EUR Rises On Greek Debt Deal, US Fiscal Cliff Showdown

Spanish Unemployment Change (Spain, 08:00 GMT)

Interest Rate Decision (Can, 14:00 GMT)

Republicans are renewing attempts to use a debt-limit increase to force deeper spending cuts, replicating the 2011 showdown that caused the U.S. to come within days of default and led to a credit-rating downgrade. House Republicans, rejecting President Barack Obama’s demand for higher tax rates, countered with a $2.2 trillion deficit-cutting plan that would trim Medicare and Social Security and cap tax deductions for top earners

The Reserve Bank of Australia cut its benchmark interest rate to the half-century low set during the 2009 global recession as hiring falters and an elevated currency hurts industries such as manufacturing and tourism. Governor Glenn Stevens and his board reduced the overnight cash-rate target by a quarter percentage point to 3 percent, the central bank said in a statement in Sydney today.

Spain has formally requested aid for its ailing banking sector on Monday. 36.5 billion euros of bailout funds, including 2.5 billion euros for the “bad bank," are due to be released on December 12. Four nationalized Spanish banks will be the recipients of the funds: 18 billion will go to Bankia; 9 billion to CatalunyaBanc, 5 billion to Nova Caixa Galicia; 4.5 billion to Banco de Valencia. The release of the aid is expected to be approved by the Euro group during their monthly meeting today in the European afternoon.

In addition, Greece has unveiled the details of its bond buyback plan, ahead of the Euro group meeting on Monday. According to the document released by the Public Debt Management Agency, the buyback will be carried out using a modified Dutch auction system: private investors are given the chance to swap the Greek bonds their hold for between 40.1% and 32.2% of their nominal value.

EUR/USD: The EUR/USD rose yesterday after Greece offered to spend as much as 10 billion euros ($13 billion) to buy back government securities and after soft manufacturing data out of the U.S. Today the pair was trading flat at 1.30519 at the time of writing as investors jumped on the sidelines waiting for some news and headlines from Euro group meeting regarding the bailout funds for Spain. Moreover, market participants are also waiting news and headlines from U.S. lawmakers’ consultations on how to avert the so-called fiscal cliff of spending cuts and tax increases.

Economic data likely to bring some slight fluctuations on the market on the European session are the Spanish Unemployment Change and the PPI (MoM) data in the eurozone --- Expected at -0.1% compared to last month 0.2%. Later in the day, the U.S will release its Redbook (MoM), the New York NAPM, the 4-Week Bill Auction, the API Weekly Crude Stock and the API Weekly Gasoline Stock. Investors should remain prudent on the pair as there might be some market corrections and profit taking intra trade, following the gains registered yesterday. If the Euro group approves Spain’s bailout funds, the EUR/USD may increase to test the resistance level of 1.31251. The support level is at 1.29790.
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AUD/USD: The AUD/USD was trading at 1.04398 at the time of writing after the Reserve Bank of Australia cut the benchmark interest rate and after soft manufacturing data out of the U.S yesterday. Sentiments for risky assets improved after Greece offered to spend as much as 10 billion euros ($13 billion) to buy back government securities and Spain has formally requested aid for its ailing banking sector, enhancing hopes the European debt crisis may be fading. U.S. lawmakers’ negotiations on how to avert the so-called fiscal cliff of spending cuts and tax increases will continue to weigh on the U.S dollar.

Investors should closely monitor all the economic data and news in the Eurozone, China, japan and the U.S as they will bring some volatility on the pair. Economic data in the U.S today that may affect the trend of the pair are the Redbook (MoM), the New York NAPM, the 4-Week Bill Auction, the API Weekly Crude Stock and the API Weekly Gasoline Stock. If the Euro group approves Spain’s bailout funds the pair may increase to the resistance level at 1.04904. The support level is at 1.03837.
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Gold: The yellow metal was trading lower at 1699.99 at the time of writing as the stalemate in U.S. budget talks weighed on commodities, countering record assets in exchange-traded products. U.S. lawmakers are trying to avert more than $600 billion in tax increases and spending cuts starting in January. House Republicans, rejecting President Barack Obama’s demand for higher tax rates, yesterday countered with a $2.2 trillion deficit-cutting plan.

Other news is that an interbank gold trading platform started in China yesterday, with Bank of Communications Co. and Industrial and Commercial Bank of China Ltd. completing the first spot gold transaction valued at 20 million yuan, according to an e-mailed statement from Bank of Communications. Market sentiments will be driving the price of gold. News and headlines from the U.S, regarding the fiscal cliff will bring volatility on the market. News from the eurozone also might bring some fluctuations in the price of the commodity. Investors should stay focus and cautious on the market. The resistance level is at 1717.27 and the support level is at 1687.89.