Daily Market Analysis: Currency Report

“According to a chain-store sales index released Wednesday by New York-based International Council of Shopping Centers and Goldman Sachs Group Inc. (GS), Sales at U.S. retailers rose 4.5 percent last week from a year earlier, as shoppers snapped up last-minute purchases for Christmas and took advantage of some chains extending hours.” reported by Bloomberg. Furthermore, Bloomberg reported that The Obama administration declined to brand China a manipulator of its exchange rate while calling the Yuan undervalued and vowing to press for further appreciation of the currency. The U.S. contends that China uses an undervalued currency to give its exporters an unfair advantage in overseas markets and boost growth.

A report published by Bloomberg today said that The People’s Bank of China may suspend a scheduled sale of three-month bills tomorrow as banks hoard cash before the New Year holidays, pushing money-market rates to the highest since October. The central bank didn’t gauge demand for the securities this morning, according to two traders who declined to be identified because the information isn’t public. The seven-day repurchase rate, a measure of interbank funding availability, touched 5 percent today as lenders sought to boost capital to meet year-end requirements.

Italy's borrowing costs plunged at an auction of its 6-month debt on Wednesday, signaling that markets are more confident on the economy's prospects after the government passed austerity measures to bring down debt. The Italian Treasury sold its maximum target of EUR 9 billion of 179-day bills at a rate of 3.251 percent, half of the euro-record 6.504 percent paid in the previous auction held on November 25. In addition, ECB’s balance sheet soared to a record 2.73 trillion euros ($3.55 trillion) after it lent financial institutions more money last week in an attempt to keep credit flowing to the economy during the debt crisis.

EUR/USD: The pair plunged sharply Wednesday from a high of 1.3079 to a low of 1.2887 after European Central Bank's overnight deposit facility hit a record EUR 452.03 billion, fueling fears that banks are hoarding money stemming from recent loans made to them from the ECB instead of investing it back into the economy. Today, the pair is trading slightly higher in the range of 1.2937 -1.2916 in Asia. The current resistance level is at 1.2944 and the Support level is at yesterday’s low of 1.2887. Investors’ sentiments remain low on the pair and prudence is recommended as more auctions are on the way in Italy later Thursday and U.S weekly jobless claims and will the Chicago Purchasing Managers' Index are set to be released today. This might affect the direction of the pair. EUR/USD" title="EUR/USD" width="661" height="260">
USD/CHF: The U.S dollar against the Swiss Franc enjoyed a strong bullish run Wednesday on increasing concerns in the Euro zone and disappointing Swiss economic data. The pair gained more than 130pips to reach a peak of 0.9451 intra trade yesterday. Today, the pair is registering some downward corrections and is trading just above the 23.6% Fibonacci level of the last rising wave at 0.9424. The support level is at 0.9411 and the resistance level is at 0.9451. The direction of the pair will be influenced by the economic data which are schedule to release today as well as the results of the debt auctions in Italy.
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EUR/JPY: The pair fell massively Wednesday to a fresh 11-year low as market sentiment on Euro deteriorate following the announcement that European Central Bank's overnight deposit facility hit a record EUR452.03 billion. The pair is trading in the range of 100.64 – 100.42 this morning. It seems that the bearish momentum will continue on the pair as the JPY is regarded as a high yielding and at the same time a safe haven currency. However, investors should remain cautious on the pair and wait for the Economic data from the U.S and the Italian debt auctions result before entering the pair. The support level is at 100.33 and the resistance level is at 100.77.

Gold: Gold prices fell to a nearly 14 weeks lows Wednesday on concerns that concerns that financial institutions are hoarding money made available to them from recent loans from the ECB instead of investing it back into the economy. The precious metal fell to a low of $ 1549.08 an ounce intra trade yesterday. Gold maintained its decreasing trend today in Asia as investors avoided the precious metal and snapped up dollar positions on fears that the European debt crisis is seriously eroding credit markets there. The support level may be at 1532.70 and the resistance level is at 1561.34.

DAX: European stocks closed lower on Wednesday, led by the announcement that the European Central Bank’s balance sheet increased to a record after a surge of bank lending to stem the region’s debt crisis. DAX fell from a high of 5908.81 points to a low of 5772.59 points. The index is slightly up today at 23.6% Fibonacci level of the last falling wave at 5801.00. The current support level is at 5772.59 points and the resistance level is at 5850.17 points. Invest should wait for the Italian’s debt Auction today to have more visibility on the index.