Gold Forecast Dec. 07, 2011, Fundamental Analysis

Gold prices remained under pressure on Tuesday, as fears continued to dominate global financial markets over the outlook of the European debt crisis after rating agency Standard & Poor’s announced it could downgrade the credit rating of 15 euro zone countries including Germany and France. Standard & Poor’s also signaled it could downgrade the credit rating of the European Financial Stability Facility EFSF.

Investors opted to stay away from gold amid the levels of volatility in markets and due to the huge uncertainty that is surrounding the outlook, where gold prices continue to fluctuate heavily, which forced investors away from gold, since it had lost its safe haven appeal due to rising volatility in markets.

Traders will continue to monitor the developments from Europe regarding the debt crisis, where the focus will turn to the EU summit, as European leaders continue their efforts to find a resolution to the debt crisis.

Accordingly, we still expect volatility to continue to dominate gold prices over the course of this week, as investors will be also eyeing the ECB meeting later in the week amid rising pressures from investors for a bigger role for the ECB to ease the debt crisis.

Mixed Sentiments Dominate, as S&P Warns Europe of Possible Debt Downgrade in Cautious Trading

Mixed feelings dominated financial markets on Tuesday amid the lack of economic data from the United States, as fears continued to dominate global financial markets over the outlook of the European debt crisis after rating agency Standard & Poor’s announced it could downgrade the credit rating of 15 euro zone countries including Germany and France. Standard & Poor’s also signaled it could downgrade the credit rating of the European Financial Stability Facility EFSF.

Nonetheless, better than expected factory orders from Germany provided some hope for investors, where factory orders increased by 5.2% in October, better than median estimates of 1.0%, while compared with a year earlier, factory orders increased by 5.4%, also better than median estimates of 1.9%. Moreover, GDP data from the euro zone for the third quarter came in line with median estimates.

Meanwhile, the Bank of Canada left the benchmark interest rates unchanged at 1.00% in line with median estimates, where the BOC signaled that the European debt crisis could weigh down on global economic growth. Nonetheless, the BOC signaled that rising economic activities in the United States represent a good sign for the outlook, since the United States is indeed Canada’s largest trading partner. Canada also released the Ivey PMI for November, which rose to 59.9, better than median estimates of 55.5.

The U.S. dollar fell slightly against a basket of major currencies on Tuesday, where the U.S. dollar index was trading at 78.62, compared with the opening level at 78.71. The Euro was little changed against the Dollar, where the EUR/USD pair traded at $1.3383, compared with the opening level at $1.3386, the British Pound also fell against the Dollar, where the GBP/USD pair traded around $1.5601, compared with the opening level at $1.5642, and the U.S. dollar fell slightly against the Japanese Yen, where the USD/JPY pair was trading around 77.75, compared with the opening level at 77.80.

Stocks in the United States were mixed by opening on Tuesday, as the Dow Jones Industrial Average was up by nearly 0.25% to trade around 12,129, while the S&P 500 index was down by nearly 0.05% to trade around 1256. European stock indexes were also mixed before closing on Tuesday, where FTSE 100 was higher by nearly 0.20% to trade at 5579 and the DAX was down by nearly 1% to close around 6043.

Gold prices remained under pressure and dropped to trade now around $1709 an ounce and crude oil prices were little changed to trade around $100 a barrel.

EUR/USD Forecast Dec. 07, 2011, Fundamental Analysis

The EUR/USD fluctuated heavily on Tuesday after S&P issued a new warning for the eurozone members and placed 15 nations under review with a threat of downgrades that might eventually lead to an EFSF downgrade.

Standard & Poor’s was the highlight of the day after the late surprise on Monday that continued into Tuesday with warnings that if the European leaders again fail to produce something solid this week the rating could be cut as soon as that. The agency also placed the top six and grantors of the EFSF under review the triple-A rated Germany, France, The Netherlands, Austria, Finland and Luxembourg could take a hit with one notch downgrade as it said on Monday and followed the warning with another on Tuesday saying the EFSF long term credit rating could be downgraded if the euro zone nations are downgraded and will take the lowest grate of the mentioned grantors.

This is renewed pressure on the market sentiment and on the euro which eased the hope for the summit ahead and increased the risk of its failure as it will further complicate the crisis once the major economies are downgraded and if the EFSF loses its top notch rating!

On Wednesday the anxiety will increase for sure with the eyes on the ECB on Thursday ahead of the summit and investors are really anxious to see what the final decision from Europe will be, are they going to make it or break it once and for all this time.

Germany will start the session at 11:00 GMT with the Industrial Production index for October, where the non-seasonally adjusted annual index is projected to expand by 3.2% from 5.4%, while the seasonally adjusted monthly index could have expanded by 0.3% from the previous drop of 2.7%.

The United States will join the session at 20:00 GMT with the Consumer Credit figure for October, which could have declined to $7.000 billion from $7.386 billion.

EUR/CHF Forecast Dec. 07, 2011, Fundamental Analysis

Despite the volatility seen for the euro on Tuesday the EUR/CHF still found the space to move to the upside after the Swiss data signaled rising deflation threats and raised expectations for the SNB to take action.

As we previously expected, rising deflation threats means a stronger EUR/CHF, the SNB stated numerously its readiness to take action if the economy needed and to support stability the CPI fell 0.5% on the year and dropped 0.8% in EU harmonized means which is assuring of the mounting pressures. Also the foreign currency reserves ticked higher in November that further signaled to markets that the SNB might move and really soon.

We still expect further franc softness until the SNB expectations wane again with no remarks from the bank as they will likely await till the critical ECB and EU Summit conclude to see what the next course of action will be and how aggressive to they need to be in defending the economy.

As of 05:15 GMT, the Swiss economy will release unemployment for Nov. with expectations referring to steadiness in the seasonally adjusted reading at 3.0%.

Germany will start the session at 11:00 GMT with the Industrial Production index for October, where the non-seasonally adjusted annual index is projected to expand by 3.2% from 5.4%, while the seasonally adjusted monthly index could have expanded by 0.3% from the previous drop of 2.7%.

GBP/USD Forecast Dec. 7, 2011, Fundamental Analysis

On Tuesday trading, amid the absence of data from both economies, the pair followed the general sentiment in the market which is fueled with concerns after Standard & Poor’s warned the euro-area nations with a possible credit rating cut in case European leaders failed to quell jitters and tackle the debt crisis during the coming summit on Friday.

S&P also has placed the debt rating of 15 nations of the euro zone on a negative review as S&P said “systemic stresses” are growing up, while credit conditions tighten in the euro zone.

The warning put European leaders under pressure before they gather on Friday in the awaited summit that will probably involve change in treaty to resolve debt crisis.

The jittery situation gave support to the dollar as the most favorite refuge, where eyes will be in the EU summit on Friday to see whether European leaders would be able to introduce stricter budget discipline.

Thereafter, the pound continued its decline after the BoE said it will introduce a new contingency liquidity facility, in response to the turbulences engulfing financial markets, where this facility would allow the bank flexibility in offering sterling liquidity on short term basis in case of any shortage stemming from the volatility in markets.

On Wednesday, at 09:30 GMT, manufacturing and industrial production reports will be available, where manufacturing reading will show 0.2% drop in Oct. from 0.2% in Sep. In the U.S., MBA mortgage applications for Dec. 2 at 12:00 GMT.

The data is expected to affect the pair due its importance, yet it is expected to be also affected by the general sentiment which is tracking the latest developments in the euro region.

USD/CHF Forecast Dec. 7, 2011, Fundamental Analysis

On Tuesday trading, the Swiss franc weakened against the dollar after a report showing that Swiss consumer prices dropped 0.5% from a year earlier, marking the sharpest drop since Oct. 2009, raising speculations the SNB would intervene again to boost the economy especially as the most recent data showed slowdown in growth along with the fall in inflation.

Other data from Switzerland showed that the SNB’s holdings of reserves dropped to 229.3 billion Swiss francs compared with a revised CHF245.0 billion in October

Last week, the Swiss economy recorded 0.2% expansion in the third quarter compared with the revised 0.5% in the second quarter and median estimates of 0.1%, while PMI manufacturing showed further contraction to 44.8 in Nov. from 46.9 in Oct.

Moreover, the pair followed the general sentiment in the market which is fueled with concerns after Standard & Poor’s warned the euro-area nations with a possible credit rating cut in case European leaders failed to quell jitters and tackle the debt crisis during the coming summit on Friday.

S&P also has placed the debt rating of 15 nations of the euro zone on a negative review as S&P said “systemic stresses” are growing up, while credit conditions tighten in the euro zone.

The warning put European leaders under pressure before they gather on Friday in the awaited summit that will probably involve change in treaty to resolve debt crisis.

The jittery situation gave support to the dollar as the most favorite refuge, where eyes will be in the EU summit on Friday to see whether European leaders would be able to introduce stricter budget discipline.

On Wednesday, as of 05:15 GMT, the Swiss economy will release unemployment for Nov. with expectations referring to steadiness in the seasonally adjusted reading at 3.0%.  In the U.S., MBA mortgage applications for Dec. 2 at 12:00 GMT.

The data is expected to affect the pair due its importance, yet it is expected to be also affected by the general sentiment which is tracking the latest developments in the euro region.

USD/JPY Forecast Dec. 07, 2011, Fundamental Analysis

The USD/JPY pair dropped for the second day as demand increased for safe assets, after Standard & Poor’s announced it may cut the credit ratings for France, Germany and other countries from the EU region.

The Japanese yen strengthen against of its major counterparts as a safe haven currency, due to concerns over the gloomy outlook for the euro area.

On the other hand, the greenback advanced against other major currencies, as risk aversion returned to the market during the Asian session pushing the higher-yielding currencies to the downside.

On Wednesday at 05:00 GMT, Japan will issue the preliminary reading for Leading Index for October, where it’s expected to come at 91.5 the same inline with the previous reading.

The preliminary reading for the Coincident Index for October had a prior reading of 89 and it’s expected to come at 90.2.

The U.S. economy will release the Consumer Credit for October at 20:00 GMT, where it’s expected to come at $7.00 billion compare to the previous reading of $7.386 billion.

AUD/USD Forecast Dec. 07, 2011, Fundamental Analysis

The AUD/USD pair dropped to its lowest level in four days after the Reserve Bank of Australia cut interest rate by 25 basis points to 4.25%, which reduced demand for Aussie pushing the pair to the downside.

The RBA indicated that the inflation retreated during the last period, which helped the central bank approach a more easing monetary policy. The central bank statement increased bets for a possible rate cut in the upcoming period.

On the other hand, the greenback soared against other major currencies as a safe haven, after Standard & Poor’s announced it may cut the credit ratings for France, Germany and other countries from the EU region.

The Australian dollar tried to reflect its downside movement last week, as it increased to its highest level in almost three weeks, but after the RBA decision the Aussie may lose more ground against the dollar.

On Wednesday at 22:30 GMT (Tuesday), Australia will issue the AiG Performance of Construction Index for November, where it had a prior reading of 34.7.

At 00:30 GMT, Australia will release Gross Domestic Product for the third quarter, where it’s the expansion is expected unrevised at 1.2% while the annual Gross Domestic Product is expected to grow by 2.3% compare to the previous reading of 1.4%.

The U.S. economy will release the Consumer Credit for October at 20:00 GMT, where it’s expected to come at $7.00 billion compare to the previous reading of $7.386 billion.

NZD/USD Forecast Dec. 07, 2011, Fundamental Analysis

The NZD/USD pair dropped to its lowest level in four days, as the greenback advanced against most of its major counterparts after risk aversion returned to the FX market.

Concerns over the EU region outlook increased after Standard & Poor’s announced it may cut the credit ratings for France, Germany and other countries from the EU region.

Investors increased demand for lower-yielding currencies as a safe haven, which pushed the pair to the downside to end last week’s gains.

On Wednesday at 20:00 GMT, the Reserve Bank of New Zealand will release its interest rate decision, where it’s expected to keep the rate steady at 2.50%.

The U.S. economy will release the Consumer Credit for October at 20:00 GMT, where it’s expected to come at $7.00 billion compare to the previous reading of $7.386 billion.

Risk Aversion on S&P’s Downgrade Warnings to Europe

Pessimism was seen across the broad markets today after Standard & Poor’s warned it might downgrade 15 European nations including Germany and France, spreading concerns in markets and boosting demand for lower yielding assets.

If European leaders will fail to decide on a credible plan during Friday’s summit that would solve the region’s debt crisis, six nations might lose their AAA credit ratings, spreading pessimism over the outlook of the European economy.

This ended the rally seen since last week in the global equity markets, as risk aversion increased demand on safe haven. Investors must be cautious over the coming period ahead of the ECB meeting and the EU summit later this week.

As uncertainty continues to surround the outlook of the European debt crisis the Australian central bank cut its interest rate by 25 basis points to 4.25% to sustain growth, signaling that Europe’s efforts to end the debt crisis are still not enough.

We expect markets to remain under pressure since more pessimism might be spread among traders ahead of the ECB’s meeting and EU’s summit. US lack the economic data today. While in Europe the GDP was unrevised at 0.2% in Q3.

In Asia stocks fell as the regions is facing “much greater downside risks”, and Nikkei 225 ended lower 1.39%, while Hang Seng closed 1.24% down. InEurope, FTSE 100 fell 0.23% while DAX fell 1.09%.

The euro is trading with some bearish momentum around the 1.3390 level, while the pound is hovering around the 1.5650 as of this writing. The USD is almost unchanged around the 78.55 level. The yen is rising trading around 77.65.

Oil is almost unchanged trading around $100.88 on the euro zone downgrade risks, while gold is trading around $1719.50. The AUD fell today trading around 1.0225 after the RBA lowered rates to 4.25%.

Australia Interest Rates Cut by .25%

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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