Daily Market Analysis: Currency Report

Last week news showed some improvements in the U.S economy and that indicates that the economic outlook in the final quarter will be positive and stronger for the U.S. In a report released on 4th December, the U.S. Labour Department in Washington showed that the U.S. Jobless Rate unexpectedly declined to 8.6%, the lowest level since March 2009 and Payrolls climbed 120,000, after a revised 100,000 increase in October. Moreover, The U.S benchmark 10-year yield increased by seven basis points, the highest level in more than a month and the Service industries in the U.S. is expected to expand in November at the fastest pace in six months following last week reports, which showed positive signs in manufacturing and declining unemployment. Major announcements that need to be monitored closely in the U.S this week are; ISM Non-Manufacturing Index (Monday), Initial Jobless Claims (Thursday) and Michigan Consumer Sentiment Index and Trade Balance (Friday).Regarding, Canada, official data showed on last Friday, that the nation's unemployment rate was up by 0.1% to 7.4% and payroll decreased for the second month. The upcoming important economic news for Canada are; Interest Rate Decision and Building Permits (MoM) (Tuesday), Housing Starts (Thursday), Trade Balance and Labor Productivity (QoQ) (Friday).

China’s Vice Foreign Minister Fu Ying said Last Friday, that China can’t use its $3.2 trillion in foreign exchange reserves to rescue European nations and China has done its part to help the region deal with its financial crisis. China’s non-manufacturing industries fell in November from 57.7 to 49.7 the previous month, The China Federation of Logistics and Purchasing published on its website Saturday. Some key economic news coming for China this week is; Chinese CPI (YoY) (Thursday), Chinese CPI (YoY), Chinese Industrial Production (YoY) and Chinese Industrial Production (YoY) (Friday).

Standard & Poor’s downgraded Australia’s largest lender the Commonwealth Bank of Australia (CBA) to BBB from A- and Commonwealth, Westpac Banking Corp., Australia & New Zealand Banking Group Ltd. and National Australia (NAB) Bank Ltd. were cut one level to AA- from AA. There are some key events coming on for Australia that might certainly have great impact on the financial market of nation such as: RBA Rate Statement, Interest Rate Decision, Current Account (Monday), GDP (QoQ) (Tuesday), Unemployment rate (Wednesday) and the speech of RBA Governor Stevens (Thursday).

German Leader Angela Merkel said on Friday that a quick resolution of the debt crisis is not possible and attaining greater fiscal unity in the area would be the first step on the path to recovery and emphasized that resolving the sovereign debt crisis is a process and this process will take years. She also stressed that the ECB has a different role than the Fed or the BoE and that its independence should be preserved. She also once again expressed her opposition towards the creation of Eurobonds, which she does not consider a proper rescue measure in the context of the current crisis. The ECB is holding its monthly policy meeting on Thursday and expectation is that ECB will cut rates by 25bps again may also announce further liquidity-providing measures for the region's banks that are finding it increasingly difficult to obtain financing. While the BoE which is sitting for its monthly policy meeting on the same day as ECB is expected to maintain its current rate. Important economic news in Europe this week are: GDP (QoQ) and German Factory Orders (MoM) (Tuesday), UK Manufacturing Production (MoM) (Wednesday), ECB Press Conference, UK and Euro Interest Rate Decision (Thursday) and German CPI (MoM) (Friday).

EUR/USD:

The Euro is trading slightly higher against the USD in Asia this morning ahead of the meeting between France and Germany to find a longer term solution to the Debt Crisis. Furthermore, according to Reports over the weekend, the ECB was preparing a EUR1 trillion cash infusion scheme. The pair is most likely to rise later during the day, when the European market will be in action. The support level is at 1.3394 and the current resistance level is at 1.3423. If the pair breaks the retracement level of 38.2% then we might expect the pair to bounce to the 68.2%. Investors may enter the market at the current support level with a stop loss at 1.3370 and a take profit at 1.3425 in the short term.





WTI

GBP/YEN: The British Pound was slightly higher against the Japanese Yen on Monday after having loss almost 1.35pips last Friday. The British pound was trading higher at 121.95 (38.2% Fibonacci retracement level) on the beginning of the Asian market. However, the pair is presently giving all the gains and trading below the 23.6% Fibonacci retracement level at 121.50. The support level on the pair may be located at the Friday’s closing price of 121.50 and the resistance level is at today’s session high of 121.94. The GBP may decrease further as The Engineering Employers Federation is to cut its U.K. growth forecasts and said manufacturers expect the industry to stagnate in the first quarter. Prudence is recommended on the pair.

AUD/USD: The Aussie registered a decrease against the USD on Friday and the pair is trading under pressure ahead of the European session today, despite Australia's company gross exceeded expectations and reached its highest level in three months ended in September. Moreover, reports are saying that the European Central Bank was to lend the IMF $200billion to help fund the weaker Eurozone states. With this news the market still looks bullish and investors are buying the pair on dips. However, investors should remain cautious before European summit this week where the region’s leaders will seek to resolve their sovereign-debt crisis. In case of failure the Aussie may suffer massive sets back. The pair is trading positively in the region of 1.0215-1.0225. The support level is at Friday’s low of 1.0195 and the support level is at session high of 1.0257.

Oil: Oil rose for a second day in New York on concern that tension in the Middle East threatens supplies and speculation that European leaders will take actions to tame a debt crisis that may restrain economic growth. Iran said crude will breach $250 a barrel if nations threaten to ban its purchases, according to the Shargh newspaper. The Iranian tension is the main reason for driving WTI back to $100 a barrel. If this tension continues, crude might increase further and if the tension is pull back then we might see a correction in the Commodity.



S&P 500:

U.S. stocks rose, sending the Standard & Poor’s 500 Index to its biggest weekly rally since March 2009, after central banks took action to ease Europe’s debt crisis and American Thanksgiving retail sales set a record but the Index gave up all the gains in the evening on the same day. The index is trading higher today as Prime Minister Mario Monti will lobby parliament to support a 30 billion-euro ($40 billion) package of austerity and growth measures to trim the euro-region’s second- biggest debt and prevent Italy from sparking the euro’s breakup and ahead of the meeting of the European Leaders to find solution to counter the debt crisis. The Index seems to have some good support following the good news but if the meeting fail to produce some concrete action to counter to the debt crisis then the index will go down.