USD/JPY Forecast December 14, 2011, Technical Analysis

USD/JPY fell for the first part of the session on Tuesday, only to bounce hard and end the session slightly positive. In fact, the daily candle looks like a hammer, and even suggests that higher levels are to come. This wouldn’t be a massive surprise as the Dollar is being bought hand over fist right now because of the EU debt crisis. However, there is massive resistance at the 80 level, se we feel the upside is limited at this point. The Bank of Japan can’t break through this area, and that means something. We aren’t buying, but rather are interested in the idea of shorting this pair much closer to 80.

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

Pessimism Spreads through Markets on Reports Merkel Rejected Increasing EU Bailout Fund

Earlier optimism in markets diminished soon after the opening of the U.S. session, where equity indexes in the United States rallied at the start of Tuesday’s session, as financial shares recovered Monday’s losses and supported demand for higher yielding assets, as investors’ risk appetite improved, especially after the reported strong demand for the Spanish bond sale, which eased concerns over the outlook of the European debt crisis.

Nonetheless, pessimism dominated markets once again after reports suggested that German Chancellor Angela Merkel rejected increasing the bailout fund for European sovereign debt. Moreover, the worse than expected U.S. retail sales put more negative pressure on confidence, as retail sales rose in November but well below median estimates, retail sales increased by 0.2% in November, worse than median estimates of 0.5%.

Meanwhile, investors are now eyeing the FOMC meeting, where the Federal Open Market Committee is expected to leave the current monetary policy unchanged, as the FOMC is expected to confirm its pledge to keep interest rates at a record low until mid 2013, while reports suggest that the FOMC will be putting the final touches on its new communication policy, although the FOMC is not expected to change its communication policy at this meeting.

The U.S. dollar erased earlier losses and rallied against a basket of major currencies on Tuesday, where the U.S. dollar index was trading at 79.72, compared with the opening level at 79.54. The Euro fell for a second day against the Dollar, where the EUR/USD pair traded at $1.3075, compared with the opening level at $1.3164, the British Pound also fell against the Dollar, where the GBP/USD pair traded around $1.5521, compared with the opening level at $1.5575, and the U.S. dollar was little changed against the Japanese Yen, where the USD/JPY pair was trading around 77.93, compared with the opening level at 77.95.

Stocks in the United States were mixed by opening on Tuesday, as the Dow Jones Industrial Average was up by nearly 0.20% to trade around 12,046, while the S&P 500 index was up by nearly 0.10% to trade around 1238. European stock indexes were also mixed before closing on Tuesday, where FTSE 100 was up by nearly 1.20% to trade at 5493 and the DAX was down by nearly 0.25% to close around 5771.

Gold prices fell to trade now around $1657 an ounce, but crude oil prices gained to trade around $100 a barrel.

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

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

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

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

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

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

Europe’s Possible Downgrade Weighs on Sentiment

Pessimism continues to dominate markets as rating agencies warn from mass downgrades in Europe which could pose significant economic threats on a global scale, raising concerns among traders and push them to seek safe havens.

Europe’s possible downgrade is weighing down on markets since yesterday when Moody’s said European nations still face the risk of credit ranking downgrades since the outcome of the European summit was disappointing.

Meanwhile Fitch said that the solutions offered by the European leaders last week are not strong enough to prevent a “significant economic downturn” in the region, fueling believes that Europe may be entering a “mild” recession.

As markets continue to price a possible downgrade in Europe while the global economy may be further damaged byEurope’s debt crisis, downside pressures on the higher yielding assets persist.

Thereby the MSCI Asian pacific Index was down 1.2% at 15:24 inTokyo, where Nikkei 225 fell 1.17% while Hang Seng was down 0.69%. In Europe stock indexes are mixed with CAC 40 falling 0.14% while DAX rose 0.36%.

Yet the gains may be short-lived as confidence in Germany continues to be very weak in Dec., while the EFSF is preparing for an auction worth 2 billion euros of 91-day bills, Greece will sell 1.25 billion euros of 182-day bills, Belgium will sell 1.2 billion euros of short-term debt, and Spain will sell 364-day and 553-day bills.

Confidence will be put to the test again later today, as theU.S.will release the retail sales figures for Nov., while FOMC will announce its monetary policy decision that is expected to remain unchanged yet the Feds might put the final guidelines for its new communication strategy.

The euro fell to a two-month low trading around 1.3190 as of this writing, after the USD reached the highest today at 79.62. The pound is trading around 1.5595 with a slight upside momentum after the CPI matched expectations of 4.8%.

The yen rose today as demand on safe haven intensified trading around 77.80 as of this writing. The AUD rose today trading around the 1.0106 after the Australian government bonds rose today with the 10-year note yield reaching a record low.

The dollar’s bullish momentum due to the fragile sentiment on concerns over Europe’s troubles, pushed gold to a 7-week low trading around the $1664.30 after the precious metal broke the physiological support found at 1700.00 yesterday. Oil is moving in a tight range today around the $98.00 level.

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

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

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

Optimism Fades Over EU Summit Draft after Moody’s Reignite Debt Crisis Concerns

Following optimism over the EU Debt accord on Friday, markets awaked early Monday on new fears that Europe’s debt-trapped nations could be actually downgraded in the next quarter by one of the world’s biggest credit rating agencies. Traders went jittered, stocks slumped sharply, euro dropped and the dollar gained.

Earlier Monday, Moody’s Investors Service said in a statement that it will review the rating of European Union nations in the first quarter of 2012, after last week’s summit failed to craft a credible measure to halt the debt crisis, leaving the euro zone vulnerable to further possible shocks.

More failure to produce effective measures to break the debt impasse in the euro zone fueled fears the European outlook is yet to worsen. Traders went skeptical and began to weigh last week’s summit, with more disappointments after the EU Leaders “mostly” agreed-on new government treaty failed to quell market jitters.

And though Italian and French debt auctions went well with a slight drop in yields at the auction and good demand, yet still was offset by prevailing pressure and rising yields on the benchmark 10-year bonds in the region, especially for Spain that rose again above 6.0, pointing that last week’s optimism was barley seen today.

The U.S. dollar build up momentum against its peers on Monday, after the US dollar Index opened at 78.75 levels and picked up to trade around 79.37. The Euro fell the most in two weeks against the Dollar, where the EUR/USD pair trades 1.3184, compared with the opening level at 1.3370, the British Pound fell slightly against the Dollar.

The GBP/USD pair trades around 1.5592, compared with the opening level at 1.5653. Japanese Yen strengthened on Monday but little changed versus the dollar, after the USD/JPY opened at 77.61 level and currently trades around 77.87.

Stocks in the United States were lower after opening on Monday, as the Dow Jones Industrial Average traded below the 12,000 level with a 1.61 percent drop, while the S&P 500 index was down 1.85% to trade around 1232.

European stock indexes were also lower before closing on Monday, where FTSE 100 was down by nearly 1.62% to trade around 5438 and the DAX was down by nearly 3.2% to close around 5795.

After the dollar rebounded strongly on Monday, gold prices dropped heavily to currently trade around $1663 after opening at almost $1711 an ounce, while crude oil prices fell as well after opening at $99.49 to trade around $98.21 a barrel.

USD/JPY Forecast Dec. 13, 2011, Fundamental Analysis

USD/JPY Forecast Dec. 13, 2011, Fundamental Analysis
USD/JPY Forecast Dec. 13, 2011, Fundamental Analysis
but it was biased to the upside as risk aversion returned to dominate the FX market amid concerns regarding EU debt crisis.

The EU leaders’ summit failed to provide the market with solid measures about the 17 nation’s outlook, where fears that the EU’s new plan may not be able to contain the sovereign debt crisis pushed investors to increase demand for the lower-yielding assets, opening the way for the yen and the dollar to increase.

The greenback advanced against most of its major counterparts before the FOMC meeting this week, where concerns that the EU region’s debt crisis is spreading to other nations fueled risk aversion.

On Tuesday at 23:50 GMT (Monday), Japan will release the Tertiary Industry Index for October, where it’s expected to rise 0.4% following the drop of 0.7%.

The United States will release the Advance Retail Sales Index for November at 13:30 GMT where it is expected with 0.6% rise after 0.5%.

The U.S. Business Inventories for October will be released at 15:00 GMT where it’s expected to come at 0.3% from the previous reading of 0.0%.

At 19:15 GMT, the Federal Reserve Bank will announce the Federal Open Market Committee Rate Decision, where the central bank is expected to keep the rate steady near zero.

Risk Aversion as Euphoria Over Europe’s Rescue Deal Fades

Concerns about the euro zone’s safety persist as the euphoria over Europe’s rescue deal is fading since investors consider the measures to be insufficient to prevent the spread of the debt crisis, while inChinaexports rose by the weakest pace since 2009.

In Asia this morning, confidence and risk appetite were sustained by the improvement in the US consumer confidence which rose to a 6 months high last Friday, while European leaders revealed last week a blueprint for a fiscal deal aimed to save the euro union.

However, as the excitement over Europe’s rescue deal started to fade, worries overEurope’s growth were reignited, especially since the deepening debt crisis is starting to disturb global trading and limit demand on exports, pushing the Chinese exports to the weakest in more than two years.

As the Chinese economy seams to be slowing down, and inflations proved to be softening, Chinese policy makers are expected to start loosen their monetary policy to sustain growth. Thereby Nikkei 225 rose today by 1.37% and Australia’s S&P/ASX 200 Index rose 1.18%.

In Europe however stocks are dropping as investors are uncertain about the rescue deal. FTSE 100 fell 0.53% while DAX fell 1.27% asItalyis preparing to sell 7 billion euros of one year bills today, while France is preparing to sell 6.5 billion euros of short-term debt in an auction.

While Europe will lack the economic data today, and the US will only release the monthly budget statement for Nov., investors are seeking the safe haven USD which is trading with strong bullish momentum around the 79.20 level, pushing the higher yielding assets sharply to the downside.

The euro is trading with strong bearish momentum around the 1.3260 from the opening at 1.3378 while the pound is trading around the 1.5544 level from the opening at 1.5651. The yen also weakened trading around the 77.81 level, while the AUD is trading around 1.0110 from the opening at 1.0208.

The dollar’s bullish momentum is imposing downside pressures on commodities, while oil is trading around the $98.00 per barrel level from the opening at $99.54, while gold is trading around the $1678.50 per ounce level from the opening at $1712.60 per ounce level.

USD/JPY Forecast Dec. 12th, 2011, Technical Analysis

USD/JPY fell during the Friday session as the Dollar got sold off. This pair is decidedly bearish, and the downside pressure seems to be continuing. The Bank of Japan intervenes every once in a while, but the pair simply fades these rallies. This pair is a “sell the rally” pair as the bearish presence is simply too strong. The 76 level is the start of intervention levels, so selling until we get that low seems to be the way to go.

USD/JPY Forecast Dec. 12th, 2011, Technical Analysis
USD/JPY Forecast Dec. 12th, 2011, Technical Analysis

EUR/USD Forecast for the Week of Dec. 12th, 2011, Technical Analysis

The EUR/USD pair has been a focus of the markets for some time now. With the various debt issues in that region, it makes total sense. The headlines have been pushing the markets around lately, and many traders have been chopped up in this pair.

The EU summit came up with a band aid situation, and the UK even has decided not to participate going forward. The real questions loom as to whether or not the ratings agencies will downgrade the European Union countries because of the lack of a common bond and tighter fiscal union than the S&P actually wanted. The outlook for the EUR/USD is somewhat beholden to that issue now at the moment.

The resulting candle for the week is a doji, but closing lower than the open. The week did have at least some positive news coming out of Europe, but the reaction was muted. The lack of enthusiasm almost undoubtedly has to do with the fear of credit downgrades for the EU and its countries. If this comes about, we could see a real move to the downside in reaction. The S&P agency mentioned the fiscal union by name, and threatened to downgrade 15 of the countries in the union, as well as the EFSF bonds that are meant to bail everyone out. With this in the backdrop, there is a real chance that the Euro doesn’t move much, or even moves to the downside.

The 1.30 level continues to be massive support, and there has even been talk of Asian central banks buying at that level. The reality is that the level has been fiercely supportive. The breaking below that area would be massive in its scope, and would send this pair much lower. The resistance at the 1.40 level seems to be a cap in this market as well. In the near-term we think there are still massive headline risks ahead, and we think the longer-term direction is probably down, but choppy.

EUR/USD Forecast for the Week of Dec. 12th, 2011, Technical Analysis EUR/USD Forecast for the Week of Dec. 12th, 2011, Technical Analysis

 

USD/JPY Forecast for the Week of Dec. 12th, 2011, Technical Analysis

The USD/JPY pair continues to grind lower as the bears step in every time it rallies. The Bank of Japan is the only reason the market isn’t sitting below the 75 handle at this point. Once the price gets closer to 75, the BoJ intervenes. Because of this, it is hard to form any long-term selling in this pair. Buying isn’t an option until we close over the 80 level finally as it is massive resistance.

USD/JPY Forecast for the Week of Dec. 12th, 2011, Technical Analysis
USD/JPY Forecast for the Week of Dec. 12th, 2011, Technical Analysis

USD/JPY Forecast Dec. 12, 2011, Fundamental Analysis


USD/JPY Forecast Dec. 12, 2011, Fundamental Analysis
USD/JPY Forecast Dec. 12, 2011, Fundamental Analysis
after risk aversion returned to the financial market, pushing the yen up against most of its major counterparts as a safe haven currency.

Expectations for the USD/JPY pair will depend on the market sentiment, which accordingly depend on the developments in the EU debt crisis.

The week will start in Asia with continued reaction to the final details from Brussels after Wall Street and Europe attempted to find the support in the measures from extending the support to the IMF to the new intergovernmental pact for the euro area and other nations that might join excluding UK. The support is there but not as strong and accordingly fluctuations will be evident this week.

On Monday at 05:00 GMT, the Japanese economy will release the annual Consumer Confidence for November where it’s expected to come at 38.5 from the previous reading of 38.6.

The U.S. economy will release the Monthly Budget Statement for November at 19:00 GMT where the deficit is expected to wider to $150 billion from $98.5 billion.

USD/JPY Weekly Forecast Dec. 12-16, 2011, Fundamental Analysis


USD/JPY Weekly Forecast Dec. 12-16, 2011, Fundamental Analysis
USD/JPY Weekly Forecast Dec. 12-16, 2011, Fundamental Analysis
, where the Japanese currency is considered the market’s confidence parameter, and since the EU debt crisis is the main event in the financial market nowadays, the yen reflects any developments in the EU crisis.

Standard & Poor’s announced last week that it may cut the credit ratings for France, Germany and other countries from the EU region as they were all placed under review, which powered the Japanese yen to gain momentum against most of its major counterparts as a safe haven due to concerns over the gloomy outlook for the euro area.

On the other hand, EU leaders’ summit in Brussels added to the volatility after they reached an according for a new intergovernmental pact after UK blocked the treaty change and also provided 200 billion euros for the IMF to fight the crisis which still was not major for markets yet also was not a total disappointment and this week the market will continue to react on the measures.

The greenback also returned to profits zone, as the instability in the financial market drove investors to buy the dollar as a safe haven, while the USD/JPY pair declined as a result of a stronger demand for the yen than the dollar.

Expectations for the USD/JPY pair will depend on the current market sentiment, which in roll depend on the developments in the EU debt crisis and the understanding of the results of the Brussels summit.

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

Monday December 12:

On Monday at 05:00 GMT, the Japanese economy will release the annual Consumer Confidence for November where it’s expected to come at 38.5 from the previous reading of 38.6.

The U.S. economy will release the Monthly Budget Statement for November at 19:00 GMT where the deficit is expected to wider to $150 billion from $98.5 billion.

Tuesday December 13:

On Tuesday at 23:50 GMT (Monday), Japan will release the Tertiary Industry Index for October, where it’s expected to rise 0.4% following the drop of 0.7%.

The United States will release the Advance Retail Sales Index for November at 13:30 GMT where it is expected with 0.6% rise after 0.5%.

The U.S. Business Inventories for October will be released at 15:00 GMT where it’s expected to come at 0.3% from the previous reading of 0.0%.

At 19:15 GMT, the Federal Reserve Bank will announce the Federal Open Market Committee Rate Decision, where the central bank is expected to keep the rate steady near zero.

Wednesday December 14:

On Wednesday at 04:30 GMT, the Japanese economy will release the Industrial Production for October where the previous reading was 2.4%, as for the annual reading it was up by 0.4%.

The Japanese Capacity Utilization will be released at 04:30 GMT, where it had a prior reading of –3.6%.

At 13:30 GMT, the U.S. economy will release the Import Price Index for November where it is expected to rise by 0.9% after 0.3% drop.

Thursday December 15:

On Thursday at 23:50 GMT (Wednesday), Japan will release the Tankan Large Manufacturers Index for the fourth quarter, where it’s expected to drop by 2 from the previous rise of 2, while the Tankan Non-Manufacturing Index is expected to remain steady at 1 the same as the prior reading.

As for the Tankan Large All Industry Capex it is expected to rise by 2.2% from the previous reading of 3.0%.

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

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

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

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

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

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

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

Friday December 16:

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

EU Summit Decisions Lift Up Debt-Crisis Optimism Once Again

Financial markets were dominated with fresh sentiments and new hopes on Friday, after European leaders agreed to toughen budget rules, lend the IMF bilateral loans up to 200 billion euros to help debt-laden nations and boost the capacity of the ESM to 500 billion euros.

The measures were considered credible though EU leaders failed to get approval of all 27-euro members to a change treaty, anyhow, the newly-born intergovernmental treaty, which will include the 17 euro-area nations besides to any EU country that would like to join, is now the key vaccine to cure debt crisis.

The decisions made by European leaders in addition to the ECB cut to interest rate by another 25 basis points to 1.00 percent, and the adopt of non-standard measures to give access to liquidity to banks improved the sentiment so far and enhanced risk appetite before weekend.

While jumping to the world’s largest economy, gains were triggered following the European debt accord and quite cheerful economic reports as well, as both consumer confidence and the U.S trade balance beat median estimates, adding to hopes the economic momentum will support the overall global economic recovery.

U.S consumer confidence exceeded forecasts as reported this morning, rising to 67.7 in its preliminary reading for December from 65.8 in November, according to University of Michigan survey, while also the U.S Department of Commerce U.S reported earlier the U.S trade deficit narrowed 1.6 percent to $43.5 billion from $44.2 billion is September.

The U.S. dollar fell slightly after rebounding to the upside against a basket of major currencies on Friday, where the U.S. dollar index was trading at 78.77, compared with the opening level at 78.85. The Euro rose faintly following a two-day low against the Dollar, where the EUR/USD pair traded at $1.3376, compared with the opening level at $1.3345.

Moreover, the British Pound edged up a little bit against the Dollar, where the GBP/USD pair traded around $1.5651, compared with the opening level at $1.5635, and the U.S. dollar was little changed against the Japanese Yen, where the USD/JPY pair was trading near 77.54, compared with the opening level at 77.68.

Stocks in the United States were higher by opening on Friday, as the Dow Jones Industrial Average was up by nearly 1.3% to trade around 12,158, while the S&P 500 index added nearly 1.4% to trade around 1,251. European stock indexes were also higher before closing on Friday, where FTSE 100 was up by nearly 0.8% to trade at 5528 and the DAX was rose nearly 1.9% to close around 5986.

Gold prices inclined today to trade now around $1715 after opening at level of $1709 an ounce and crude oil prices were merely changed after opening at $98.19 level to steady up around $98.45 a barrel.

Markets Disappointed by the EU Summit Results

After the sharp losses seen yesterday, markets are moving in tight ranges ahead of the weekend, as trading is light since many investors closed their positions to lock on profits following the disappointment felt when the results of the EU’s summit were announced.

European leaders managed during the summit that started yesterday to agree on a new fiscal pact that ensures tougher budget disciplines, yet after nearly 10 hours of intensive talks they failed to agree on a treaty that would involve the 27 member nations, so the deal will involve for now the 17 euro zone nations.

EU leaders also said the euro zone is planning to make available up to 200 billion euros to the IMF to strengthen its resources that would be effective as soon as possible, while ECB’s president Mario Draghi hinted that any bond purchase program is not considered at the time being.

Sentiment deteriorated further after Moody’s downgraded three French banks BNP Paribas, Societe Generale, and Credit Agricole due to the fragile and deteriorating operating environment for European banks. BNP and Credit Agricole  were downgraded to Aa3 while Societe Generale was downgraded to A1.

Meanwhile in Asia, South Korea’s central bank cut the 2012 growth forecasts dramatically to 3.7% from 4.6%, while China’s inflation fell to the lowest since Sep. 2010 at 4.2% from 5.5% previous, and the industrial output grew by the slowest pace in more than two years during Nov. by 12.4%.

The Chinese data signal weaker growth and open the way for more stimulus measures as economic conditions are deteriorating since the downside risks generated by Europe’s debt crisis are widening. As European leaders failed to boost investor confidence, losses were seen across the Asian stocks markets.

Nikkei 225 fell 1.48% while Hang Seng was down 2.73% at closing. However in Europe stocks are mixed after Angela Merkel said she is very satisfied with the agreement since it is not a “lousy compromise”, while some investors expect the ECB to buy Italian bonds. DAX fell 0.1% while CAC 40 rose 0.17%.

Although there are numerous economic data today, it is more likely that it wont grasp any of the markets’ attention as the focus remains on the European leaders. In Germany, the trade balance disappointed after exports fell by -3.6%, while the CPI came inline with expectations.

In UK the producers price index fell in Nov. from the previous month, yet not as much as expected.Canada will release later today its trade balance for Oct., while the US will release its consumer confidence report for Dec. expected to improve and the trade balance for Oct. expected to show wider deficit.

The currencies are moving in tight ranges today ahead of the weekend, with some bullish momentum after the European markets opened trading. The USD is trading around the 78.75 level while the euro is moving around the 1.3360 level. The pound is trading around 1.5645. The AUD is trading around 1.0120.

The yen weakened slightly today trading around the 77.70 level. The dollar’s bearish momentum helped commodities compensate some of yesterday’s losses, where oil is trading around $98.40 per barrel while gold is trading around the $1714.40 per ounce level.

USD/JPY Forecast Dec. 9th, 2011, Technical Analysis

USD/JPY fell during most of the session on Thursday, only to bounce again in the end. The rumors are flying out of the EU and the markets are rocking back and forth because of this. The USD/JPY pair has had massive pressure to the downside on it, and the Bank of Japan has been the sole reason this pair would stay above the 75 handle. With this in mind, it is hard to hold onto short positions in this market below the 76 handle. The buying of this pair is very difficult to do at least until we get above the all-important 80 handle. The market is a “sell only” one at the moment, but only for short-term moves.

USD/JPY Forecast Dec. 9th, 2011, Technical Analysis USD/JPY Forecast Dec. 9th, 2011, Technical Analysis

Pessimism Spreads in Markets despite ECB Easing Policy and Falling Jobless Claims, as EU Summit Doubts Mount

Pessimism dominated markets ahead of the EU summit on Friday, where the U.S. dollar strengthened despite the ECB’s announcement of more monetary easing, as the European Central Bank cut the benchmark interest rates by 25 basis points to 1.00% in line with forecasts and announced more nonstandard measures to ease tensions surrounding the European debt crisis. Nonetheless, the ECB stopped short from signaling quantitative easing, which weighed down on confidence ahead of the EU summit on Friday.

Also, the Bank of England decided to keep its monetary policy unchanged on Thursday, where the BOE left the benchmark interest rates at 0.50%, while also keeping the Asset Purchase Program unchanged at 275 billion pounds, which was in line with median estimates.

Moreover, Canada released the housing starts for November, where housing starts fell to 181.1 thousand, worse than median estimates of 200.0 thousand.

Meanwhile, U.S. jobless claims failed to restore confidence despite falling to the lowest level in 9 months, where jobless claims fell to 381 thousand last week, well below median estimates of 395 thousand and the prior revised estimate of 404 thousand.

Pessimism started to spread through markets ahead of the EU summit, where investors are starting to doubt the ability of EU leaders to come up with a resolution to the debt crisis. Accordingly, investors targeted lower yielding assets including the U.S. dollar, which put higher yielding assets under pressure.

The U.S. dollar gained sharply against a basket of major currencies on Thursday, where the U.S. dollar index was trading at 78.82, compared with the opening level at 78.43. The Euro fell against the Dollar, where the EUR/USD pair traded at $1.3307, compared with the opening level at $1.3399, the British Pound also fell against the Dollar, where the GBP/USD pair traded around $1.5620, compared with the opening level at $1.5699, and the U.S. dollar fell against the Japanese Yen, where the USD/JPY pair was trading around 77.54, compared with the opening level at 77.68.

Stocks in the United States were lower by opening on Thursday, as the Dow Jones Industrial Average was down by nearly 0.45% to trade around 12,140, while the S&P 500 index was down by nearly 0.75% to trade around 1251. European stock indexes were also lower before closing on Thursday, where FTSE 100 was down by nearly 0.60% to trade at 5512 and the DAX was down by nearly 1.80% to close around 5886.

Gold prices fell to trade now around $1715 an ounce and crude oil prices fell as well to trade around $98 a barrel.

USD/JPY Forecast Dec. 09, 2011, Fundamental Analysis

The USD/JPY pair dropped for the fourth day, as safe haven currencies are still holding their ground amid the uncertainty and fears ahead of the EU summit.

Asian stocks recorded losses after the Australian economy cut jobs for the first time in three months during November, in addition to the RBNZ and the BOK which left their interest rate steady at 2.50% and 3.25% respectively.

Financial market fluctuated during this week between optimism and pessimism, as the EU crisis and the global growth outlook affected investors’ and controlled the market sentiment.

On Friday at 23:50 GMT (Thursday), Japan will release the final reading for the third quarter Gross Domestic Product where the previous reading showed that the Japanese economy grew by 1.5%.

The U.S. economy will release the Trade Balance for October, where it’s expected to show a deficit of $44.0 billion widening from the previous deficit of $43.1 billion.

The University of Michigan Confidence for December will be released at 14:55 GMT and expected to slow to 63.0 from 64.1.

USD/JPY Forecast Dec. 8th, 2011, Technical Analysis

USD/JPY had a fairly quiet day, albeit negative on Wednesday. The pair continues to grind lower every time it rises, and this latest sequence of trading days does nothing to suggest this will change anytime soon. The pair is to be sold only, and on rallies if possible. The Bank of Japan is intervening in this pair from time to time, but at levels lower than here, namely the 75 – 76 area. Because of this, we continue to be short of this pair for another 100 pips or so.

USD/JPY Forecast Dec. 8th, 2011, Technical Analysis USD/JPY Forecast Dec. 8th, 2011, Technical Analysis

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.