It’s people closing shorts.”

This morning’s coordinated action also implies that the central banks feel conditions are much worse than they would otherwise lead us to believe, which is why more liquidity is needed immediately,” said Kathy Lien, director of currency research at GFT. “The markets are always relieved to see central banks put up a unified front, especially on the heels of a similar increase in liquidity from China.”

Removing the risk of liquidity problems increasing further as year-end approaches provides a major relief to financial markets,” said Greg Anderson, senior currency strategist at CitiFX in New York.
“The level of cooperation and responsiveness being shown by the G7 central banks suggests that policy makers are now highly engaged and likely to come forward with further measures in coming days.”

“The big deal is just saying they are going to be involved. It’s not like they brought out the tank, they brought out the six shooter,” he said.

“It’s not enough. It’s a temporary liquidity initiative which is good, but it won’t solve the problem, because in a couple of days, the problems will put on their hats again,” De Leus said.

 

EUR/USD Forecast Dec. 1st, 2011, Technical Analysis

EUR/USD shot straight up during the session as the major central banks around the world have agreed to reduce the costs of swapping Dollars between the banks, and can help alleviate the possibility of another Lehman Brothers kind of event. The pair slammed into the 1.35 area, but failed to stay above it. In fact, at the close – the pair had given roughly an entire handle back in those gains. Because of this, we are even more interested in fading rallies in this pair under 1.35 now.

EUR/USD Forecast Dec. 1st, 2011, Technical Analysis EUR/USD Forecast Dec. 1st, 2011, Technical Analysis

EUR/GBP Forecast Dec. 1st, 2011, Technical Analysis

EUR/GBP rose during the session as the Euro found relief in the form of major central banks relaxing their rates to borrow Dollars. The move makes the repeat of a bank collapsing like Lehman Brothers did in 2008 much less likely. As a result, the markets took off. The Euro initially surged, but so did the Pound. This created a choppy day in this pair, with the Euro coming out on top in the end, albeit barely. This pair will continue to be highly volatile as long as the EU’s problems are still around. We expect this pair to continue to consolidate between 0.85 and 0.8650.

EUR/GBP Forecast Dec. 1st, 2011, Technical Analysis EUR/GBP Forecast Dec. 1st, 2011, Technical Analysis