Forex Blog

February 6, 2012

Market Outlook for February 6, 2012

Filed under: Forex News — Tags: , , , , , , , — admin @ 7:30 am

Recap of the Latest Global News
By Cory Vi & Andrew Su on Feb 6, 2012

Markets rallied on Friday after the release of much better than expected US employment data. The non-farm payrolls data showed an increase of 243,000 in January which was well over the median economist’s forecast of 140,000. Furthermore, the unemployment rate dropped to a three year low at 8.3%. Market analysts, who were extremely bearish at the beginning of the year are now making grand announcements such as ‘the stars are aligning’ to push markets higher. The contrarian in us is now extremely cautious and we expect the USD to make a comeback after losing ground last week as the better than expected data has seen the likelihood of further quantitative easing fall. The EURO has retraced lower during the European trading session to as low as 1.3030 after opening in Asia above 1.3115.

In more sobering news, the situation is coming to a head in Greece with the government there expected to respond to the troika and demands by its international creditors for increasingly severe austerity measures within the next couple of days. It has become apparent that Greece is finding it difficult to come to an agreement with its creditors. The IMF has said that a worsening debt crisis in Europe could cut China’s growth in half. In China, Chinese Lunar New Year sales grew at the slowest pace since the 2009 financial crisis and a full 3% lower than last year at 16%. There are increasing signs of slowing consumer spending in China which does not bode well for the increasing numbers of foreign retailers rushing into the Chinese market. The Australian dollar has eased off highs at 1.0796 on Friday to fall more than a cent to as low as 1.0685 today.

US equity markets rose to their fifth weekly gain last week after the release of the much better than expected US employment data. The Dow Jones is now trading at its highest levels since May 2008 as financial and technology companies gained more than 3%. The S&P 500 closed 1.45% higher at 1,344. Stocks in Asia were largely higher while the continuing Greek tragedy has seen European bourses trading down about 0.5%.

February 3, 2012

Land of the Rising Yen

Filed under: OANDA News — Tags: , , , , , , , , , , , , — admin @ 10:33 am

Japan’s Finance Minister Azumi said that the government will take decisive currency steps if needed and that speculative moves in the currency market are increasing. He and his policy makers can breath a small ‘sigh-of-relief’ after NFP, the market decided to sell the JPY outright! How long is this going to last? These specific market moves are providing better levels to own the currency. Markets have taken the Ministers comments in their stride. Intervention is a rising risk for USD/JPY shorts if the pair falls towards that psychological 75 benchmark. It seems that exporter related sales will continue to cap any upside potential for the dollar. So, fears that the Greek Prime Minister may resign, the uncertainty that the Dutch Government may not want to write down loans to Greece will again make the yen more attractive.

Below are some other highlights of the week:


Asia

  • CNY: Chinese markets resumed trading following the week-long Lunar New Year holidays. Premier Wen said that the Chinese government will enhance the elasticity of the CNY exchange rate in both directions.
  • JPY: Japanese Finance Minister Azumi warned against a renewed rise in the yen and vowed to take firm steps against excess volatility and speculative moves in the FX market.
  • JPY: Japans December IP rebounded +4.0%, m/m, following the -2.7% fall in the previous month (the ‘flood’ knock effect-on from Thailand).
  • JPY: Yen remains sensitive to G10’s yield compression.
  • KWN: Korean IP growth fell to +2.8%, y/y in December from +5.8% in November. This is very much inline with soft export growth in December.
  • SGD: Singapore’s unemployment rate remained at +2% in Q4, despite weakness in IP and GDP growth for the same period. This suggests that the tightness in the labor market is partly structural.
  • CNY: China’s manufacturing PMI rose +0.2pt to 50.5 (higher than the consensus forecast of 49.6). Importantly, the PMI was much stronger than the seasonal pattern for a -0.7pt fall. New orders up +0.6pt to 50.4 while inventory fell -2.6pt to 48.0. Export orders fell -1.7pt to 46.9 while input prices rallied +2.9pt to 50.0. The data reduces the scope for monetary easing.
  • KWN: Korea’s CPI inflation fell to +3.4%, y/y, last month (foretasted for +3.6%). Core-inflation also slowed to +3.2%, y/y, from +3.6% in December. Digging deeper, exports fell -6.6% in January (first negative growth in three-years), providing a – $2.0b trade deficit. Note: Asian data may be distorted by the lunar New-Year celebrations.
  • IDR: Indonesia CPI inflation eased to +3.7% in January as expected. Core-inflation was broadly unchanged at +4.3%, y/y. The futures market expects their Central bank to ease monetary policy further, cutting rates -25bps to +5.75% next week (February 9). Export growth fell to +2.2% in December while import growth surged to +24.3%. The data has narrowed the trade surplus. Is their economy in the first stages of over heating?
  • TWD: Thai CPI inflation fell to +3.4%, in January (as expected). Futures market again expects the Bank of Thailand to cut policy rates by another -50bps to +2.5% by the end of Q2.
  • JPY: Comments from Japanese officials are finding it difficult to halt the yen gains. The perception that JPY is one of the most liquid currencies in the world is been seen as a sound alternative to the two prime reserve currencies, EUR and USD. Their stability and debt-led debasement issues are to blame. This would suggest that it’s only a matter of time before the BoJ appears in the markets directly. A similar storyline is being played out in Europe with the SNB.
  • CNY: China’s non-manufacturing PMI fell -3.1pts to 52.9 in January (less than expected). The HSBC Services PMI was unchanged at 52.5 for a third straight month in January.
  • JPY: Japan Finance Minister Azumi said that the government will take decisive currency steps if needed and that speculative moves in the currency market are increasing.
  • INR: RBI’s Deputy Governor Gokarn said that the central bank may buy dollar rupee to inject INR liquidity.

NFP no license to apply risk

Filed under: OANDA News — Tags: , , , , , , , , , , , , — admin @ 10:32 am

Analysts’ employment expectations were blown out of the water on Friday. NFP produced a stellar report, creating +243k new jobs, pushing the unemployment rate down two ticks to +8.3%. Risk has been quickly applied and added to in the markets. The loonie is a shining example of a growth currency outperforming, especially on the back of its own disappointing employment report. However, beware of the extremely bearish risk factors lurking in the background i.e Euro debt crisis, slowing global growth and Iran nuclear concerns, which remain largely ignored, before wagering it all on risk. It’s a good start to 2012 for the Obama administration, but not a trend just yet. The headline print has managed to produce some blood on the “street”, they had predicted a more bearish print.

Below are some other highlights of the week:


Americas

  • USD: This week we saw incomes pick up during December, +0.5%, however, individuals chose to increase savings instead of spending, showing a caution that will likely keep the US economy in slow growth mode throughout 2012. November spending was unrevised at +0.1%.
  • USD: Unexpected poor Case-Schiller Home Prices and an unexpected Chicago PMI managed to trigger some macro-money profit taking on the last day of the month. Case-Schilller November 20-city HPI fell -1.3%, m/m. The housing market remains sluggish despite lower prices and interest rates, an abundance of foreclosures and tighter mortgage requirements.
  • USD: Chicago PMI was 60.2 compared with a forecast of 62.2. The forward looking component, the new order index, dropped in January to 63.6 from 67.1.
  • USD: US January consumer confidence retreats to 61.1 from 64.8, giving back some of the huge gains witnessed over the past two-months. The fallback was concentrated in consumers views of the current economy. The present situation index (current economic indicators) dropped to 38.4 from a revised 46.5-“consumers are more upbeat about employment but less optimistic about business conditions and their incomes.”
  • CAD: The Canadian economy shrank for the first time in six-months, dragged down mostly by a decline in energy output (oil and gas fell -2.5%), down -0.1% to +CAD$1.27t in November. The BoC released forecasts from two-weeks ago was for GDP growth to slow to +2% in October through December from +3.5% in Q3.
  • USD: ADP reported that Private Sector Jobs with small businesses lead the hiring +95k. However, the December print was revised lower to +292k from +325k. Its a “slow and steady pace” that could bring down the unemployment rate, but not rapid enough to return payrolls to their pre-recession peaks anytime soon.
  • USD: January ISM rises near to expectations of 54.1, proof that growth picked up last month. Digging deeper, prices gained ground after contracting in December, and hiring grew at a slightly slower pace. Factories continue to be a consistent contributor to overall growth.
  • USD: The number of US workers filing new claims for unemployment benefits declined last week (-12k to +367k), continuing the mostly improving trend seen in nine-months. The four-week moving average decreased by -2k to +375,750, remaining below that psychological +400k benchmark that’s required to add jobs to the economy.
  • USD: In his House Budget Committee testimony this week, Bernanke has not changed his tune, again stating that the economy has shown signs of improvement while remaining vulnerable to shocks, and he called on lawmakers to reduce the long-term US budget deficit.
  • USD: Dallas Fed Fisher (nonvoter) reiterated his opposition to further QE. He said that QE3 is not needed and that it would complicate the eventual tightening policies.
  • CAD: Employers hired far fewer workers than expected in Jan (+2.6k vs. +23k) and the jobless rate rose unexpectedly to +7.6% from +7.5%. The data reflects an economy that’s slowing and is consistent with the BoC keeping rates unchanged. Despite creating +129k jobs last year-growth was in the first six-months. (Full-time jobs declined by -3.6k, part-time rose +5.9k, private and public sector increased by +39k while self-employed fell-37k).
  • USD:NFP produced a stellar report, sideswiping most analysts expectations. Payrolls increased by +243k, m/m, allowing the unemployment rate to ease two-ticks to +8.3%. The breakdown saw manufacturing gain +50k, services +162k and the Government eliminate-14k positions. The hourly income increased +0.2% while the number of hours worked remained unchanged at +34.5.

February 1, 2012

Buy the EUR Rumor and Sell that Fact?

Filed under: OANDA News — Tags: , , , , , , , , , , , , , — admin @ 4:32 am

The EUR again has failed to break out of its current range. When its on its knees, down and just about out, Chinese PMI lends a hand in the overnight session. The world’s second-biggest economy has withstood weaker exports driven by the Euro periphery debt crisis and a government-induced property slowdown to give a PMI print of 50.5. A print that still is in expansion territory, no matter if the data may be distorted by a weeklong holiday.

Along with a rise in risk appetite influenced by a ‘whisper’ that a Greek debt deal is imminent, has the EUR testing against its upper range. In truth, it’s difficult to find a diehard Bull amongst us. The market psyche has us believing that most EUR positive moves are supposedly an excellent opportunity to add to the record short positions. These EUR short squeezes are to be treated as an opportunity-no action taken and it becomes a cost! The weak bears certainly hope so.

A successful conclusion to the PSI talks as “promised and expected” will not be the end of the matter-negotiations will remain ongoing. Why? The haircuts being discussed (around 70%) naturally will meet “with very unsatisfactory participation from the perspective of Greek and Euro/IMF authorities for forward looking debt sustainability.” Greece is likely to legislate Collective Action Clauses into the outstanding debt. The objective would be, once legislated, they can be used more coercively to force participation in the restructuring process-In English, whatever is agreed upon, there will be more negotiations required. The nightmare does not end with a successful PSI announcement.

Given that there are so many technical details to be worked out, maybe the market is not fully reflecting the difficulties that are likely to be associated with completing the Greek rescue package. For now, data showing that contraction in the Euro-zone factory activity last month (48.8 vs. 46.9) has slowed is supporting the single currency. Germany remains the outlier, the only country registering a reading above 50, indicating expansion. No matter, investors will wait for the promised Greek PSI agreement before outright celebrating. So, is it buy the rumor sell the fact time now?

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January 27, 2012

Week in FX Europe Jan 22-27

Filed under: OANDA News — Tags: , , , , , , , , , , , , , , — admin @ 11:50 am

Plans for the Greek Private Sector Involvement remain a source of considerable uncertainty for peripheral markets, and the inconclusive result of negotiations over the past few days will leave the EUR and risk complex vulnerable to a large correction. However, the EU economic and monetary commissioner has indicated that authorities are very close to concluding their talks, either later today or over the weekend. Will the market add to the risk trades that have been applied since the Fed, earlier this week, increased its “free money” term length by 18-months? So far it’s been too tempting for the market to refuse and risk is being added accordingly.

The mixed signals from the Euro-zone debt market means investors need to tread with caution. Thus far, ECB liquidity has boosted demand for Spanish and Italian debt. The same cannot be said for Portugal. Peripheral bond yields have resumed their collapse this week, with Italian 10-year yields down -18bp to +5.84%, a long way from that +7% imploding benchmark. Portugal remains the outlier, with yields still under upward pressure. Perhaps if China invested in Europe we would not care so much?

Below are some other highlights of the week:


EUROPE

  • EUR: Greek talks were expected to show something of substance last weekend. Not unexpected, this week began with Greece failing to yield agreement on the public sector involvement. Negotiators have been squabbling over the coupon that restructured bonds will carry.
  • EUR: The single currency opened lower in the Chinese New Year and despite all the negatives, soared through last weeks highs allowing the techies to start talking about outside weekly reversals as the currency remains elevated.
  • EUR: Analysts expect that even a successful conclusion to discussions would still leave the actual degree of private sector uptake unclear. EUR bears are still looking for that top, as default risks will not fully ‘abate’.
  • FRF: French January business confidence surprised weak, falling to 91 from 94. The market had been expecting a small uptick, especially after the German IFO and EU PMI prints.
  • EU: Portuguese debt worries have resurfaced to add to Greek default concerns.
  • EU: Finance Ministers reject Greek debt swap offer, coupon demands too high.
  • S&P’s Chambers: Greece ‘In all likelihood’ is down to a selected default. However, this default is not expected to destroy the credibility of EMU.
  • EU: Euro-zone flash PMI’s came in firmer than expected with the composite back above 50 after four-months in contraction territory. This suggests that the region ‘should avoid a collapse in output’ and another quarter in the GDP ‘red’. Manufacturing PMI rose to 48.7 from 46.9 and services PMI rose to 50.5 from 49.0.
  • GER: Their numbers were strong with manufacturing PMI at 50.9 and services PMI at 54.5. Big picture, data should help the Scandis and CE3 currencies.
  • ESP: Spain saw strong demand at its bill auction. Spanish Treasury sold +EUR2.51b of 3-and 6-month bills. The bid-to-cover was high in both issues.
  • EU: With Greek PSI negotiations inconclusive, the IMF is pushing for the ECB’s to take a haircut along with PSI as a means of distributing losses back to governments. However, the ECB and German coalition remains opposed to taking a loss on ECB holdings. Expect the heavy peripheral issuance schedule to remain a key factor in keeping the bulls on their toes.
  • GER: German ifo surprised higher with the expectations component at 100.9, above the consensus for 99 and up from 98.6 previously (the third consecutive rise) and suggests a GDP growth rate of +0.5% q/q.
  • GBP: UK GDP contracted more than expected in Q4, down -0.2%, q/q, vs. -0.1%. The weakness was driven mainly by soft industrial production in October and November and poor services at the start of the quarter.
  • GBP: BoE minuets deferred the decision on more QE until next month, as expected. The assessment on the economy was somewhat less pessimistic as members judged the most serious downside risks have abated. However, others understood that the “risks of undershooting the target meant an expansion of the QE program is likely to be required”.
  • FOMC: FX risk has rallied following the Fed’s shift to a more dovish policy stance. With US yields holding on to post meeting losses and pricing of tightening being pushed further out in the future has increased the appeal of EM FX.
  • HUF: Hungary sold HUF +48b worth of bonds (+13b more than expected). This would suggest that market perception of HUF risk has improved. PM Orban has softened his stance on recent legislation and indicated that he is willing to adjust their policies in order to win financial backing from the EU and IMF.
  • SEK: Manufacturing confidence surprised soft, falling to -14 vs. -11. Analysts believe that weak growth and the recent sharp moderation in core-inflation allows for a rate cut by the Riksbank at the next meeting.
  • EU: Peripheral bond yields have resumed their collapse, with Italian 10-year yields down -18bp to +5.84% (Friday Morning). However, Portugal remains the outlier with yields still under upward pressure.
  • EU: On Friday, Rehn indicated that PSI talks are very close to conclusion, either today or over the weekend.
  • EU: Euro area M3 growth has slowed significantly to +1.6%, y/y, from +2.0%.
  • CHF: Swiss KoF leading indicator dropped to -0.17 this month from +0.01 in December (ninth consecutive monthly decline and the first negative reading in two years). However, the release is at odds with the recent upward surprise in the PMI back above 50.
  • Fitch: Downgrades Belgium, Italy and Spain.
  • PLN: Poland recorded above consensus 2011 GDP growth of +4.3%, y/y.
    Should continue to attract foreign capital and support the PLN.

January 23, 2012

US Debt Prices on the Back Foot

Filed under: OANDA News — Tags: , , , , , , , , , , , — admin @ 11:32 am

Weekend discussions between Greece and its private lenders did not result in agreement as many had anticipated. At the same time, it has not been able to derail global equities entirely. It seems that investors have shunned the safety of US treasuries for a fourth straight session on hopes that a ‘Hail Mary’ deal by the Greek government is imminent.

With the beginning of the Chinese New Year holiday affecting market liquidity, some market moves have been slightly overextended. The US yield curve has steepened +3bps with 2/30’s moving out to +289bps, as longer dated securities lead the fall. Prices have also been pushed lower temporarily by German comments on the possibility of running the ESM and EFSF programs parallel. US 10’s are now trading on top of its first resistance point of +2.06%. The 10/30’s spread traded at +189bps, the widest point in six-weeks.

In this morning’s session, treasuries temporarily found a bid ahead of this week’s FOMC meet starting tomorrow and concluding on Wednesday. Policy makers are to introduce “major transparency” as an innovation process with individual FOMC members providing projections of the Fed Funds rates and each to explain the quantitative factors behind the projections.

Also putting pressure on prices will be the US treasury department coming to market this week to sell a total of +$99b in notes (2’s, 5’s and 7’s). First up will be tomorrows +$35b two-years, another +$35b of five-years are set for Wednesday, and finally, +$29b seven-year notes will take place on Thursday. Dealers expect this weeks issue’s to receive ‘extra’ concession, as China, a non-starter, will be celebrating New Year and providing little support. Now its back to ticker watching ahead of a Euro press conference scheduled for 20:30 GMT.

The Nikkei closed at 8,765 down -1. The DAX index in Europe was at 6,432 up +32; the FTSE (UK) closed at 5,782 up +54. US indices remained in negative territory with the Dow currently trading at 12,686 down -34.

    Market Outlook for January 23, 2012

    Filed under: Forex News — Tags: , , , , , , , , , , , , , , — admin @ 8:03 am

    Recap of the Latest Global News
    By Cory Vi & Andrew Su on Jan 23, 2012

    January 20, 2012

    China Feels the EURO Heat

    Filed under: OANDA News — Tags: , , , , , , , , , , , , — admin @ 11:27 am

    Can we shout “soft landing” loud enough? That is what Europe et al. are praying for from the “Red Rocket,” China. As their economy slows and key export partners struggle more than ever, the government must ensure a soft landing. The call must be fiscal stimulus driven with one priority, improve domestic consumption.

    Policy makers seem to agree and are determined to push ahead with shifting the country’s growth drivers away from exports and towards personal spending. The PBoC continues to gradually ease policy. The market should not expect to see a repeat of 2008 when authorities pumped the equivalent of $630b to shield their “empire” from recession. This time around they are expected to be target selective.

    Below are some other highlights of the week:


    ASIA

    • EUR: The single currency is beginning to lose support from foreign Cbanks. Reserve data for the 4Q in 2011 reveals a weakening in reserve accumulation as compared to previous years. The ‘build (buy EUR’s) to hold down local currencies was nearly “zero”-resulting in a change of global asset prices.
    • CNY: China reported 4Q GDP growth of +8.9%, y/y, higher than the consensus forecast of +8.7%. For full year 2011, year-over-year, growth was +9.2%, down slightly from the +10.4% growth in 2010, supported by robust December macro-data. Retail sales growth rose to +18.1% in December, up from +17.3% in the prior month.
    • JPY: Japan’s Finance Minister Azumi indicated that the BoJ is monitoring the EURJPY rate as it continues to print record lows.
    • IDR: Bank of Indonesia widened the lower end of their inter-bank rate to +200bps, that is similar to a -50bps cut. With BI continuing to ease monetary conditions and the current account now balanced leaves the IDR more vulnerable to capital flow weakness.
    • CNY: There have been reports from China indicate the RRR for banks in Guizhou has been lowered. It seems that authorities want to continue to ease selectively following the robust 4Q data.
    • MYR: Malaysia’s inflation fell to +3.0%, y/y, in December from +3.3%. Analysts note that robust domestic demand points to Bank Negara Malaysia keeping policy rates on hold.
    • IDR: Indonesia’s credit rating was raised by Moody’s to investment grade at Baa3. Along with Fitch’s support, this can potentially increase portfolio inflows going forward, a positive for the IDR in the medium term.
    • AUD&NZD: Poor Aussie employment data (-29.3k in December, below consensus for a +10k gain) is supporting expectations of a further RBA cut (-25bps in February) and a weaker than expected CPI by the Kiwis (+1.8%, y/y, versus the +2.6% forecasted and down sharply from +4.6% in Q3) has put the antipodean currencies on the back foot medium term.
    • PHP: Bangko Sentral ng Pilipinas cut policy rates -25bp to +4.25% as expected. Easing inflation has allowed the Cbank to commence easing to support growth. Ample liquidity allows the easing to have a minimal impact on the currency.
    • CNY: China’s 2011 fiscal revenue rose +24.8%, while fiscal spending only rose +21.2%. The HSBC flash Chinese PMI was roughly flat in January at 48.8. The market believes the results to have been biased by the by the Lunar New Year.
    • THB: Thailand’s export growth was better than expected at -2%, y/y in December vs. -10% expected. Import growth surged to +19.1%, y/y, from -2.1% in November. The trade deficit widened to a record high of +$2.1b. The market expects the floods to continue put pressure on the trade balance. This will obviously affect the THB

    January 17, 2012

    Will China Weaken the Yuan to Boost Its Market?

    Filed under: OANDA News, Uncategorized — Tags: , , , , , , , , , , , , — admin @ 1:51 pm

    By Sam Mattera
    Benzinga Guest Writer

    In the second half of 2010, David Tepper achieved a level of notoriety after he had made the correct call on equities for the second half of that year and the beginning of 2011.

    Tepper suggested investors get bullish. He made this recommendation on a simple assumption: either the economy improves, in which case equities should rally, or the economy does not improve, in which case the Federal Reserve boosts the market with additional easing measures.

    Following Tepper’s call, in November, the Fed unleashed the second round of quantitative easing. QE2 elevated markets higher, as equities traded up for most of the first half of 2011.

    Now, are investors seeing much the same situation in China?

    On Tuesday, Chinese GDP beat estimates, coming in at 8.9%. This was widely hailed by market pundits as being an ideal reading—slower, so as not to push inflation, yet not so low as to an indicate a “hard landing.”

    The Shanghai Composite rallied strongly in the wake of the report, gaining over 4% on the session. The index had been badly beaten down in recent months, as investors may have become concerned with China’s future growth prospects.

    Tuesday’s Shanghai rally may have been in reaction to investors anticipating a far lower number. 8.9%, while great for a developed nation, is comparatively poor for China.

    The rally may have been motivated more so by easing expectations. With growth slowing, Chinese officials may have no choice but to engage in large-scale easing.

    China’s leadership is set to change this year, and the People’s Bank of China has already signaled their willingness to ease, as they have recently cut reserve requirements.

    That additional yuan circulating in the economy could mean higher asset prices and a better market in China. It may also mean China’s aggressive expansion continues, which could support commodity prices and related economies like Australia and South Korea.

    Yet, are investors set to be disappointed? With Chinese GDP reporting lower, the Asian could economy have more downside from here, even if Chinese officials ramp-up easing policies.

    In terms of the USD/CNY, the currency pair could show strength. The pair rallied slightly on Tuesday—yet, as the PBoC directly pegs the value of the yuan, the currency’s movement is limited.

    One way for the PBoC to ease would be to change its peg. Although some have predicted that the PBoC would increase the peg—making the yuan stronger to fight inflation—it may be more likely that the PBoC will weaken the yuan by lowering the peg. That would be bearish for the value of the yuan relative to the dollar.

    At any rate, China continues to be a major player in the global economy. US equity markets traded higher on Tuesday, perhaps due to the rally seen on the other side of the globe.

    Compass Directions Tuesday, 17 January 2012

    Filed under: Forex News — Tags: , , , , , , , , , , , — admin @ 6:58 am

    After downgrading nine European nations including France on January 13, Standard and Poor’s announced that it will also cut the rating of the European Financial Stability Facility from AAA to AA+. The news offset a relatively successful French bond auction which saw yields fall on one year notes fall from 0.454% at a January 9 auction to 0.406%. It appears that most investors had already priced in a cut in ratings for France and the reaction of investors in the first trading session after the release of the mass downgrades was rather muted. Germany is now the only eurozone nation with a stable AAA rating. The EUR has failed to moved much from 18 month lows and opens the Asia morning trading at 1.2660.

    The focus this week for European leaders will be to address the mounting criticism of their handling of the debt crisis by delivering new fiscal rules and work out a solution for Greece as the rescue plan for that nation flounders. The discussions surrounding Greece and the reduction of the debt burden re-main a strong focus and will be an important tests in the eyes of international investors. Pimco’s Bill Gross has already stated that a Greek default is very likely. There was speculation last night that the ECB acted to buy Italian and Spanish bonds. In other currencies, the GBP is trading at…while the Australian dollar continues to hold up well at 1.0300.

    With the Martin Luther King holiday in the United States, investors were focussed largely on Europe and it was somewhat of a surprise to see a very muted reaction to the S&P downgrade of a number of eurozone nations including France. Although US markets were closed, S&P futures did record a modest rise as the market awaits results from Wells Fargo, Citigroup and Microsoft this week. In Europe, after initial weakness, the bourses there have closed higher with the DAX gaining 1.25% to 6,220 while the FTSE rose 0.37% to 5,657. Carnival, the world’s largest cruise ship operator, fell 14%, after one of its ships struck rocks and capsized off the coast of Italy.

    Commodities futures were largely closed fro trade due to the US holiday. WTI crude rose 1% to above $99.60 as the war of words escalated over the Irani-an situation. Precious metals are higher with gold gaining 0.8% to $1,644 while silver is trading just below $30 up 1.43%. Soft commodities were largely closed for trade while copper gained 1.07%. Today, we have the release of the high impact Chinese GDP data amongst a series of other releases including retail sales and industrial production. Overnight, we have UK and European CPI, a speech by BOE Governor King and the Canadian Rate Statement. The Chinese data will have a strong impact on the markets this week if they show a marked slowdown in the world’s second biggest economy as we expect.

    GOLD moved higher in offshore trade as sentiment picked up, especially in the Euro region with bond yields falling in France after a successful bond auction. The USD steadied which assisted a rise in precious metals prices but all in all it was a quiet night with the US off on holidays. Gold finished offshore trade stronger by 0.80% at $1,643. A very quiet night for precious metals last night as most of the big moves come out of the US and the liquidity just wasn’t their as we had a US holiday. Prices remained well bid throughout the session and are definitely looking prone to further gains. Support down at $1,625 was never in doubt and this level remains short-term support and below here key support is now located at $1,600/05. So depending on the timeframe depend son where stops should be placed. Longer-term holders should consider stops under $1,580 for now. A move looks set to test $1,662 and if we get through here then we should continue to grind back towards $1,700. China data key today so any weakness after this data should be an opportunity to get long.

    AUD/USD was one of the best performing currencies during the last 24 hours as the better than expected Australian Home Loans data started the ball rolling and with a lack of liquidity around the markets due to the US long weekend the price managed to get back above 1.0300 and posting a 1.0335 top during the US afternoon.  This bounce hasn’t surprised us and yet again we are seeing it as another opportunity to re-enter a short term sell position. The price has already moved back to 1.0306 to close out the US session with the ratings agency S&P taking any positive spin out of the markets with a downgrade to the EFSF Bailout Fund from AAA to AA+.  There is a lack of Australian data, however, with the Chinese GDP release today expect some movement for the AUD. The AUD looks to be on the knifes edge of something and this could be the tipping point. An    improvement in Chineawill see the bulls take AUD above the pivot 1.0370 whilst a lower number will give the bears what they have been waiting for, more Doom and Gloom with parity around the corner.

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