Daily Market Analysis: Currency Report

New orders for U.S. manufactured goods rebounded in November, increasing for the first time in three months, according to figures released Wednesday by the Commerce Department. The Commerce Department figures showed that new orders for manufactured goods were at $459.2 million in November, a 1.8 percent increase over October's figures. Moreover, Retail sales at stores open more than a year may have gained as much as 4.5 percent in December, more than previously estimated, as U.S. shoppers pursued holiday discounts, a trade group said, according to a report published by Bloomberg.

The People’s Bank of China refrained from selling three-month bills (PBOC3M) for a second week today, helping stem increases in money-market rates as banks hoard cash in the run-up to the Chinese New Year holiday. In addition, the Yuan dropped after the central bank lowered the daily reference rate by the most since November amid concern the European debt crisis will cool demand for Chinese goods. The People’s Bank of China set the fixing 0.18 percent weaker, the biggest reduction since Nov. 15, at 6.3115 per dollar.

Eurostat revealed Wednesday that Eurozone inflation slowed as expected in December giving room for the central bank to cut interest rates further. Consumer price inflation came in at 2.8 percent in December, down from 3 percent in November. Today, France plans to sell as much as 8 billion euros ($10.4 billion) of debt in the country’s first test this year of investor appetite for its bonds as credit companies threaten to cut the nation’s AAA rating.

EUR/USD: The pair dipped as low as 1.2896 from a high of 1.3071 in earlier trade Wednesday, on good economic data from U.S and renewed concerns over the Eurozone debt crisis. Today, the pair is trading in narrow range of 1.2934 – 1.2909 in Asia. EUR/USD might register some upward corrections intra trade up to the 23.6% Fibonacci level of the last falling wave or slightly higher in the range of 1.2940-1.2950, ahead of the France debt auction. However, market sentiments remain weak on Euro and if better than expected initial job claims data and ADP Nonfarm Employment Change data are released later during the day it will surely drag the pair down to test the support level at 1.2887. The resistance level is at 1.2952.

EUR/JPY: The euro weakened against the yen Wednesday as concerns on the Euro debt crisis was back on the market. The pair is currently hovering around the key level of 99.00 in Asia but later we might see some upward volatility if the debt auction in France is successful later today. Investors’ fears on the Eurozone situation will continue to affect the Euro and it seems that the pair is likely to continue its decreasing trend to 88.83 (March 2000 lows). The support level is at 96.34 and the resistance level is at 99.43.

AUD/USD: The Australian Dollar is trading lower against the U.S. Dollar this morning after the release of Australian data on Trade Balance. Official data showed that Australia’s trade balance rose less-than-expected to a seasonally adjusted 1.38B last month from 1.60B in the preceding month. The pair is trading in the region of 1.0337-1.0308 in Asia. The market trend indicates that the pair will go further down later and positive Initial Jobless claim data and ADP Nonfarm Employment Change data will boost the bearish sentiments of investors. The pair might fall below the key level of 1.0300 and test the support level at 1.0260. The resistance level is at 1.0384.

WTI: Oil traded near the highest price in almost eight months in New York as speculation that sanctions against Iran will curb crude supplies countered concern that Europe’s debt crisis will worsen and slow demand. The commodity is up again after a slight fall in early Asia and is trading at $103.38 a barrel. Investors seems bullish on oil futures after repeated threats to close the Strait of Hormuz and block the world of a crucial supply conduit by Iran. The support level is at $101.85 and the current resistance level is at $103.69 a barrel.

DAX: European stocks fell from a five month high Wednesday on worries that banks will be forced to raise more capital than initially projected to survive the regions debt crisis. The index is lower in the region of 6138.53-6099.48 points on the Asian Market. DAX is more likely to continue its decreasing trend to test the support level of 6097.95 points as bearish sentiments will persist given the fact that regions crisis is far from over. The resistance level is at 6182.72 points. Prudence recommended.