Sales of U.S. homes probably rose in December to the highest level in three years as the industry headed toward a more rooted recovery in 2013, economists said before reports this week. Combined purchases of new and existing properties climbed to a 5.49 million annual rate last month, the highest level since November 2009, according to the median forecast of economists surveyed by Bloomberg. Another report may show the outlook for growth brightened last month.
European finance ministers gathering for the first time this year begin the long march to enacting policies they promised to subdue the debt crisis, beginning with how to channel firewall funds directly to banks. At a meeting in Brussels today, where an assessment of Spain, Cyprus and Greece will feature, euro-area ministers are likely to clash over how and when the 500 billion-euro ($666 billion) European Stability Mechanism can bypass governments and provide direct help to banks.
Spain’s scars from the slump that overshadowed Prime Minister Mariano Rajoy’s first year in office will emerge this week as data shows the toll on economic output that may have kept as many as 6 million people out of work. Spanish trade figures due today will be followed by house price data tomorrow showing if the property market endured a fourth year of declines. The Bank of Spain may also release its estimate for fourth-quarter gross domestic product, and the data will culminate in jobs figures on January 24, forecast by economists to show a record 26 percent of Spaniards unemployed.
EUR/USD: The EUR/USD traded lower on Friday as demand for risky assets faded after data indicated that the eurozone economy would struggle to recover in 2013 and after weaker than expected U.S data were released. Market sentiments remain fragile on ongoing concerns over the U.S. debt ceiling debate. Today, the pair was trading at 1.33225 at the time of writing, after U.S. Republicans said Friday that they would hold a vote next week to grant a three-month debt limit extension to give Congress time to pass a Federal budget.
Market participants should stay cautious on the pair as sentiments will be driving the market. In the week ahead, some fluctuations are expected as some important economic data will be released. The events likely to bring volatility on the pair are:
- Monday - the euro group of finance ministers will hold talks on a range of financial issues in Brussels. Meanwhile, Germany will release data on producer price inflation.
- Tuesday - the euro group of finance ministers will hold a second day of talks in Brussels. In addition, the ZEW Institute will release the German economic sentiment. On the other hand, the U.S. will publish data on existing home sales. Moreover, the World Economic Forum will begin its annual meeting in Davos, Switzerland.
- Wednesday - the U.S. will release data on crude oil stockpiles while; the World Economic Forum will continue for a second day in Davos, Switzerland.
- Thursday - the eurozone will produce data on the current account and data on manufacturing and service sector activity, while Germany and France will release individual reports. In addition, Spain will publish data on the unemployment rate. On the other hand, the U.S. will publish the report on initial jobless claims, as well as data on manufacturing activity. The World Economic Forum will continue for a third day in Davos, Switzerland.
- Friday - the Ifo Institute will publish a report on German business climate, while the U.S. will release data on new homes sales. The World Economic Forum will continue for a fourth day in Davos, Switzerland. All these data should be closely monitor to get visibility on the pair. The resistance level is at 1.34867 and the support level is at 1.32112 on the weekly chart.
EUR/USD" title="EUR/USD" width="687" height="348">USD/JPY:
The USD/JPY traded above the key level of 90.000 on Friday, as expectations that the BoJ will implement more aggressive easing measures weighed on the yen. Today, the pair was trading at 89.551 at the time of writing as Bank of Japan (8301) officials began a two-day policy meeting. All 23 economists in a Bloomberg News survey expect the BOJ to expand its asset purchases, with the median estimate signaling a 10 trillion yen ($112 billion) increase.
Abe has announced a spending package of similar size and is calling on the central bank to double its 1 percent target for consumer price gains to defeat entrenched deflation. On the other hand, In the U.S., sales of existing homes probably climbed 1.2 percent to a 5.1 million annual rate last month, the strongest since November 2009, according to the median estimate of economists polled by Bloomberg before the National Association of Realtors publishes the figures tomorrow.
Another report this week may say new-home sales picked up to a 385,000 annual pace for the month, the best showing since April 2010. Here, again investors should stay cautious and adopt a wait and see strategy on the pair. Events in Japan likely to bring some fluctuations on the market are:
- Tuesday - the BoJ will announce its benchmark interest rate, the rate announcement will be accompanied by the bank’s rate statement. The central bank will hold a press conference to discuss the monetary policy decision after the rate announcement
- Thursday - Japan will publish official data on the trade balance.
- Friday - Japan will release data on consumer inflation. Meanwhile, the BoJ will publish the minutes of its most recent policy meeting. The resistance level is at 90.235 and the support level is at 88.706 on the weekly chart.
USD/JPY" title="USD/JPY" width="691" height="349">Oil (WTI):
Oil dropped from the highest price in four months before U.S. lawmakers vote this week on budget measures and European finance ministers meet today to discuss the debt crisis that threatens the region’s economy. The commodity was trading lower at 95.485 at the time of writing. Trading seems sticky amid indications China’s economic recovery was gaining momentum.
The stronger-than-expected data reinforced expectations China’s economic recovery was gaining momentum. The Asian nation is the world's second largest oil consumer after the U.S. In the week ahead, oil traders will remain focused on political developments in the U.S., amid growing uncertainty over how the country will tackle the upcoming USD16.4 trillion debt ceiling debate. The economic data in the U.S, Europe and china will also weight on the price of oil. Investors should monitor all the data to get visibility on the movement of the commodity.
Other data that might affect the direction of the commodity is that Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries, shipped 7.15 million barrels a day in November, down 1.7 percent from October, as it reduced monthly output by 2.4 percent to 9.49 million barrels a day, the Joint Organizations Data Initiative said on its website. Iraq, OPEC’s second-biggest oil producer, cut its exports by 3.3 percent to 2.62 million barrels a day even as it pumped 1.7 percent more crude. Angola, the United Arab Emirates, Qatar, Ecuador and Venezuela also reduced exports. The resistance level is at 98.238 and the support level is at 93.391 on the weekly chart.