AUD/USD Forecast Dec. 16, 2011, Fundamental Analysis

AUD/USD Forecast Dec. 16, 2011, Fundamental Analysis
AUD/USD Forecast Dec. 16, 2011, Fundamental Analysis
, as Aussie lost more ground against the U.S. dollar due to risk aversion that controlled the FX market during the latest period.

The U.S. dollar is the main focus in the FX market as a safe haven currency, after the latest decisions from the EU leaders did not provide confidence in the financial market, which opened the way for lower-yielding currencies to record more gains.

The AUD/USD pair is expected to drop further, as the risk aversion reduced demand for the higher-yielding currencies opening the way for the pair to drop, while the latest Australian fundamentals did not offer any support for the Aussie, which continued to decline versus the dollar.

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%.

AUD/USD Forecast December 15, 2011, Technical Analysis

AUD/USD fell on Wednesday as the risk off trade came back into vogue again. The parity level has been broken though, and the gap from two weekends ago looks set to be filled. The 0.97 level looks to be the target and knowing this we are willing to sell rallies and a break below the Wednesday low. The pair cannot be bought at this point in time as the commodities markets are falling apart presently. The Aussie will continue to get punished in this “risk off” environment.

AUD/USD Forecast December 15, 2011, Technical Analysis
AUD/USD Forecast December 15, 2011, Technical Analysis

Central Bank Actions Dec 14, 2011

Norway’s central bank cut its key policy rate by half a percentage point, to 1.75%, in a bid to dampen the effects of financial market turbulence. Norges Bank said market funding for Norwegian banks has also “become more expensive and less accessible.”

International Monetary Fund, Xinhua Zhu Min, said here today that the European debt crisis by drag, slowing world economic growth, this will make the world’s estimated 27 million people into extreme poverty.

Zhu said, the past five, a series of low-income countries suffer from food crisis, financial crisis, and debt crisis in Europe as well as attacks. Face of the first two crises, as 10 to try to build “policy barriers” reduce the budget deficit, current account deficit and foreign debt, low-income country’s economy is still strong growth in sub-Saharan African countries such as 2010 the average economic growth rate reached 5.4%, the performance is quite good.

The Bank of England director Adam Posen said, the bank may need to expand the size of bond purchase program up to 100 billion pounds (about $ 158 billion) to the UK to support the economic recovery process.

Director Posen said in a speech today: “We should be in the next three years on the secondary market to buy at least 50 billion pounds (about $ 79 billion) debt, mainly tend to buy long term the national debt. In view of the future situation is likely to be due to external developments is expected to become worse, I propose a more ‘quantitative easing’ measures, the amount should be 750 million pounds (about 118.5 billion U.S. dollars), or 100 billion pounds. “

The Reserve Bank of Australia released a report today stating that, Central bank intervention in foreign exchange markets has only short-lived results that are of limited value, according to a report from.

The report reviews each period of intervention by the Reserve Bank of Australia since the nation’s currency was floated in 1983. It says the foreign-exchange market has evolved to where participants are now better equipped to manage their own risk. As a result, intervention has become less frequent and more targeted, and should be reserved chiefly for periods of market dysfunction.

The bank, using regression analysis, also gauges the effectiveness of its past interventions, concluding that the results illustrate the inherent limitations of intervention, which it says policymakers need to be aware of.

The Peoples Bank of China may continue to lower the reserve requirement ratio for banks and even cut interest rates next year, as the government shifts its policy priority toward stabilizing economic growth, the state-run China Securities Journal said in a front-page editorial Thursday.

“The growth rate of its money supply and the new Yuan loans issued by Chinese lenders in 2012 will likely increase moderately from 2011,” the influential financial newspaper wrote.

The editorial was in response to the conclusion Wednesday of the Central Economic Work Conference, a key annual policy setting meeting, during which the country’s top leaders pledged to maintain economic growth and social stability next year amid a deteriorating global economic climate.

The Reserve Bank of India, facing mounting evidence of slowing growth and risks of a spillover from the crisis in Europe, is widely expected to pause its monetary-tightening campaign on Friday.

But the rupee’s slide to record lows and persistent inflation pressures mean that unlike most emerging-markets central banks, the RBI isn’t expected to start cutting interest rates any time soon.

US Federal Reserve reiterated that the fed funds rate at zero to 0.25 percent level at least until mid-2013 the same, in order to stimulate employment and economic recovery in the United States.Announcing that they will continue to sell U.S. short-term government bonds, and buying mortgage-backed securities and reinvest the principal policies to buy more Fannie Mae, Freddie Mac and other institutions to issue agency mortgage-backed securities to help depressed real estate market.

European Central Bankpolicymaker Christian Noyer said on Thursday that a downgrade of France’s AAA credit rating would not be justified and ratings agencies are making decisions based more on politics than economics. may n$

AUD/USD Forecast Dec. 15, 2011, Fundamental Analysis

The AUD/USD pair tried to cover some of its previous losses with slight gains early Wednesday, where the pair is trading near its lowest level in two weeks as the greenback soared against other major currencies.

The Strong US dollar was supported by two factors: the risk aversion which dominated the FX market and increased demand for the safe haven dollar, and the other factor is the FOMC decision which did not carry any surprise to the market, keeping the greenback on the upside track.

Aussie was able to record some gains against the greenback before the FOMC meeting, in a correctional move and supported by slight relief after a successful bond sale from Spain and the EFSF but the effect did not last as the overall debt woes remain strong.

On Thursday at 23:30 GMT (Wednesday) Australia will release the Consumer Inflation Expectation for December, which had a previous reading of 2.5%.

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.

Pessimism Dominate Markets as the Feds Refrained From Offering New Stimulus

As concerns about the European debt crisis are deepening while the Feds offered no new stimulus to boost the economy yesterday, demand for safe haven is still high as investors are avoiding the riskier higher yielding assets.

The Feds offered no new measures to stimulate the economy although growth is modest, yet they warned from the downside risks from Europe’s debt crisis. More downside pressures were imposed by the weak U.S. retail sales report yesterday.

Today German Chancellor Angela Merkel is expected to give a statement to the German parliament about last week’s summit, while OPEC will meet to discuss oil production targets, with projections to keep oil output at current levels.

Markets will follow today a bond auction from Italy and Germany worth a combined 8 billion euros, and later in the day the U.S. will release its EIA crude oil inventories report and its import prices index.

IMF said that Greek GDP will contract 6% in 2011 compared to a Greek projection of a 3% contraction, while the German IFO institute cut its 2012 growth forecast for Germany to 0.4% from 2.3%, confirming the depth of the crisis in the region.

As the economic environment continues to deteriorate Asian stocks dropped today as risk aversion is still fueled by caution, Nikkei 225 fell 0.39% while Hang Seng was down 0.50%. In Europe DAX fell 0.51%, and CAC 40 fell 1.01%.

Today inflation slowed to the lowest in a year in India, in Japan the industrial production fell to 2.2% in Oct., in China the money supply growth was the weakest in 10 years, in UK unemployment hovered around the highest level in 17 years, while in Europe the industrial production fell to -0.1% in Oct.

Such disappointing results highlight the risks of a deeper slowdown in the global economy, while Europe’s possible downgrade continue to weigh on sentiment leaving currency markets moving in tight ranges.

Caution is keeping the euro and the dollar index moving in tight ranges today, where the USD is trading around the 80.25 level, while the euro is trading around the 1.3035 level, while the yen is trading around the 77.95.

The pound however gained slightly, trading now around the 1.5500 level as the unemployment report matched expectations. The AUD is almost unchanged and is currently trading at 1.0015 while the CHF is trading in a tight range around the 0.9460.

Today’s light trading is keeping the commodities in a tight range, yet with mixed results, where oil is trading with bearish momentum around the $99.60 level, while gold is recovering some of the losses, trading now around the $1635.30.

AUD/USD Forecast December 14, 2011, Technical Analysis

AUD/USD initially tried to rally on Tuesday but found itself selling off later in the session. The resulting candle is a shooting star that sits just above the parity level, an ominous sign in and of itself. The breaking below the parity level signals that the market is ready to fill the gap from two weekends ago, and that would see this pair go down to the 0.97 handle at least.

We aren’t buyers of this pair currently at all. The global “risk off” scenario should continue to be the stronger attitude, and with that in mind, we are not willing to buy the commodity currencies at all, Aussie included. A break below the parity level for more than an hour has us selling for 0.97 or so.

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

The Last Federal Reserve Meeting of the Year

The last Federal Reserve meeting of the year will take place today, the meeting will not focus on the potential rate cut and if announced it will only be a small sideline of the meeting. Today the Fed will be busy planning and discussing 2012.

While today’s meeting is likely to produce any explicit action Chairman Bernanke and associates are busy at work behind the scenes trying very hard to make the holiday season, and the outlook for 2012, a little brighter. A statement is expected at 2:15 p.m. There will not be a press conference by Bernanke.

Economists are hoping that the Fed will engineer another round of asset purchases, or quantitative easing, early next year with a good chance they will also buy mortgage-backed securities in the first half of the year, possibly as early as January, that would be a good step for the banks and would unfreeze a lot of lending power giving the banks additional liquidity.

The economy is slowly recovering, retail sales were not as good as expected for November, after all the hoopla on Black Friday, but there was a slight increase for the month. Unemployment is down, jobs are up a bit and GDP is moving along slowly but moving in positive steps, not like most of Europe.

Ben Bernanke is a slow and cautious Chairman, and he will most likely take a sit and let’s see attitude through the holidays. The Fed also needs time to see the possibilities of Europe pulling itself up before they have a full blown recession.

The purpose of the asset purchases at this juncture would be to help stabilize the financial system and alleviate interest rate risk and uncertainty. It looks more and more likely that we will hear some news about QE3 in today’s announcement as there is a good probability we will see the use of QE3 right after the first of the year.

The Fed is expected to leave the bank’s key interest rate at an historic low range of 0% to 0.25%. This will be the third anniversary of rates near zero, a sign of just how weak the economy remains.

The Fed is expected to maintain its guidance that it intends to keep rates near zero until mid-2013 given its expectations for the economy. This guidance will be central to the Fed’s discussions at the meeting.

Analysts think the Fed will spend the bulk of the meeting fleshing out details of a planned overhaul of how they signal policy plans. Some positive commentary from the Fed might drive and US markets and the USD to significant gains today.

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

The AUD/USD pair covered some of its previous losses, as the US dollar retreated slightly against other majors after in a correctional movement after its prior gains.

Moody’s Investors Service announced it may put the ratings of eight Spanish banks on review for possible downgrades, which fueled concerns about the spread of the sovereign debt crisis in the EU region.

The current market sentiment added more pressure on the higher-yielding assets, as investors preferred the safest assets in the current unstably financial market, which increase demand for the US dollar and the Japanese yen as safe haven currencies over the short term.

On the other hand, the Asian shares dropped on the bets that the EU summit’s measures may fail to solve the EU sovereign debt crisis, which increased pressure on the Australian dollar and prevent it from recording more gains.

On Wednesday at 23:30 GMT (Tuesday), Australia will release Westpac Consumer Confidence for December, where it had a previous reading of 6.3%, while the Westpac Consumer Confidence Index had a prior reading of 103.4.

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.

AUD/USD Forecast December 13, 2011, Technical Analysis

AUD/USD got absolutely hammered on Monday as traders sold off most commodities. With the backdrop of a weakening EU and Chinese growth seemingly slowing down – the commodities markets got hit hard during the session. The Aussies supply the Chinese with much of their commodities that are used in construction and the like, and as a result it is often the Chinese economy that moves the Aussie more so than the Australian one.

The deleveraging of hedge funds and large traders could continue to push this pair lower over time as the worries seem to only compound over time. The rising bond rates all over the EU continue to punish anything risk related as well, and we should see that most rallies in this pair will fall going forward.

The parity level is just below, and should be massively supportive. The area has been violated several times, but a bounce isn’t exactly out of the question at this point. The level being broken to the downside could be a catalyst to fill the gap from a couple of weekends ago and push price down to about 0.97 or so. The upside seems to be capped by the 1.04 level as the most recent top saw a serious struggle to break it, and consequent failure. The level now will be the start of the resistance band all the way back to the 1.05 handle.

Because of these factors, we are willing to sell all rallies on weakness and will not buy the pair at this time. There are simply far too many problems around the world to consider going too far out on the risk spectrum and with this in mind, the pair will continue to struggle going forward. The events in Europe and China simply aren’t positive enough right now to consider such risky trading. The US Treasury notes should continue to attract bidders, and because of this the US Dollar continues to be in demand going forward. Until there is a clear and concise solution for the EU issues, we are sellers of rallies in this pair.

AUD/USD Forecast December 13, 2011, Technical AnalysisAUD/USD Forecast December 13, 2011, Technical Analysis

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

The AUD/USD pair fell with the beginning of the week as the US dollar advanced against most of its major counterparts amid risk aversion that controlled the FX market.

The Australian dollar lost momentum against the greenback and other majors after the Australian trade surplus narrowed more than expected, reducing demand for the Aussie.

On the other hand, the US dollar was able to regain grounds against other majors as risk aversion dominated the market after the EU leaders’ summit failed to provide the market with solid measures to contain the debt crisis.

On Tuesday at 00:30 GMT, Australia will issue NAB Business Confidence for November, which had a previous reading of 2, while the NAB Business Condition had a prior reading of –1.

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.

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

AUD/USD had originally fallen on Friday, only to bounce again and form a hammer in a very supportive manner just above the obvious parity support level. The recent consolidation has focused on the 1.03 level, which has acted like a magnet for price and it looks like this could continue. We think that the global headwinds could continue, and the upside in this “risk on” pair should be somewhat limited. Because of this, we are willing to sell the rallies as long as we stay under the 1.05 level. The gap from two weekends ago still needs filled, and should be fairly soon.

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

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

The AUD/USD pair recently rose back above the parity level, and has since been very volatile. This makes sense as it is so sensitive to headline risk. The markets have been acting erratically lately, and this pair shows that emotion-fueled trading quite well. Choppiness should continue as the markets continue to digest the issues surrounding not only Europe, but potential slowing down in China as well. The weekly candle is a doji, and this shows just how directionless this pair is right now. In order to get long, we will need to see a weekly close above the 1.05 level, and shorting would be under parity. Until then, we are simply watching – but prefer shorting as the panic trading seems to rule over all every couple of days.

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

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

The AUD/USD pair retreated last week as the Australian dollar lost momentum after the Reserve Bank of Australia cut interest rates, which reduced demand for the Aussie

The AUD/USD pair is expected to drop further as the risk aversion reduced demand for the higher-yielding currencies opening the way for the pair to drop, while the latest Australian fundamentals did not offer any support for the Aussie.

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 00:30 GMT, the Australian economy will release Home Loans for October which is expected to remain flat after rising 2.2% the previous month.

At the same time, the Trade Balance for October will be released and expected to show a narrowing trade surplus of A$2000 million from A$2564 million.

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.

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

The AUD/USD pair dropped significantly last week to relinquish the previous gains, as the current market sentiment and the Australian economy outlook did not support Aussie against the greenback.

The Reserve Bank of Australia cut interest rate by 25 basis points to 4.25%, as inflation retreated during the last period which helped the central bank to move for further easing to support growth amid the global economic uncertainty and rising downside pressures.

On the other hand, the unemployment rate in Australia during November increased to 5.3% from the previous 5.2%, where the economy cut 6.3 thousand jobs for the first time in three months.

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 AUD/USD pair is expected to drop further, as the risk aversion reduced demand for the higher-yielding currencies opening the way for the pair to drop, while the latest Australian fundamentals did not offer any support for the Aussie.

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

Monday December 12:

On Monday at 00:30 GMT, the Australian economy will release Home Loans for October which is expected to remain flat after rising 2.2% the previous month.

At the same time, the Trade Balance for October will be released and expected to show a narrowing trade surplus of A$2000 million from A$2564 million.

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 00:30 GMT, Australia will issue NAB Business Confidence for November, which had a previous reading of 2, while the NAB Business Condition had a prior reading of –1.

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 23:30 GMT (Tuesday) Australia will release the Westpac Consumer Confidence for December, where it had a previous reading of 6.3%, while the Westpac Consumer Confidence Index had a prior reading of 103.4.

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 23:30 GMT (Wednesday) Australia will release the Consumer Inflation Expectation for December, which had a previous reading of 2.5%.

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%.

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.

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

AUD/USD had a rough day on Thursday as it both shot straight up, and then fell apart. The original move was in reaction to the EU announcement of a rate cut, something the market desperately wanted. The initial reaction was short-lived though as the statement was trumped by the news conference that Chairman Draghi gave afterwards. The lack of ECB commitment to buy bonds in Europe spooked the markets, and it was all downhill from there.

There were several rumors coming out over the course of the day, and the markets reacted in kind to them. The AUD/USD actually broke the bottom support level we have been watching as represented by the hammer from Tuesday and Thursday of last week. That level was pierced and represents a real attempt at breaking the support overall. If this level can be broken back below, the market will look very bleak for the Aussie as it is a risk-related currency.

The gap from two weekends ago is calling it appears, and if we are to close it – a failure to come to a widely accepted agreement out of the EU summit on Friday could be the catalyst to see us try and fill it. If so, this pair can head back to 0.97 over the course of the next several days. In fact, it could be in a very short time as it is quite possible we could see panic at that point.

The upside might be somewhat limited as the 1.05 is massive resistance. The Aussie will react to market sentiment overall, and we think that the odds are certainly stacked against the bullish case. However, the meeting can produce headline events – and we think the real move will come after that announcement. In the mean time, it is possible that we will see choppy movement. The breaking of the daily range on Thursday has us selling this pair aggressively as the gap will more than likely be filled in short order, and the Dollar will continue to be favored in this scenario. If we rally, there will still be stagnation in the EU, and the world economy could very well slow down. At the 1.05 level – we would look for shorts as well.

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

Caution Ahead of ECB’s and BoE’s Meetings

Markets are cautious and volatile ahead of ECB’s and BoE’s monetary policy meeting later today, as well as Friday’s EU summit, since some traders doubt the European leaders’ ability to come up with a clear plan that would solve the two-years-old debt crisis.

Investors are locking in their profits ahead of ECB’s and BoE’s last monetary policy meetings for this year, where European policy makers are believed to cut rates to record low at 1.00%, while BoE may hold rates steady awaiting for more measures from Europe.

Global conditions continue to be unstable, and the confirmation came this morning from the Australian unemployment rate which unexpectedly rose to 5.3% in Nov. from 5.2% previous, while Japan’s machinery orders unexpectedly fell in Oct. to -6.9% on strong yen and slower global demand.

Meanwhile South Korea held rates steady at 3.25% today,New Zealand held rates steady at record low of 2.5%, while Indonesia maintained rates steady at 6%, all in an attempt to sustain growth as the downside risks imposed by Europe’s debt crisis are widening and weakening demand on exports.

However some hopes that EU leaders will announce strong measures to ease the euro zone debt crisis are seen across the broad markers today, providing some markets with bullish momentum. As a result European stocks managed to rise today at opening where FTSE 100 gained 0.27% while DAX rose 0.69%.

In Asia however stocks dropped today with Nikkei 225 loosing 0.66% while Hang Seng lost 0.69% as investors were seeking safer positions ahead of the crucial summit of European Union leaders and Japan’s GDP report set for early tomorrow morning with speculations of a downside revision for growth during Q3.

Europe will lack the economic data today, however the US will release the weekly jobless claims and the wholesales inventories. Yet the attention will focus on Europe’s rate decision and Mario Draghi’s press conference during which he might announce more aggressive measures to protect Europe from the debt crisis.

Currency markets are moving in tight ranges today awaiting the ECB’s and BoE’s monetary policy meetings, where the USD is almost unchanged around the 78.40 level while the euro is moving in a tight range around the 1.3400 level. The pound is trading around 1.5720 level and the AUD is trading around 1.0285 level.

The yen strengthened today as demand on safe haven widened in Asia today, while the limited movement seen by the USD is keeping commodities in tight ranges, where oil is trading around $100.90 per barrel while gold is trading around the $1740.50 per ounce level.

Fear Contagion – Who Is In Control In Europe

Fear is spreading throughout the markets today. Fear is spreading among government officials. Fear is spreading though business and corporations. Fear is spreading Bank to Bank.

With each hour, the possibility of a collapse of the EU becomes a stronger possibility. Merkel and Sarkozy, have an interesting proposition, a new treaty to solve future problems, but is it the right time to implement.

The markets are demanding immediate results and an immediate call to action. A new treaty however suggested, however presented will take a long time to implement and there is more and more concern that several countries will not be willing to sign such an agreement, many countries will need legislative approval, which could take a great deal of time. The question the markets are asking is how the EU will present a recovery plan when they do not have an agreement.

How will the ECB handle the situation, at present the Central Bank seems to have decided to act on their own, to implement a plan to protect the markets, avoid defaults and to maintain liquidity? The European Central Bank is expected to deliver its second rate cut in as many months on today. “The ECB will make no promises at its press conference on Thursday,” said Gilles Moec, economist at Deutsche Bank. European leaders need “to be as ambitious as possible on Friday. … Assuming a strong enough ambition and a broad enough consensus, we believe the ECB can increase its intervention thereafter.”

The hint has been credited with helping defuse tensions in the European bond market. Outright yields of Italian and Spanish government bonds have fallen sharply since Draghi’s remarks last Thursday, cutting the premium investors demand to hold peripheral government debt over German bonds.

Namely, investors will be looking for further clues that the central bank is willing to expand its bond-buying program after the ECB president last week told the European Parliament that “other elements might follow” if European leaders put together a credible “fiscal compact.”

With each passing moment, the likelihood of the euro failing becomes more and more inevitable; the likelihood of a breakup of the EU becomes a stronger possibility. The International Business Times reported the main news today was Germany trying to douse expectations for the EU Summit, via an anonymous official. That means that divisions remain and that European politicians may not be able to come together to agree on tough decisions in such a short timeframe.

Private and Public businesses are preparing themselves for the worse, the question is how do you prepare?

Gold  the safe haven has seen a rise on the daily chart and is currently trading at 1737.67 U.S. dollars per ounce, since the opening of trading at 1727.44 dollars an ounce. Oil has settled and is  trading near record highs, opening up to 101.25 dollars a barrel, and climbing since the opening of trading at levels of U.S. $ 101.31 a barrel.

Today’s Wall Street Journal: “An official said Germany was more pessimistic about the success of the summit than it was last week and said the European Financial Stability Facility and the permanent European Stability Mechanism, which is due to start in 2013, won’t run simultaneously, pouring cold water on earlier press reports. The official added that there were no additional resources planned for the ESM.”

Several economist say that this week’s meeting of the EU has the potentially of a make-or-break summit for the euro.