EUR/USD Forecast December 23, 2011, Technical Analysis

EUR/USD rose again during the session on Thursday as the “risk on” move came back into the markets in general. The stock markets gained, and the optimism increased during the session judging by the rise in such places as Paris, Frankfort, New York, and London. However, the gains were given back later in the session and the daily candle formed was a shooting star, the second one in a row.

The pair currently sits on a massive support zone at 1.30 that is suspected to be at least 100 pips thick. The 1.29 level looks like the mark that the pair will have to break below in order for massive selling to ensue, something that many people have been expecting for a very long time in this pair, but have yet to see. The situation in Europe is dire, and the currency simply refuses to die at this point. There are many traders out there calling for the currency to fall precipitously from here, but it has yet to happen.

There are many different theories as to why, but the truth is that the only thing that matters at the end of the day is that it hasn’t fallen. The level is far too strong at this point to be ignored, and the lack of volume at this time of year puts a lot of doubt on the idea of the market collapsing from this point. However, the bias must certainly be to the downside at this point.

We have been selling rallies in this pair and doing quite well by it. The same strategy will be used by us going forward, and we will not hesitate to sell every time this pair rises in the near future. The situation in Europe simply is far too complex for a quick fix, and the market will more than likely continue to punish the Euro over time. Because of this, we are willing to sell rallies going forward, and would get extremely aggressive to the short side if the daily charts can show a close below the 1.29 level.

EUR/USD Forecast December 23, 2011, Technical Analysis
EUR/USD Forecast December 23, 2011, Technical Analysis

US Shows Signs of Recovery

Financial markets were quiet on yesterday, with only two days before the Christmas holiday. Financial Stocks drove the markets today and the U.S economy released better than forecasted reports, adding to signs the economy was improving, pushing US markets upwards.

GDP figures were the only negative in the forecasts today but that was a revision of prior quarter results, the U.S Department of Commerce announced the economy grew at slower pace than forecasted in the third quarter, as third-quarter growth was revised to 1.8 percent from 2.0 percent annual pace, below median estimates of 2.0 percent as well. A prior report said that health care spending increased at a $19.7 billion rate. Health care spending subtracted about 0.1 of a percentage point from the G.D.P. change in the final revision, whereas in the previous estimate, it added 0.61 of a percentage point to growth.

Despite the downward revision, the third-quarter growth is still a step up from the April-June period’s 1.3 percent pace. Part of the pickup in output during the last quarter reflected a reversal of factors that held back growth earlier in the year.

Other supportive news was the U.S Department of Labor report that the U.S jobless claims fell to the lowest level since April 2008, beating median estimates for the third consecutive week, while Michigan’s confidence rose more than forecast in December, in addition, the U.S Conference Board’s leading indicators climbed above projections in November.

A survey released on Thursday showed that consumer sentiment rose in December to its highest level in six months. And a gauge of future economic activity increased more than expected in November because of a sharp pickup in new permits to build homes.

But revised data showed that the nation’s economic growth was slower than previously estimated in the third quarter because of a sharp drop in health care spending. Stronger business investment and a fall in inventories pointed to a pickup in output in the current period.

Slight gains were seen in the currency markets today, but the biggest were mostly in the equities since demand for safe havens ebbed down. The U.S dollar erased an early gain after oil rose for the fourth consecutive day, euro and pound rose while the yen fell following strong economic reports about the U.S economic progress.

Meanwhile, the U.S dollar index eased below the opening level of 80.18 to trade at $80.18, recording the highest level of 80.138 and lowest level of 77.646. The EUR/USD pair inclined faintly from the opening level $1.3036 levels and currently steady at $1.3043 levels.

The GBP/USD pair traded above the cut at $1.5679 compared to the opening level of $1.5667, while the USD/JPY pair picked up slightly after opening at ¥78.08 levels and currently bottled up at ¥78.17 levels.

The US government’s count of first-time filings for unemployment benefits last week declined to 364,000. And, the Conference Board’s index of leading economic indicators rose 0.5% in November after a 0.9% rise the month before.  Separately, the Thomson Reuters/University of Michigan’s final reading of consumer sentiment rose to 69.9 in December from 64.1 at the end of last month.

Asian Currencies Dip as the Rupee is the Worse Performer

Asian Forex markets dipped versus the USD today with the South Korean won losing some of the gains of the past few days, as risk-taking was diminished by continual uncertainties about the euro zone’s debt crisis.

The won chopped 0.9 percent against the dollar and led the expansive fall in emerging Asian currencies. The Singapore dollar moved up 0.1 percent, keeping firm compared to its Asian counterparts.

Investors have been hesitant to follow Asian currencies higher and are guarded about their outlook for coming New Year due to concerns about the depth of the euro zone’s debt crisis on Asian economies. Similarly to currencies around the world, no one is sure how far the euro zone crisis will reach out and how to isolate and protect their own markets and growth. The world continues to wait for a plan by the EU leaders so that they can interpret the potential effects.

One factor that may be promoting such gambles is the hope that China may adopt further monetary stimulus to support its economy, such as reducing the ratio of deposits banks are required to keep as reserves…

If that helps to put a base under Asian growth, then on a relative basis Asia will still be looking more attractive than certainly Europe the recent moves in the euro versus the Singapore dollar propose that such positioning may be taking place. While the Singapore dollar dropped 1.1 percent versus the U.S. dollar this month, it has jumped roughly 1.9 percent against the euro.

The Rupee is the worst performing Asian currency in 2011. It touched a record low of 54.30 to the dollar last week. Rupee has lost about 17 per cent against the US dollar since its year high in July, and.

The Reserve Bank of India have taken steps to hold up the rupee, including putting curbs on exploratory trading, but analysts say some of the steps risk hurting the currency in the long term.

The rupee closed weaker but off its intraday low today on signs that the European Central Bank’s massive loans to banks will avert a euro zone credit crunch for now. At least giving one a relaxing Christmas break.

The RBI is believed to have sold dollars on last week after the rupee hit a record low of 54.30 to the USD, and traders imagine it has been intervening intermittently ever since.

Gloomy Figures in the UK and Revised Figures in the USA

Currently there are an estimated 2.64 million unemployed people in the UK, with a total of 9.33 million domant people in the country. As unemployment climbs 128,000 to a rate of 8.3 per cent – the highest level since the 1980’s. Many seem surprised except if one had honestly looked at the austerity measures implemented in the UK, the jobs cut by government and military alone would have predicted this rise added to the business failures and the employment cutbacks an astute economist should have be able to project these figures pretty close to dead on.

Data released today put the unemployment rate at its highest since 1996.

Growth is stalling and there are chances of another recession in the first half of 2012, as inflation sits right around 5 per cent.

Cutbacks to the welfare system will also add to the problems of Britain’s unemployed.

Market analysts are stating that while today’s overall unemployment figures are “better than expected” it “doesn’t change the picture at all”.Prospects aren’t looking good for next year either because of low growth.

Today’s  ONS figures have shown, moderate gains in the private sector but they have not offset losses in the public sector, primarily in public administration and education.

There is still a demand for specialist roles in finance and IT and these sectors will remain liquid over the coming months.

While across the pond in the USA the economy expanded less than thought during the third quarter as consumer spending fell short of an earlier estimate, though signs point to stronger growth in the final months of the year. And this is left open to interpretation and to revision.

New claims for unemployment benefits unexpectedly fell last week, reaching the lowest level since April 2008 and providing another sign of improvement for the weak labor market. But are expected to come in higher this week, or hold steady until after the holiday season

GDP, the widest measure of all the goods and services produced in an economy, grew at an inflation-adjusted annual rate of 1.8% in the 3rd quarter period. While still the strongest performance of the year, the Commerce Department’s third estimate of GDP is lower than the previous reading of 2.0%.

The economy’s lower growth level was largely due to a downward revision of how much consumers spent. The latest estimate showed personal consumption expenditure, which accounts for about two-thirds of spending in the economy, rose by 1.7% in the third quarter. That compares to a previous estimate of a 2.3% increase.

All in all the US is chugging along slowly but surely on the way to a slow recovery. Whereas the UK and the EU show signs of entering a recession in the 1st quarter of 2012. It looks gloomy back across the Atlantic. Hopefully, America will be able to fence themselves off from the problems facing the EU.

EUR/USD Forecast Dec. 23, 2011, Fundamental Analysis

EUR/USD Forecast Dec. 23, 2011, Fundamental Analysis
EUR/USD Forecast Dec. 23, 2011, Fundamental Analysis
The EUR/USD is entering the holiday mode. The market movement is still choppy and volatile yet the direction is still mixed with the low volume and many still sidelined with the holidays starting and the last trading day before the long Christmas holiday.

We can see the market still assessing the impact of the ECB loans with the euro holding between $1.30-$1.31 areas and that is due to the lack of major events or volume to take the pair to a defined direction to resume the correction.

The market turned weak after the GDP was less than expected from the US economy on Thursday and that again keeps the weak outlook still in focus and not very tempting for a strong upside short term recovery even if needed.

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 December 22, 2011, Technical Analysis

EUR/USD initially rose during the Wednesday session, only to fall at the end as the situation in Europe continues to worry the markets. The 1.32 level held as support, and the shape of the candle for the day ended up being a shooting star, a bearish sign of course. The support level goes from 1.30 to 1.29, and as a result we aren’t ready to sell this candle. A break below 1.29 would be significant, and we would be very aggressive with our selling at this point. In the mean time, we don’t want to own the Euro, so we are waiting for a breakdown of the support level.

EUR/USD Forecast December 22, 2011, Technical Analysis
EUR/USD Forecast December 22, 2011, Technical Analysis

Pessimism Returned to Market and USD Trimmed Some Losses

By the start of the European session, currencies benefited from the optimism which extended from yesterday’s trading, yet optimism didn’t last as the European Central Bank offered more than expected loans for the euro-area banks.

Knowing that the BoE released its meeting minutes today, where the vote to keep the rates 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.

Noting that Asian stocks managed to end today’s session in green, while the European and American stocks couldn’t, as they dropped despite the data that was released by the US housing sector, where existing home sales incline in November above expectations, knowing that investors felt pessimistic after the ECB’s announcement.

In Europe DAX declined nearly 0.5% while CAC 40 dropped by 0.6%, on the other hand, the euro slumped against the US dollar trading around the 1.3039 level compared with the highest level today of 1.3198, dragging the pound to the opening levels trading around 1.5658 level.

The yen is trading around the 77.96 level. The AUD dropped trading around the 1.0063 level. The CHF is stronger today as demand on safe haven widened, trading around 0.9376 level, on the other hand, the USD trimmed some of yesterday’s losses trading around the 80.07 level.

As markets returned to the pessimistic view over the euro zone debt crisis and the USD experienced gains, commodities dropped, where gold is trading around the $1608.79 level from the opening at $1615.34, while oil is trading around the $98.20 per barrel level after the EIA report showed a deep decline in crude oil inventories.

EUR/USD Forecast Dec. 22, 2011, Fundamental Analysis

It was a very volatile day for the markets and for the EUR/USD on Wednesday as the focused was on the ECB. The pair moved higher ahead of the three-year auctionon hopes for stability and support for banks yet after the auction the fear spread again over how weak the banking sector might be.

The European Central Bank said it will lend euro-area banks 489 billion euros of three-year loans (1,134-day loans) at the average rate of its benchmark rate –currently at 1.0%- over the period of the loan. The loans will start tomorrow as the bank said that 523 banks asked for the funds at the auction.

Investors saw the amount at the upper range of forecasts as surprising and high which increase the fears over the stability of the sector and the outlook for the euro area. Banks obviously need cash and till now investors still can’t tell now what the money was for or where will it be used.

Volatility will remain as the euro area enters holiday mode early with the lack of major releases and events as the market will focus on the aftermath of the ECB.

The Untied 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%.

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