Markets and Investors Shrug Off ECB LTRO

The euro began climbing  this morning after strong demand in response to the European Central Bank’s first ever three-year refinancing operation, but slacked shortly after.

The ECB attempted to send a loud signal to  markets by offering to loan $641 billion to 523 euro-area banks in a massive three-year funding operation. If anything the ECB assured that European markets and currencies should be under control over the holiday season.

The funding move by the eurozone central bank, known as a longer-term refinancing operation, or LTRO, is open to lenders across the euro zone. The figure came in excess of market expectations of $408 billion. The loans run for three years.

A spokesperson with the European Central Bank‘s press office said that the central bank would not be releasing the names of the banks that applied for loans. Nor would it provide a breakdown of loans by euro-zone nation.

The LTRO operation was the first three-year funding operation undertaken by the central bank. The funds are borrowed at its average interest rate, which stands at 1%.

Having been already higher, the euro jumped to a session high of $1.3197 against the dollar immediately after the ECB’s announcement, before dropped back. In New York, the single currency was down 0.4 per cent on the day at $1.3026. Against sterling, the single currency was down 0.5 per cent at £0.8310.

European indexes added as much as 1.3% in the moments after the results of the ECB funding operation was released, but those gains all but disappeared.

Among the beneficiaries, Lloyds Banking Group PLC climbed 3.9% and RBS PLC gained 3.3% in London.

The FTSE 100 index rose 0.1% to 5,427.12, raised by bank stocks, but weighed by a 1.3% loss for BP PLC. The Stoxx Europe 600 index increased 0.1% to 238.90, following a 2% rise in the prior session, which was the biggest overall gain since Nov. 30.

French banks, BNP Paribas SA moved up2.7%, Credit Agricole climbed 1.6. The French CAC 40 index rose 0.3% to 3,063.13.

The German DAX 30 index moved up 0.3% to 5,866.28, prompted by a 3% rise for Commerzbank and a 2.7% rise for Deutsche Bank, Insurer Allianz rose 2.7%.

Sterling’s move higher was little influenced by minutes from the Bank of England’s December meeting.

The vote to leave policy on hold earlier this month was unanimous, but some members of the monetary policy committee noted that the fragile economic conditions, particularly in the labor market suggested “a further expansion of the asset purchase program might be warranted in due course”.

There was, however, equal uncertainty about inflation. The bank has consistently predicted a sharp fall in inflation in 2012, but there have been few signs so far that this will materialize.

Analysts played down hopes that the funds would help prop up euro-zone sovereign bond markets, despite the heavy demand, which was at the high end of the market’s expectations. All in all the markets ignored this move by the ECB, as the only beneficiaries seemed to have been the banks, but there still isn’t an overall plan to guide the eurozone out of the financial and debt crisis it is facing. Just a lot of banks bloated with money.

Investors Feel More Appetite for Risk as Sentiment Improves

Demand on higher yielding assets persisted today as the upbeat U.S. and German data yesterday alongside the easing worries over North Korea and the strong Spanish bond sale which pushed yields down, improved sentiment among traders.

The positive housing data from the U.S. yesterday and the unexpected improve in the German business confidence reversed the worries ignited by the possible downgrade to UK’s top-notch rating by Fitch.

The focus will turn today to the European Central Bank as it will announce the results of its first tranche of unlimited three-year loans, while Canada will release its retail sales and the US will release its existing home sales and the EIA oil inventories.

BoE released its meeting minutes today where the vote to keep the rate at 0.50% and the Asset Purchase Facility at 275 billion pounds was unanimous, as policy makers await the impact of the program that will end in February.

In Japan the central bank held its interest rate steady at a very low level of 0.10%, and kept the asset-purchase program unchanged, yet it lowered its assessment of the economy for the second month in a row.

In Asia stocks extend gains today on the upbeat US and German data, where Nikkei 225 rose 1.48% and Hang Seng rose 1.86%. Stocks rose in Europe as well where DAX gained 1.04% while CAC 40 gained 1.17%.

As risk appetite is improving, the euro continues to gain trading as of this writing around the 1.3150 level, while the pound is trading around the 1.5745 from the opening at 1.5659. the AUD also gained trading around 1.0178.

Meanwhile the safe haven USD weakened trading around the 79.45 level, which helped the yen to rise to 77.75, and provided commodities with a bullish momentum where oil is trading around $98.00 while gold is around $1636.60.

EUR/USD Forecast December 21, 2011, Technical Analysis

The EUR/USD pair rose on Tuesday as the market bounced from the 1.30 level. The rise has been rather strong, but it also gave up a lot towards the end of the session. The 1.31 level proved to be resistive, and the situation in Europe simply hasn’t improved, even with a fairly successful Spanish bond auction for the day. The breaking below the 1.29 level is the next sell signal that we could get, but in this low volume market during the holidays, it is possible that we won’t see it until January. No matter what, we aren’t buying the Euro at this point in time. A rally could be sold on weakness, as well as a daily close below 1.29 as well.

EUR/USD Forecast December 21, 2011, Technical Analysis
EUR/USD Forecast December 21, 2011, Technical Analysis

EUR/USD Forecast Dec. 21, 2011, Fundamental Analysis

The EUR/USDmoved to the upside on Tuesday and recovered on the back of hope that some progress is being made with high focus on the ECB auction this week, its first of the announce twin three year auctions.

Markets turned higher with stronger than expected German confidence and a very strong Spanish bond sale. Spanish short term borrowing costs dropped heavily allowing the nation to exceed its upper limit selling 3.7 billion of 3-month bills at an average yield of 1.7% from 5.11% the previous auction and sold 1.92 billion of 6-month bills at an average yield of 2.4% from 5.2%.

We saw a very positive reaction for the auction despite the fact that many downplayed the move as banks pilled the bonds to benefit from the ECB facilities and gear for the three-year loans to be auctioned on Wednesday.

Holiday volatility is clearing more by day and on Wednesday we expect more volatility with the lack of heavy data as the eyes will be centered on demand for the three-year loans at the ECB window as they announce the total bids and allotted amounts which is key for the markets and a very large number might as well be shocking and could send a jitter wave that the banking sector is indeed stressed, yet already expectations are for demand to be high that might reach as much as 300-400 billion euros.

At 15:00 GMT the US Existing Home Sales for November are due and expected with 2.2% rise to 5.06 million from 4.97 million.

Are the Ministers of the EU Countries Con Men and Scammers

I normally do not write commentary or opinions or even in the first person, but today, I was reading the Wall Street Journal and came across a story on how euro nations are going to try to prop up their banks.

I was totally amazed at what is being suggested. It is like a terrible con game, a fraud. Politicians and Government Officials along with Bankers have concocted a huge network of deceit and fabrication to circumvent the legal requirement of the International Monetary Fund. Does this mean that individuals and businesses can bend the rules, break the laws and use fraud and deceit in times of crisis?

There are a lot of convicted felons we should be releasing from prison if this is the case.

This chart looks like a giant scam or it is a Ponzi scheme or one of those other schemes that con men and scammers give great names to.

This is not a way to solve debt crisis or financial crisis, it is simply a way to move it from column A to column B. Ah, and maybe that is it, Chinese checkers.

The Italian government is encouraging banks to buy public properties that the banks then can use to borrow money. As part of a broader deficit-reduction program in Portugal, the government essentially is borrowing money from bank pension funds and could use some of the funds to help state-owned companies repay bank loans. Perhaps they should ask the mafia for assistance.

Maybe the EU should contact the drug cartels of South American and ask for a loan.

It is not only the Italians, it so the cash strapped governments throughout the EU.

Governments in Germany and Spain also are using unorthodox measures to support their ailing banks.

“Most of these backdoor-type schemes seem to be limited in size and don’t address the broader problem,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland.

If the EU cannot resolve their own problems or at least develop a plan to do so, why should the other nations of the world allow this type of behavior? In this case, I am in full support if the US uses their veto and pressures the IMF to avoid these type situations. The ECM, the IMF and the Finance Ministers of the World need to exert pressure on the leaders of the EU to come up with a definitive plan of action.

Each day we hear promises that fail to materialize. The Sarkozy-Merkel fiscal pact is in trouble. The Emergency Fund is unable to raise the funds that are needed. The promises of the EU Council, The EU Parliament and the EU Leaders seem to go up in smoke.

It seems that it is alright to bend the rules during times of crisis. The reason, governments, banks, funds, agencies develop rules and policies are to prevent them from acting improperly during times of need or crisis.

Commerzbank AG is negotiating with the finance ministry to transfer its troubled real-estate finance unit into a government “bad” bank. The bank and government are in talks about ways to structure the deal so it isn’t “considered” a bailout, possibly by protecting the government against some losses or paying the government a nominal fee, according to people familiar with the matter. I ask you is this correct, finding technical ways to hide the truth.

The Portuguese government is devising a complicated financial maneuver that could give the country’s banks The government just closed a plan to transfer banks’ future pension responsibilities to the state balance sheet in exchange for €6 billion in assets, which include cash, stocks and bonds. Most of the money will help the government meet deficit targets.

But about €2 billion may be shifted to struggling government-owned companies, such as transport providers. Under the plan, these companies would use the funds to pay off debts to Portugal’s banks.

“The move will allow debt repayments to public entities, contributing to a cut in loan-to-deposit ratios of Portuguese banks and helping the financing of the economy,” Finance Minister Vitor Gaspar told parliament recently.

Instead of raising more money through a Spanish government bailout fund, a central-bank spokesman said that tapping the deposit-insurance plan would leave the country’s budget goals this year intact. The deposit-guarantee fund will be refilled early next year, and the government will provide a back-stop in the meantime.

This just sounds like shift debt from place to place and hiding it away. We use to call it borrowing from Peter to pay Paul. I always thought it was illegal, it is most definitely unethical and it sure doesn’t solve any problems.

News From the ECB Moves Markets

If ever you wanted to see how important fundamental analysis is to understanding the forex markets and building a trading strategy yesterdays comments by European Central Bank President Mario Draghi dismissed the idea that the euro currency could break up, as he stated it was “irreversible “even as the ECB issued a report about the rising contagion risks posed by the sovereign debt crisis.

The markets and investors are edgy and every comment, press release, statement and rumor is affecting the markets.

Let’s follow the comments yesterday, as Mario Draghi made various different statements, speeches and comments during the day

Draghi, appearing before the European Parliament, said that the next year will be a painful one for European banks and the overall economy. But he said it was simply “morbid speculation” to talk about the demise of the euro.

“I have no doubt whatsoever about the strength of the euro, about its permanence, about its irreversibility,” he said. “The one currency is irreversible.”

The euro rose up 0.2% versus the dollar in trading Monday following the remarks.

In a later interview with the Financial Times, Draghi cautioned that euro-zone nations that depart the euro-area bloc would face severe economic difficulties, including high inflation. He also said that such nations would still need to pursue structural reforms.

This statement surprised the market as it seems to contradict his earlier statement in regards to the irreversibility of the euro stating it was “morbid speculation”

Investors are now asking which countries might leave the euro.

Another statement yesterday that surprised the markets was Draghi’s comments and rebuff of the possible downgrade of France’s debt.  “France losing its Triple-A debt rating shouldn’t be a “terrible thing” but that if France were downgraded, other nations likely would be as well.”I don’t know if France will lose its Triple-A. I hope not,” he said in response to a question of whether the nation will be downgraded. He further stated: ratings from the credit agencies are just one factor the ECB uses to assess collateral. Draghi, who again poured cold water on the idea of stepping up the pace of bond purchases, also said the U.S. needs to take structural reforms and said the U.S. labor market may be “too flexible.”

Markets dropped Draghi downplayed expectations that the ECB would be more aggressive in aiding struggling countries by widening its bond purchases, Draghi has reminded us over and over that the banks governing treaty “forbids monetary financing.”

The comments “put more nails in the proverbial coffin of having the European Central Bank step in as the lender of last resort,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.

“That’s disappointing to investors who view ECB purchases of debt issued by European countries nearly squeezed out of the bond market as an important tool in ending the sovereign-debt crisis.”

“That’s one solution seemingly removed,” noted Luschini.

Losses increased after a statement from European Union ministers, said euro-currency members had agreed on providing additional bailout funding via the International Monetary Fund, but fell short of the total funding the markets are expecting.


EUR/USD Forecast December 20, 2011, Technical Analysis

EUR/USD fell on Monday as the market continues to concern itself with the European debt crisis. The Euro is fairly untouchable at the moment, even if it is sitting right on the 1.30 level, an obvious support area. The market could bounce from this level, but it should only provide the prudent trader with an opportunity to sell from higher levels at this point. The Dollar is simply too strong for the Euro currently. We are selling rallies, and would sell aggressively if the daily chart closes below the 1.29 level.

EUR/USD Forecast December 20, 2011, Technical Analysis
EUR/USD Forecast December 20, 2011, Technical Analysis

EUR/USD Forecast Dec. 20, 2011, Fundamental Analysis

The EUR/USD started the week with choppy tradingon reaction to the news from rating agencies and also pressured by the news of the death of North Korea’s leader Kim Jong-il that left the dollar stronger on haven demand.

The euro remains weak in general with the start of a new week yet we can notice the quiet movement in the markets starting early ahead of the holidays. The pressure was seen from Fitch that downgraded the outlook for France to negative and also from Moody’s that cut Belgium’s credit rating yet the reaction was not very negative as the euro attempts to consolidate around $1.30.

We still have investors waiting on the finance ministers’ decision that are following up on the EU summit and the pledge to give the IMF 200 billion euros. The news might continue to drag into the session on Tuesday if they give any comment to ease the jitters though in general we expect trading to remain choppy and mixed.

Germany will release the Gfk Consumer Confidence Survey for January at 07:00 GMT which is expected to slow slightly to 5.5 from 5.6.

Also at 07:00 GMT we have the Producer Price Index from Germany which is expected with 0.1% gain in November after 0.2% and on the year to ease to 5.2% after 5.3%.

At 09:00 GMT we have the IFO survey for December were the Business Climate index is expected to fall to 106.0 from 106.6, the Current Assessment index to fall to 116.0 from 116.7 and the Expectations index to fall to 97.0 from 97.3.

The United States will start the day at 13:30 GMT with the November housing starts which are expected with 0.3% rebound to 630 thousand from 628 thousand. Building permits are expected to drop 1.8% to 633 thousand from 653 thousand.

Caution Still Hovering While US Stocks Managed to Rise

Concerns continue to spread within the broad markets since this morning persisting till the opening of the US session, since investors are heading towards the low yielding assets after the announcement of the North Korean Leader’s death.

Asian markets faced huge losses during today’s session, as Kim Jong’s death created fears regarding the global growth, noting that the Japanese relations may be affected after his death. Furthermore, the European finance ministers didn’t reach till now to a final solution on the issue of deficit.

Still, markets are facing escalating challenges due to the debt crises in Euro Zone which became a plague spreading all over Europe, and Fitch warned again of possible downgrades for some European nations, but eyes still focused on the finance ministers’ meeting, hoping that they will announce an additional aid.

On the other hand, US stocks managed to rise, as some reports showed that the holiday season’s online sales jumped 15%, noting that investors’ hopes regarding the European ministers’ meeting helped US stocks to incline at the opening of today’s session.

The euro is trading with some bearish momentum around the 1.3022, while the pound is trading around the 1.5521 level as investors were avoiding risks throughout today’s trading sessions.

The yen is trading around the 77.86 level. The AUD managed to trim some losses by the opening of US session trading around the 0.9957 level. The CHF is stronger today as demand on safe haven widened, trading around 0.9360 level.

As the USD was stronger and euro weaker commodities are mixed with gold loosing some of its gains and is trading as of this writing around the $1599.20 per ounce, while oil inclined trading around the $94.20 per barrel level.

Kim Jong-il Death Trigger Caution

Risk aversion was seen across the global financial markets today after North Korean leader Kim Jong-il, 70, died on Dec. 17 of a sudden illness. Demand on safe haven intensified on fears of regional instability.

Sharp losses were seen across Asia today while in Seoul Kospi Index fell by 3.43% as Kim Jong-il death triggered worries about global growth and muted hopes for nuclear talks with theUS.

In South Korea alert levels were raised while the central bank was asked to step in if needed to stabilize financial markets, since the future of this communist country is uncertain and the impact on the region is unknown.

Kim Jong-il death brings an end to a 17-year reign during whichNorth Koreabuilt nuclear weapons, and the young and inexperienced Kim Jong Un, is believed to take overNorth Koreafrom his father, extending his family’s dynasty.

More downside pressures were seen today after Fitch warned of possible downgrades for 7 European nations, while the Euro-area finance ministers will meet today to talk about additional aid through the IMF.

Franceis set to sell 7 billion euros of bills today after Fitch reduced its credit outlook to negative from stable, saying the “country is more exposed to the region’s debt crisis than others”.

The US will lack fundamental data today, yet a report showed that the holiday season’s online sales jumped 15%.Europehowever released a disappointing construction output and positive current account report for Oct.

The euro is trading with some bearish momentum around the 1.3025, while the pound is trading around the 1.5495 level after the USD rose slightly trading now around the 80.20 level as cautions is prevailing.

The yen is trading around the 77.90 level. The AUD fell as investors were avoiding the high yielding assets trading around the 0.9950 level. The CHF is stringer today as demand on safe haven widened, trading around 0.9350.

As the USD was stronger and euro weaker commodities are mixed with gold loosing some of its gains and is trading as of this writing around the $1595.55 per ounce, while oil is trading around the $94.10 per barrel level.

EUR/USD Forecast December 19, 2011, Technical Analysis

EUR/USD rose slightly on Friday as traders did a bit of profit taking before the weekend. However, the options markets are showing that the net short positions in the Euro are at all-time highs, suggesting that the outlook for the common currency is getting worse. The Moody’s credit agency downgraded Belgium by two notches after the stock markets closed, and this chart doesn’t reflect any possible reaction to this move. The markets are expecting several downgrades in the EU, so it is hard to determine whether or not the Euro will sell off based upon this.

The 1.30 has historically been a big deal, and the fact that it has held shouldn’t be ignored. However, the real target to break through is actually 1.29, as it is the bottom of the support “zone” that is currently holding the Euro up. If we break below that level – 1.25 is almost a certainty at that point. The headline risks out of the EU should continue to plague the markets and all risk related assets are to be treated with suspicion, and this now includes the Euro. The next few weeks will be very low volume, and as a result – the moves could be exaggerated and extreme on headlines. The later in the week we get, the less the volume will be, creating a dangerous environment to say the least.

The outlook for the Euro is going to be heavily tied to these upcoming downgrades. It really comes down to one country: Germany. If the Germans get whacked by the agencies, we could see serious selling in this pair. The Germans are the one piece of the puzzle that everyone still thinks is solid, and if that gives way, there isn’t much left at that point. The next few days will offer many chances for the agencies to do this, so news flow will be even more important in this pair than ever. The selling of rallies is how we are playing this pair, and we will not buy it until we see significant progress in Europe on the debt issues – something that likely won’t happen in the next few weeks.

EUR/USD Forecast December 19, 2011, Technical Analysis
EUR/USD Forecast December 19, 2011, Technical Analysis

EUR/USD Forecast for the Week of December 19, 2011

EUR/USD had a very bearish week as traders pushed the market to retest the 1.30 level for support. The level did hold, but the candle closed very near the lows for the week. The lack of enthusiasm in buying at the level also suggests that the pair is going to have a very hard time in rallying going forward as there are simply far too many negative headlines coming out of Europe to make traders want to buy the Euro presently. Because of this, we want to sell, but there is significant support below this area down to the 1.29 level, and we are looking for rallies to sell from. A break below the 1.29 level on the daily close would also have us selling. We will not buy at all.

EUR/USD Forecast for the Week of December 19, 2011
EUR/USD Forecast for the Week of December 19, 2011

EUR/USD Weekly Forecast December 19-23, 2011, Fundamental Analysis

EUR/USD Weekly Forecast December 19-23, 2011, Fundamental Analysis
EUR/USD Weekly Forecast December 19-23, 2011, Fundamental Analysis

The EUR/USD ended last week with heavy losses after the market saw the ECB and the EU summit nothing but a major disappointment and rating agencies continued to add their negative imputes to the abysmal equation.

We can surely see the euro crisis predominant in the market and this week our eyes will be on market movements rather than the data as this is the last week before Christmas and the end of the week and position squaring and closing the books will be evident as traders step aside ahead of the New Year and that will be the main focus.

We need to track the debt sales this week as well with eyes on Italy, France, Greece and Portugal as the yields and demand will be closely observed. The euro area lacks major fundamentals yet the debt crisis developments and any comments from leaders will be watched and the Italian Senates are expected to follow the lower house of Parliament vote and also okay Monti’s 30 billion austerity package this week.

As for the United States the data is heavy housing data alongside the GDP and income report. The data will add to the volatility in the market, especially if the data worsens and adds to fears of slowing global growth yet good data might help in easing the strain on markets that are preparing for the holidays ahead.

Other news from the euro area and the U.S. economy to affect the pair this week:

Monday December 19:

The euro area will start the week at 09:00 GMT with the Current Account for October where the deficit might have widened from the previous 0.5 billion after we saw the trade surplus on Friday shrink to 0.3 billion from the previous 2.1 billion euros.

Construction Output for October is due at 10:00 GMT and unlikely to have improved drastically after the previous drop of 1.3%.

Tuesday December 20:

Germany will release the Gfk Consumer Confidence Survey for January at 07:00 GMT which is expected to slow slightly to 5.5 from 5.6.

Also at 07:00 GMT we have the Producer Price Index from Germany which is expected with 0.1% gain in November after 0.2% and on the year to ease to 5.2% after 5.3%.

At 09:00 GMT we have the IFO survey for December were the Business Climate index is expected to fall to 106.0 from 106.6, the Current Assessment index to fall to 116.0 from 116.7 and the Expectations index to fall to 97.0 from 97.3.

The United States will start the day at 13:30 GMT with the November housing starts which are expected with 0.3% rebound to 630 thousand from 628 thousand. Building permits are expected to drop 1.8% to 633 thousand from 653 thousand.

Wednesday December 21:

At 15:00 GMT the US Existing Home Sales for November are due and expected with 2.2% rise to 5.06 million from 4.97 million.

Thursday December 22:

The United States will start the busy day at 13:30 GMT with the final and third revision for the third quarter GDP as the expansion is expected unrevised at 2.0%. Personal consumption is expected to hold at 2.3% and the Core PCE to remain at 2.0%.

The Jobless Claims are due the same time after the unexpected huge drop in the past week to 366 the lowest in three and a half years.

The University of Michigan Confidence final estimate for December is due at 14:55 GMT and expected with an upside revision to 68.0 from 67.7.

The leading indicators for November will be released at 13:00 GMT and expected to ease to 0.3% from 0.9%.

Friday December 23:

The week will end with the United States as well starting with the Durable Goods Orders at 13:30 GMT which is expected with 2.1% rebound in November after 0.7% drop and excluding transportation it’s expected to rise by 0.4% after 0.7% gain.

The November Income Report is also due at 13:30 GMT with the Personal Income expected with 0.3% rise after 0.4% and personal spending expected to rise 0.3% after 0.1% as for the core PCE it is expected to hold at the previous gains with 0.1% rise on the month and 1.7% on the year.

New Home Sales for November will be released at 13:00 GMT which is expected with 2.0% rise after 1.3% gain to 313 thousand.

EUR/USD Forecast Dec. 19, 2011, Fundamental Analysis

EUR/USD Forecast Dec. 19, 2011, Fundamental Analysis
EUR/USD Forecast Dec. 19, 2011, Fundamental Analysis
despite the attempts to recovery at the end of the week as investors remain pessimistic regarding the outlook for the euro area.

This week the focus will shift to the end of the year trading as this week is the last before the holiday infamous for low volume and tight ranged trading. The sentiment will start to shape as investors stay aside ahead of the start of the coming year and closely eye developments from the euro area.

On Monday we need to focus on the French auction for sure for signs of demand slowing or rising yields that keeps nation the center of market focus as rating agencies still has its top credit rating under the line of fire that if seen will have drastic and negative consequences on the sentiment and on the market.

The euro area will start the week at 09:00 GMT with the Current Account for October where the deficit might have widened from the previous 0.5 billion after we saw the trade surplus on Friday shrink to 0.3 billion from the previous 2.1 billion euros.

Construction Output for October is due at 10:00 GMT and unlikely to have improved drastically after the previous drop of 1.3%.

Mixed Sentiments Dominate Markets on Europe’s Debt Crisis Fears; Inflation Trapped in the U.S

Cautious optimism prevailed the financial markets today, with improved economic reports capping a busy week for the U.S economy, as economic fundamentals proved the world’s largest economy is on the right track of recovery as 2011 nears to end, but negative vibes are still cited among traders as the EU leaders face a three-day deadline to build up funding package to battle the region’s debt crisis.

So far, the Federal Reserve prophecy is about to be fulfilled by the end of this year, as all key inflation data suggest that price pressures in the U.S are no longer a threat to the economic rebound, therefore, the Fed could have more space to consider more stimulus if the recovery falters, which is not likely to happen now as the economy seems to be adding stream at stronger pace than forecasted.

Currency trading was limited today in light of a mix of positive economic reports and fears over Europe’s debt crisis on Friday, where the U.S. dollar steadied against a basket of major currencies on Friday, where the U.S. dollar index was trading at 80.12, compared with the opening level at 80.16. The Euro was little changed against the Dollar, where the EUR/USD pair traded around $1.3040, compared with the opening level at $1.3029.

The British Pound consolidated against the Dollar as well, where the GBP/USD pair traded around $1.5521, compared with the opening level at $1.5522, and the U.S. dollar dropped faintly against the Japanese Yen, where the USD/JPY pair was trading at 77.66, compared with the opening level at 77.85.

Stocks in the United States were up at early trading on Friday, paring a weekly for the Standard & Poor’s 500 Index, as the Dow Jones Industrial Average was higher by nearly 0.5% to trade around 11,9332, while the S&P 500 index was higher by nearly 0.9 percent to trade around 1,226. European stock indexes were mixed before closing on Friday, where FTSE 100 was up by 0.15% to trade at nearly 5,408 and the DAX was lower by nearly 0.30% to trade around 5,571.

The yellow shiny metal gained to trade around $1,593.07 an ounce after gold prices opened at $1,575.34 levels while crude oil prices rose to trade around $93.83 a barrel since the opening price of $93.72 levels.

Markets React to a Week of Good News from the US

Investors are looking past the European debt crisis and banking fiasco and are looking close to home again. This week was a week of good solid financial reports from the US that were overlooked and overshadowed by the constant distractions from the EU.

The US unemployment dropped significantly, a much better than expected results. Holiday shopping remains brisk, although November figures were disappointing. Black Friday and Cyber Monday, were incredible retail days, but shopper had saved and waited all month, so the month was way down, it was the incredible turn out after the Thanksgiving Holidays that turned the month of November around. Hopefully, these numbers will continue through to the end of the shopping season. Consumer Sentiment is up.

At last week’s Fed meeting, Ben Bernanke, took little action,but stated that the US economy was showing improvement, but very slowly. It is moving in the right direction. The Fed, decided to leave things alone through the holiday season, and wait and prepare for the first quarter in 2012.

New York Manufacturing was up along with Philly, Industrial Output dropped a small amount but less than expected going into the holiday season.

The Regional Fed Factory report was up. The current account deficit was down.  The Commerce Department said the U.S. current account deficit fell to the lowest level in almost two years. The current account measures the inflow and outflow of trade and money between the U.S. and the rest of the world.

Yesterday, the New York Federal Reserve said its Empire State manufacturing gauge rose in December to its highest level in seven months.

As the week draws to an end, Asian shares took a bounce upwards as strong U.S. economic data aided relief-buying after a string of recent losses, although trading was light on concerns about the euro zone crisis and ahead of the weekend.

China’s Shanghai Composite popped out of a six-day losing streak to soar 2% to 2,224.84 and Hong Kong’s Hang Seng moved up 1.4% to 18,285.39.

Japan’s Nikkei Exchange closed0.3% higher at 8,401.72, Australia’s S&P/ASX 200 hopped up to 4,159.20, South Korea’s Kospi rose1.2% to 1,839.96 and Taiwan’s Taiex inched up 0.3% to 6,789.09.

US shares in premarket trading are rising before today’s release of the Consumer Price Index, futures rose on the Dow  48 points to 11,870 and on the S&P they climbed 7.20 points to 1,218.9. The NASDAQ joined the club climbing 12.25 points to 2,235.5.

The economic calendar is minimal today and things have been quiet from the EU, US markets should continue upwards. The dollar remains strong today

Risk Appetite Boosted by Improved US Data

Risk appetite improved among traders today after the better than expected labor and manufacturing data from the United States yesterday, boosting demand for risky assets.

Sentiment also improved after a strong Spanish bond sale on Thursday, yet gains are believed to be limited as fears from the impact of the European debt crisis may persist.

Fitch downgraded the long-term ratings for several banks in the U.S. and Europe including Bank of America, Citigroup, and Goldman Sachs, and this weigh down on confidence today.

Economic data will be light today with only the European trade balance and the US CPI index for Nov. on schedule. Yet markets may still react to the fall in the US jobless claims to the lowest since May 2008.

The lack of a resolution toEurope’s debt crisis and the uncertainties over the outlook for global growth, may continue to provide the USD with more bullish momentum over the coming period.

In Asia the MSCI Asian pacific Index rose 1% at 16:29 in Tokyo yet the index is set for a 2.2% loss this week as investors were worried fromEurope’s possible downgrade.

In Europe, stocks opened higher, where FTSE 100 gained 0.57% while DAX rose 0.08% as of this writing, yet CAC 40 fell 0.17% over continued concerns over the euro zone debt crisis.

The euro is trading with some bullish momentum around the 1.3005, while the pound is trading around the 1.5535 level after the USD fell slightly, trading now around the 80.15 level.

The yen is almost unchanged trading around the 77.87 level. The AUD gained, and is trading as of this writing around the 0.9998 level after finding support from improved risk appetite.

As the USD weakened and the stocks and the euro gained, gold managed to recover some of yesterday’s losses trading as of this writing around the $1590.50 level, while oil is trading around $94.15 level.

IMF Reveals Gloomy Future of Economy and Europe

Chief of International Monetary Fund, Christine Lagarde, said that the IMF sees a gloomy future for Europe and does not think that the available funding of the IMF will be enough to support governments in the EU without reaching of beyond the EU to raise funds.

This past week, there has been evidence of disagreement and legal problems with funds being funneled through the IMF to help specific governments or strictly for the use of EU countries. The IMF is one of the only International Funding Agencies that can offer help directly to governments. Unlike the ECB which can only offer assistance to financial institutions.  The IMF was set up to assist all governments and countries around the globe so all money goes into a general fund, where the IMF determines how it can best be used. The USA has veto power over the use of these funds. It is impossible under the present system for EU countries to contribute funds that will be earmarked only for EU member states.

Once the funds are in the IMF general account, the IMF can then use these funds to help any nation needing funds.

Nations around the globe contribute to this fund but these funds are to be distributed in the forms of loans, and many nations that are willing to contribute more to help the ailing global economy, want to know what assurances the failing EU countries are providing the IMF to make sure of repayment.

There are many problems surfacing within the eurozone that need to be addressed before there is a plan.

Each day, there seems to be more cracks emerging in the financial fiscal pact that came out of last week’s EU Summit. Many economists believe that the EU leadership is crumbling under pressure and unable to deal with the short term crisis.

New pressures keep piling up, while cracks begin to surface. Moody’s has downgraded banks, Fitch has followed suit and Standard and Poor’s continues to downgrade sovereign debt.  While the deadline continues to draw closer each day, what is going to happen in just a few short weeks when the banks of Europe need to raise additional capital and the nations of the eurozone need to refinance maturing debt. To compound the pressures on President Sarkozy, France’s official statistics agency, INSEE, said that it expects the Europe’s second-largest economy to fall into recession in the final three months of this year and the first quarter of 2012.

In her address in Washington Lagarde stated “It is going to require efforts, it is going to require adjustment, and clearly it is going to have to start from the core of the crisis at the moment, which is obviously the European countries and in particular the countries of the eurozone.”

Lagarde continue to warn the nations of the world that no economy would be immune to the economic havoc coming from the eurozone, urging nations around the globe to offer assistance.

EUR/USD Forecast December 16, 2011, Technical Analysis

EUR/USD had a fairly quiet day during the Thursday session as the 1.30 level came into play to offer support. The area is a major one, and the 1.29 would need to be broken in order to consider the next move down. With this in mind, it is likely that we will see either a bounce or a sideways grind for the near-term.

Because of this, we are currently flat in this market. Although there is significant bearish attitudes towards the Euro at the moment, the area should entice value investors looking for the Euro on the cheap. Breaking below the 1.29 level has us selling, while we won’t buy at the moment. We also would sell rallies that fail up above at the 1.32 to 1.33 range.

EUR/USD Forecast December 16, 2011, Technical Analysis
EUR/USD Forecast December 16, 2011, Technical Analysis

Improved Economic Momentum Boost Gains in Markets

A wave of optimism was spread throughout the financial markets on Thursday, following upbeat economic reports from Europe and the United States, indicating that the economic recovery is adding stream regardless of the escalating debt woes that have been spreading fears around the markets

In a busy session for the U.S economy, data from the U.S Department of Commerce showed that jobless claims dropped to 366 thousand from 385 thousand, the lowest level in three years, while manufacturing data came much better than forecasted in December.

A gauge of manufacturing activity in the New-York region accelerated more than estimates to 9.53 following an anemic expansion worth 0.6, while the factory growth in the Philadelphia Federal District advanced to 10.3 from 3.6.

Positive vibes dominated the market on Thursday though some of economic reports missed median estimates such as the U.S industrial production report which showed the U.S factory production dropped 0.2 percent after increasing 0.7 percent, while the U.S Department of Treasury reported its net long-run TIC flows eased significantly to $4.8 billion from $68.6 billion.

The U.S producer Prices Index was released as well to show that price pressures continue to be subdued  as been said by the U.S Federal Reserve Bank, and won’t be threatening and will actually support the U.S economy to maintain a stronger economic recovery.

Moreover, economic fundamentals from the euro area came better than forecasts as PMI manufacturing advanced reading came in at 46.9 from the prior reading of 46.4, while the services contraction eased to 48.3 from 47.5 in November.

After a three-day gain, the U.S dollar where little changed major currencies on Thursday, where the US dollar Index opened at 80.52 levels and traded around 80.36, the Euro versus the dollar rebound a little where the EUR/USD pair trades around 1.3022, compared with the opening level at 1.2985.

The British Pound rose faintly against the dollar, where the GBP/USD pair trades around 1.5498, compared with the opening level at 1.5472. The dollar fell before the Japanese Yen, since the USD/JPY opened at 78.12 levels to currently trade around 77.88.

Stocks in the United States were higher after opening on Wednesday, as the Dow Jones Industrial Average traded around 11888 with a 0.55 percent gain, while the S&P 500 index was up 0.53% to trade around 1218. European stock indexes extended gain before closing on Wednesday, where FTSE 100 Index was down by nearly 2.25% to trade at 5395 and the DAX Index was up by 0.83% to trade around 5726.

After rebounding from a two-month low, gold prices steadied since opening at $1574.42 levels to currently trade around $1574.33 an ounce, while crude oil prices steadied low after opening at $94.91, where crude oil trades around $96.00 a barrel, following its big drop after the OPEC decided to increase the production ceiling.