GBP/USD Forecast Dec. 29, 2011, Fundamental Analysis

On Wednesday trading, the markets witnessed thin trading amid the year-end holidays. Yet, the pound showed a slight advance against the green currency after a successful bond selling in Italy managed to restore confidence and thereby damp demand on the dollar as a refuge.

The latest announcements byU.K.officials referred that the outlook for the British economy will depend on the latest developments in the euro area, thus the pound is expected to be affected by euro zone news and data.

The Italian Treasury sold 9 billion euros of 179-day bills, where the demand increased to 1.7 times, compared to 1.47 times in the last auction while the borrowing cost retreated to 3.251% from the previous auction’s rate of 6.504%.   Also, 2013 bills were sold for 1.733 billion euros with a yield of 4.853% from the prior auction’s rate of 7.814%.

On Thursday, theU.S.economy will release initial jobless claims for the week ended Dec. 24 and continuing claims for the week ended Dec. 16 at 13:30 GMT. At 14:45 GMT,Chicagopurchasing manger is estimated to retreat to 60.2 in Dec. from the previous 62.6. 15 minutes later, pending home sales for Nov. will signal 1.8% advance compared with the preceding 10.4% rise.

The data is expected to affect the pair’s movements yet eyes will be on the selling of 2014, 2018, 2021 and 2022 bills by the Italian Treasury, especially the 10-year notes which recorded a yield of nearly 7% in the last auction, a rate which triggered the ask for a bailout by Greece and Portugal.

With mounting expectations the BoE will add to stimulus as early as in 2012, the pound remains under pressure from expected oversupply.

USD/CHF Forecast Dec. 29, 2011, Fundamental Analysis

On Wednesday trading, the markets witnessed thin trading amid the year-end holidays. Yet, the franc showed a slight advance against the green currency after a successful bond selling in Italy managed to restore confidence and thereby damp demand on the dollar as a refuge.

The Italian Treasury sold 9 billion euros of 179-day bills, where the demand increased to 1.7 times, compared to 1.47 times in the last auction while the borrowing cost retreated to 3.251% from the previous auction’s rate of 6.504%.   Also, 2013 bills were sold for 1.733 billion euros with a yield of 4.853% from the prior auction’s rate of 7.814%.

Moreover, data from the Swiss economy showed a drop in KOF leading indicator for the second straight month in Dec. to 0.01 compared with the revised 0.34 in Nov. However, the franc was not much impacted by the release.

On Thursday, theU.S.economy will release initial jobless claims for the week ended Dec. 24 and continuing claims for the week ended Dec. 16 at 13:30 GMT. At 14:45 GMT,Chicagopurchasing manger is estimated to retreat to 60.2 in Dec. from the previous 62.6. 15 minutes later, pending home sales for Nov. will signal 1.8% advance compared with the preceding 10.4% rise.

The data is expected to affect the pair’s movements yet eyes will be on the selling of 2014, 2018, 2021 and 2022 bills by the Italian Treasury, especially the 10-year notes which recorded a yield of nearly 7% in the last auction, a rate which triggered the ask for a bailout by Greece and Portugal.

Brent Crude Inches Up as Investors Worry About Mid East

Brent crude rose slightly to trade above $108 on yesterday, encouraged by supply disruptions in Syria and Iranian naval exercises in a key shipping lane, while improved US consumer confidence data and year-end short-covering also supported prices.

Iranian naval exercises also added to supply worries. Iran on Saturday began 10 days of naval exercises in the Strait of Hormuz, increasing  concerns about a possible closure or control of the world’s most strategic oil transit channel in the event of any outbreak of military conflict between Tehran and the West. Iranian officials deny any allegations but it is obvious that they are sending a signal to the West, not only in case of conflict, but also in response to the oil embargo.

The impact of the naval exercises on prices was limited for now as there was plenty of supply from OPEC countries, but it is making investors worrisome.

Brent, pushed upwards to an intraday high of $108.30 per barrel, was holding up 15 cents at $108.11.  While U.S. crude was about flat at $99.70 a barrel.

Syria could be a support factor for the time being, but we will not see a big climb or rocket high prices because of that. Syria is not a major oil producing nation but its internal conflicts are having effects throughout the gulf region. The supply disruptions have not been a big issue because of some easing of demand in Europe. This has offset the disruption of supplies.

The Syrian Oil Minister on Saturday that his country’s oil production had fallen by about 30 to 35 percent as a result of sanctions imposed on Syria over its nine-month crackdown on anti-government protests.

Kuwait produced more than 3 million barrels of oil in December and expects that rate to continue if demand exists, its oil minister Mohammad al-Busairi noted on Sunday after a meeting of Gulf Arab oil ministers in Abu Dhabi.

Leaders of Germany’s major business and industry groups said they expect the country’s economy to lose momentum although there will be no recession in 2012 thus requiring less enegy consumption.

Industrial output at top energy consumer China is also expected to slow slightly, growing 11 percent in 2012, easing from an estimated 13.9 percent in 2011, China’s industry minister stated earlier this week.

Other worries surfaced as China’s foreign debt rose to $697.2 billion at the end of September from the $642.5 billion three months earlier, these figures were released byChina’s State Administration of Foreign Exchange (SAFE) yesterday. Little doubt that China, which sits on the world’s biggest pile of foreign exchange reserves worth $3.2 trillion, would fail to honour its foreign obligations.

It’s after Christmas and a lot of people are not back in the market investors will seek cues from U.S. markets which will become active after the New Years holiday. This week, the markets will see some short covering and year end adjustments mostly by institutional traders causing a potential upswing to possibly 113.00.

Eyes on Italy Ahead of the Year-End

Amid thin volumes, investors continue to be cautious ahead of Italy’s bond auctions today and tomorrow which renewed worries over the euro zone debt crisis, yet losses seem to be limited due to the positive U.S. data.

Europe, the US and Asia lack the economic data today, however yesterday the U.S. consumers rose in Dec. to the highest in 8-months on the improving job market, rising to 64.5 from 56.0 previous.

While the holiday mood continues to dominate markets, volatility might be seen before Italy’s bond auction, since today it will sell 9 billion euros of 179-day bills and 2.5 billion euros of zero-coupon 2013 bonds.

In Asia Nikkei 225 fell 0.20% and Hang Seng fell 0.59% on concerns over growth in the region, triggered by Japan’s disappointing data yesterday which confirmed the world’s third largest economy is weakening.

Japan’s industrial production and household spending plunged in Nov., deepening the country’s deflation. This could determine companies like Nissan or Panasonic to move their production abroad, especially since the yen also hurts demand.

In Europe stocks were mixed with DAX falling 0.43% and CAC 40 rising 0.48%. Currencies however move in very tight ranges, where the euro is trading around today’s opening at 1.3070 while the pound around 1.5665.

The USD is moving in a tight range with some downside momentum around the 79.78, the yen is strengthening trading around the 77.70, while the  level, while AUD is slightly stronger trading around the 1.0170.

Commodities are weaker today where gold is trading around the $1583.00 level  on global growth concerns, while crude oil is still trading above the $100.00 level on fears from Iran’s threat to halt oil shipment.

USD/JPY Forecast Dec. 29, 2011, Fundamental Analysis

The USD/JPY pair dropped early Wednesday despite the thin trading in the FX market, where the Japanese yen advanced against most of its major counterparts, while the dollar fell amid low volume trading.

Gains for the safer assets such as the yen remain a constant, as concerns regarding the EU debt crisis fueled haven demand which in roll reduces demand for higher-yielding currencies.

On the other hand, the latest U.S. data support the hope that the U.S. economy is gaining momentum, while the ongoing EU debt crisis remains an obstacle in the way of the optimism in the financial market.

On Thursday 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 dropped to 364 thousand last week.

The U.S. economy will issue the Chicago Purchasing Manager for December at 14:45 GMT, where the prior reading was 62.6 and it’s expected to come at 60.2.

At 15:00 GMT, Pending Home Sales for November will be and expected with 1.8% rise after 10.4%.

NZD/USD Forecast Dec. 29, 2011, Fundamental Analysis

The NZD/USD pair was able to advance early Wednesday on the back of the weak U.S. dollar, while the thin trading did not support the Kiwi to record more gains against the dollar.

The U.S. dollar traded in a narrow range against most of its major counterparts, due to the absence of the volume in the FX market which reduced demand for the dollar.

On the other hand, the latest U.S. data support the hope that the U.S. economy is gaining momentum, while the ongoing EU debt crisis remains an obstacle in the way of the optimism in the financial market.

On Thursday 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 dropped to 364 thousand last week.

The U.S. economy will issue the Chicago Purchasing Manager for December at 14:45 GMT, where the prior reading was 62.6 and it’s expected to come at 60.2.

At 15:00 GMT, Pending Home Sales for November will be and expected with 1.8% rise after 10.4%.

AUD/USD Forecast Dec. 29, 2011, Fundamental Analysis

The AUD/USD advanced slightly early Wednesday due to the thin trading in the FX market, on the other hand the absence of fundamentals kept trading calm.

The U.S. dollar was little changed against most of its major counterparts, as the holiday’s season in the United States reduced market participants and the liquidity in the financial market.

On the other hand, the latest U.S. data support the hope that the U.S. economy is gaining momentum, while the ongoing EU debt crisis remains an obstacle in the way of the optimism in the financial market.

On Thursday 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 dropped to 364 thousand last week.

The U.S. economy will issue the Chicago Purchasing Manager for December at 14:45 GMT, where the prior reading was 62.6 and it’s expected to come at 60.2.

At 15:00 GMT, Pending Home Sales for November will be and expected with 1.8% rise after 10.4%.

EUR/USD Forecast December 28, 2011, Technical Analysis

EUR/USD rose again on Tuesday as the trading world felt slightly bullish. However, the market has shown time and time again that the rallies in the EUR/USD pair are to be sold, and it must be said that we are presently “hanging around” the same levels we have been over the last two weeks. The bounce that one would expect at 1.30 hasn’t really happened, and as a result – we think that the level will more than likely give way before it is all said and done. We see support all the way down to 1.29, and a break below that mark would have us aggressively selling. The rallies are to be sold until this pair can close above the 1.35 mark as well.

EUR/USD Forecast December 28, 2011, Technical Analysis
EUR/USD Forecast December 28, 2011, Technical Analysis

USD/JPY Forecast December 28, 2011, Technical Analysis

USD/JPY fell again on Tuesday as the market sold off the Dollar in an otherwise quiet session. The volumes are still light during this time of year as many traders will not be at their desks until after the New Year. The pair has been supported by the Bank of Japan over the last several months, and the selling of it can only be done with shorter term goals in mind. Having said that, the 80 mark above is where the real resistance is. Currently, it appears the markets simply cannot close above the 78.50 level in order to gain any real momentum to the upside.

The situation in the world economy does produce some demand for the US dollar, but the Yen has almost certainly not lost its “safe haven” status either. With this in mind, this is really an argument between two favored currencies at the moment. However, this standoff will not go on forever, and it should be noted that Prime Minster Noda was recently quoted as saying the Yen might actually be reflected the Japanese economy, a signal that intervention isn’t coming anytime soon. Either way, the pair will be very precarious to trade if you have anything more than a 3 day time horizon.

The pair needs to close over the 80 mark to show true strength to the upside. This would be a massive breakout, and the pair should continue to lift from that area. There simply has to be an amazing amount of short sellers in that area, and if they are forced to cover their positions, the rally would be fierce indeed.

The recent action is showing a bit of a triangle, suggesting that a run to that level could be coming soon. For now, it is simply suggested and not implied. The triangle has yet to break, and if it does break to the upside, it would be bullish, but one would have to be very concerned about the above mentioned 80 level as massive resistance. It is there where the fate of this pair will be decided. As far as selling, a break below the bottom line of this triangle would d have us shorting for about 100 pips or so.

USD/JPY Forecast December 28, 2011, Technical Analysis
USD/JPY Forecast December 28, 2011, Technical Analysis

GBP/USD Forecast December 28, 2011, Technical Analysis

GBP/USD rose on Tuesday as traders sold off the Dollar overall. The move may have been somewhat exaggerated in low volume though. Also, the 1.57 level held again, and this suggests that we are simply going to continue to consolidate in the 1.55 to 1.57 range for the time being. This makes sense as the markets are usually quiet in this part of the year with the lack of interest. The pair is towards the top of the range, so selling isn’t a bad idea for the short term.

GBP/USD Forecast December 28, 2011, Technical Analysis
GBP/USD Forecast December 28, 2011, Technical Analysis

EUR/GBP Forecast December 28, 2011, Technical Analysis

EUR/GBP rose for the start of the Tuesday session, but quickly retraced that move and more. The resulting candle is a shooting star in an already bearish market. The move shows just how little faith there is in the bullish moves of this pair, and that the downside should continue to be the way to go going forward. On a break of the Tuesday lows, we would be willing to sell yet again. Buying isn’t going to be done by us as the trend is clearly favoring the Pound at this point.

EUR/GBP Forecast December 28, 2011, Technical Analysis
EUR/GBP Forecast December 28, 2011, Technical Analysis

USD/CHF Forecast December 28, 2011, Technical Analysis

USD/CHF fell on Tuesday as the “risk off” trade came into play, at least as much as it can in an extremely low volume trading environment. The lack of liquidity simply made trading most pairs almost impossible for the session, and the breaking of support or resistance areas was probably always going to be too much to ask. The 0.93 level was the site of a breakout recently, and it shows signs of still being supportive. We like buying these dips as long as we can stay above 0.93 or so.

USD/CHF Forecast December 28, 2011, Technical Analysis
USD/CHF Forecast December 28, 2011, Technical Analysis

EUR/CHF Forecast December 28, 2011, Technical Analysis

The EUR/CHF fell slightly on Tuesday as the market continues to move sideways. The floor at 1.20 hasn’t even been seriously tested, and the upside potential of the Euro in general is very suspect at best. The market will more than likely continue to grind sideways for the foreseeable future as this pair simply has no real catalyst to move in either direction. The EU will have to get the financial crisis under control before this pair can break above 1.25, and the 1.20 level will undoubtedly bring out the Swiss National Bank if we get to that level or below. With that in mind, we are scalping this pair for a handful of pips at a time.

EUR/CHF Forecast December 28, 2011, Technical Analysis
EUR/CHF Forecast December 28, 2011, Technical Analysis

AUD/USD Forecast December 28, 2011, Technical Analysis

AUD/USD absolutely sat still during the session on Tuesday as the markets had a very quiet day. The next few sessions could be very quiet, and as a result some pairs simply won’t move. The Aussie is sensitive to bad economic news obviously, so there is always the possibility of a shock to the system, but more than likely this pair will continue to trade in the recent consolidation area between 1.02 and 0.99 going forward.

AUD/USD Forecast December 28, 2011, Technical Analysis
AUD/USD Forecast December 28, 2011, Technical Analysis

USD/CAD Forecast December 28, 2011, Technical Analysis

USD/CAD fell slightly on the session for Tuesday as the oil markets caught a bid. The Canadian dollar will often catch a bid in concert with oil, which is precisely what happened for the session. However, the volume was light and the move very small. The area it currently trades in is in the center of massive support which will keep a cap on declines. The market has support all the way down to the 0.99 level, and as a result we are not shorting it. Having said that, we see no real supportive candles currently and are not buying this market either. We suspect sideways will be the move for the next several sessions.

USD/CAD Forecast December 28, 2011, Technical Analysis
USD/CAD Forecast December 28, 2011, Technical Analysis

NZD/USD Forecast December 28, 2011, Technical Analysis

NZD/USD fell during the Tuesday session as the Kiwi was shunned overall. However, the volume was light and the fall was more than likely somewhat exaggerated by it. The pair does look a little bit toppy at the 77.50 level, so a fall from here wouldn’t be out of the question. The 0.75 level below should continue to be supportive going forward, so any selling is for small gains only. Buying isn’t an option for us until we break above the cluster at 0.78 or so.

NZD/USD Forecast December 28, 2011, Technical Analysis
NZD/USD Forecast December 28, 2011, Technical Analysis

Oil Forecast December 28, 2011, Technical Analysis

Light Sweet Crude

Fueled by comments coming out of Tehran that the Iranians would close down the Strait of Hormuz if the EU chose to put an embargo on Iranian oil imports, the oil markets reacted in a bullish manner as fears of a supply disruption came into being on Tuesday. The $100 mark was easily overcome again, and the top of the downward channel that we have been discussing has been pierced.

However, two things should be thought of during this move: The volume is almost non-existent this time of year, making the moves a bit exaggerated, and the close of the daily candle was below that top line for the channel. Considering this to be a breakout is probably being a little over anxious at this time.

Having said that, we are still tracking the potential downward channel and also the potential flag in this market that were brought up last week. A serious move to the upside would have us buying and holding onto a core position in this market, while a down move of any kind would have us selling the market for the very short-term.

Oil Forecast December 28, 2011, Technical Analysis
Oil Forecast December 28, 2011, Technical Analysis

Brent

Brent markets aren’t quite as clear about their intentions. The move on Tuesday only sent the market back into the epicenter of consolidation from the previous zone, and this isn’t enough to get us bullish of Brent at the moment. There could be a move upwards coming, but it will have much more to contend with than the CL contract will. With this in mind, we aren’t particularly interested in the Brent markets currently as the sheer amounts of noise will more than likely weight upon the market in either scenario.

The oil markets will be influenced by Dollar strength or weakness going forward, as well as this drama unfolding in the Middle East. However, if you look at demand for oil, it is actually fairly weak in a lot of the emerging markets. Also, one would have to think that the Iranians are willing to risk a real war with the United States and Saudi Arabia if they closed the sea lane down. The likelihood of that is quite slim at best. Because of this, we think ultimately this Iranian noise will turn out to be nothing.

Natural Gas Forecast December 28, 2011, Technical Analysis

Natural gas markets sat fairly still during the session on Tuesday as the volume remained light from the holidays. The markets are currently trying to form some kind of base from which to rally it appears, and the $3 mark will almost certainly be supportive. However, with the sheer supply and demand question being so heavily skewed to the oversupply answer, the market simply cannot be bought. In fact, we are hoping for a nice bounce up to either $3.25 or $3.50 from which to sell. We would sell on a daily close below $3 as well, but not as enthusiastically as the previous scenario.

Natural Gas Forecast December 28, 2011, Technical Analysis
Natural Gas Forecast December 28, 2011, Technical Analysis

Gold Forecast December 28, 2011, Technical Analysis

Gold markets continued to slump on Tuesday as the economic situation pushes people towards the Dollar in general. The stock markets did rise slightly for the session, but the optimism was tempered by the fact that the volume was very light. The Dollar strength is starting to weigh heavily on this market, and the end of the year meant that a lot of traders wanted to book end of year profits to help with their statement sheets.

The world economy is certainly slowing in many areas, and this suggests that the gold markets could see a hit for a little while. However, the market isn’t one to sell for anything more than a scalp or short-term trade. The uptrend has been far too strong over the last ten years, and this pullback has simply been a blip on the chart if you look at the totality of the rally. None the less, this market does have investors running.

Most analysts believe that gold will get a bid in 2012 as the European Union will almost undoubtedly print more Euros, and the Federal Reserve is very likely to think about Quantitative Easing 3 if the problems in Europe have too great of an effect on the US economy. These moves would almost certainly have people running back into the gold trade, and the move up from there could actually accelerate as the market runs from both the Dollar and the Euro at the same time.

Technically speaking, the $1,500 level should be massive support if we fall that far. The $1,500 to $1,600 area is one big massive support area, hence us not being overly enthusiastic to sell this market. In fact, we are presently flat in it as selling has been such a good way to lose money since the turn of the century. The market will be a screaming buy in the future, but we simply don’t see the price action telling us that we could be there yet. Stay tuned to our videos as these signs do appear, and in this market that could means months of profits.

Gold Forecast December 28, 2011, Technical Analysis
Gold Forecast December 28, 2011, Technical Analysis

 

Brazil Surpasses England as 6th Largest Economy

Brazil has become the 6th largest economy in the world, surpassing Britain. The most recent figures from the Centre for Economic and Business Research‘s annual world economic league showed that the England is now the seventh richest country in the world, and has fallen behind a South American nation for the first time. Brazil is a member of what is commonly known as BRIC nations, including Russia, India and China. Brazil in on the path to becoming a world powerhouse.

The United States, China, Japan, Germany and France occupied the top five places, with India occupying the tenth spot on the new listing.

According to the report, Brazil’s economy has grown because of vast reserves of natural resources and a rapidly growing, and cash-rich, middle class and has been aided by the global economic slowdown. At the same time the UK languishes in the grip of a national debt crisis and lack of bank credit.

The English continue to be better off and enjoy a far higher standard of living than the vast majority of people in Brazil but the latter’s 203 million population provides huge economic clout the report said.

Brazil has a variety of natural resources to rely on including gold and silver as well as oil off-shore and minerals in the Amazon. By contrast the UK economy is affected by the problems of the eurozone.

Brazil is one of the fastest-growing major economies in the world with an average annual Gross Domestic Production growth rate of over 5 percent. In Brazilian reais (currency), its GDP was estimated at R$ 3.143 trillion in 2009. The Brazilian nation has been predicted to become one of the five largest economies in the world in the decades to come. Brazil is a member of diverse economic organizations and its trading partner’s number in the hundreds, with 60 percent of exports mostly of manufactured or assembled goods.

The World Economic Forum stated that, Brazil was the top country in upward evolution of competitiveness in 2009, gaining eight positions among other countries, overcoming Russia for the first time, and partially closing the competitiveness gap with India and China among the BRIC economies.

Important steps taken in the past 25 years towards fiscal sustainability and responsibility, as well as measures taken to liberalize and open the economy, have significantly boosted the country’s competitiveness fundamentals, providing a better environment for private-sector development.

The home of advanced technological sector, Brazil develops projects that range from submarines to aircraft and is involved in space research: the country possesses a satellite launching center and was the only country in the Southern Hemisphere to integrate the team responsible for the construction of the International Space Station (ISS). It is also a pioneer in many fields, including ethanol production.

Brazil, is on its way to becoming the next powerhouse.