Comments and forex-analytics from FBS Brokerage Company

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UBS: technical levels for majors

 

EUR/USD

 

Support: $1.3259 and $1.3212;

 

Resistance: $1.3487.

 

http://static.fbs.com/upload/image/technical_analis/December2011/09_12_11/.thumbs/d64781250b0736d9d44a31c749a53541_500_0_0.jpg

 

 

GBP/USD

 

Support: $1.5561 and $1.5526;

 

Resistance: $1.5780 and $1.5883.

 

http://static2.fbs.com/upload/image/technical_analis/December2011/09_12_11/.thumbs/e1e7e3922c6fc1d4e734601ac57d00d3_500_0_0.jpg

 

Chart. Daily GBP/USD

 

 

USD/JPY

 

Support: 77.01 and 76.58;

 

Resistance: 77.86 and 78.11.

 

http://static2.fbs.com/upload/image/technical_analis/December2011/09_12_11/.thumbs/e8c73496649c03d35f3a78b1ddff8bcc_500_0_0.jpg

 

 

USD/CHF

 

Support: 0.9112;

 

Resistance: 0.9331 and 0.9401.

 

http://static2.fbs.com/upload/image/technical_analis/December2011/09_12_11/.thumbs/3d4a5b99a2b3937bc311ef7863a51473_500_0_0.jpg

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EU summit: first results

 

Only 23 out of the 27 EU nations agreed to join the new treaty which implies giving up some sovereignty of the fiscal policy and towards closer fiscal integration.

 

The main points of the statement produced after the night of negotiations are:

 

- Participants of the treaty will need to have balanced budgets with structural deficit which doesn’t exceed 0.5% of the GDP (this requirement must be included in the constitutions of the member states);

 

- In case the rule mentioned above is breeched, the unspecified “automatic correction mechanism” will be activated;

 

- Countries with deficits of more than 3% of the GDP will face sanctions;

 

- Member nations will have to submit their national budgets to the European Commission, which will have the authority to ask for revisions. Member states will have to report in advance how much they plan to borrow.

 

You can get acquainted with the whole text here.

 

So, the proposed changes are approved by 17-member euro zone and 6 more EU nations. Britain which stays out of the single currency headed the opposition to the tighter fiscal union within the 27-nation European Union (idea promoted by Germany and France) claiming that such move will threaten its sovereignty and highly appreciated financial services industry. Among the 3 other states who disagreed with the changes to the treaty there are Hungary, Czech Republic and Sweden – the last 2 haven’t made the final decision yet.

 

It’s also necessary to mention 2 more developments:

 

- Euro area will lend 200 billion euro ($268 billion) to the IMF which the latter, in its turn, lend the indebted European states. Non-euro countries Sweden and Denmark agreed to contribute.

 

- The EU's two bailout funds (the temporary EFSF and the permanent ESM would be managed by the European Central Bank).

 

The meeting will continue later today. The goal is to specify the regulations of the new treaty, including the sanctions for the members who violate stricter budget rules. The policymakers aim to prepare the ultimate version of the treaty by March.

 

The market’s sentiment is pessimistic. Asian stocks fell, the pair EUR/USD erased the advance it made on November 30 when the major central banks acted to help the euro zone get liquidity and sliding down to the levels in the $1.3280 area.

 

At the same time, ECB president Mario Draghi and German Chancellor Angela Merkel regard the result of the meeting as positive claiming that Europe is on the way toward regaining market’s confidence.

 

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Ueda Harlow: forecast for EUR/JPY

 

Analysts at Ueda Harlow note that the single currency is trading versus Japanese yen below the Turning or Conversion line – marked red on the daily Ichimoku chart.

 

In addition, the specialists points out that the Lagging line, which represents the pair’s close level shifted backwards, is moving below the Cloud and price chart.

 

The strategists claim that these factors mean that euro is likely to decline. In their view, EUR/JPY may slide next to 102.49 yen (November 25 minimum) and 100.76 yen (October 4 minimum, the lowest level since June 2001) and probably to the psychological 100 yen level.

 

The strategists warn that everything will depend on the outcome of the European summit which ends today.

 

http://static2.fbs.com/upload/image/technical_analis/December2011/09_12_11/.thumbs/6c9923c22a8c23cfccc435c031159f33_500_0_0.jpg

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Nomura, RBS: China will keep easing policy

 

The economic data released today in China were mostly lower than expected. The nation’s industrial production contracted from 13.2% in October to 12.4% in November (y/y).

 

Analysts at Nomura expect Chinese GDP growth will slow down from 9.1% in the third quarter of 2011 to 7.5% in the first 3 months of the next year. The specialists say that the country’s economy is rapidly weakening as its exports suffer from the reduced demand overseas and the property market is cooling.

 

In their view, lower inflation (annual CPI growth dropped from 5.5% in October to 4.2% in November) would allow the nation’s monetary authorities to conduct further monetary easing. The bank expects the People’s Bank of China to cut reserve requirements rate in January.

 

Analysts at Royal Bank of Canada claim that as Beijing claimed that it will maintain its “prudent” monetary policy stance, the policymakers will adjust the policy in the form of RRR cuts rather than a cut in benchmark policy rates or a shift to currency depreciation.

[fallenDC]

Ichimoku. Weekly forecast. GBP/USD

 

Weekly GBP/USD

 

Last weeks the bulls attempted to get hold of the lower border of the Ichimoku Cloud (3) and consolidate inside of Kumo, but were defeated: the Turning line has once again provided resistance for the prices (1) and pound opened new week below Kumo. As a result, resistance for sterling has strengthened.

 

The Ichimoku Cloud, though not wide, but is descending – the market is bearish. There is a possibility that the pair will resume declining after the 2 weeks of correction. At the same time, Tenkan-sen and Kijun-sen are moving sideways (1, 2), so GBP/USD is unlikely to drop below November minimums.

 

http://static.fbs.com/upload/image/technical_analis/Ichimoky/December2011/12_12_11/9f804d0a2887bdf548aca7db06022935.gif

 

 

Daily GBP/USD

 

As it was expected, last week sterling consolidated above Tenkan-sen (2). However, at the beginning of this week the mentioned support was breached by the sharp bearish move down.

 

At the same time, the Turning line is starting to incline upwards, while the descending Ichimoku Cloud has narrowed to 1 point and without being able to gain significant width. That means that it may be soon possible to buy pound on the dips.

 

As for support GBP/USD has only November and October lows left. Resistance is provided by the Turning line (2) and the Standard line (1).

 

http://static2.fbs.com/upload/image/technical_analis/Ichimoky/December2011/12_12_11/ace4ebba24ad371559cf84bfaaef77db.gif

[fallenDC]

Ichimoku. Weekly forecast. USD/JPY

 

Weekly USD/JPY

 

The bearish Ichimoku Cloud (3, 4) is still stable and keeps weighting on the prices. The Standard line (2) is providing strong resistance as the prices stay well below it since the beginning of March.

 

The greenback is fighting to stay above the Turning line (1) and remain within the horizontal Tenkan-Kijun channel. If the support holds and the pair will be able to avoid dipping and get higher, it will mean that the position of bulls is slowly but surely strengthening.

 

When US currency will finally manage to overcome Kijun-sen (2), the outlook for the pair will significantly improve.

 

http://static2.fbs.com/upload/image/technical_analis/Ichimoky/December2011/12_12_11/484c6fc1ac2334df3547326a16b0184a.gif

 

 

Daily USD/JPY

 

On the daily chart the extremely thin Ichimoku Cloud remains an alarming signal as it means that neither bulls, nor bears are strong enough to change the situation to their profit. Though the pair has managed to consolidate above the Cloud, if the market’s sentiment seriously worsens, the thin Kumo won’t do any good as support, so one should be cautious.

 

The Standard line (2) keeps moving horizontally, so the general sideways trend is unchanged and is likely to continue at least till the end of the month.

 

If the greenback stays above Tenkan and Kijun, it will have change to rise higher, but we expect no strong advance.

 

http://static.fbs.com/upload/image/technical_analis/Ichimoky/December2011/12_12_11/484c6fc1ac2334df3547326a16b0184a.gif

[fallenDC]

Ichimoku. Weekly forecast. USD/CHF

 

Weekly USD/CHF

 

As expected, the general weakness of the greenback a week before last didn’t do much harm to USD/CHF: the prices are still inside the Cloud, the bulls are patiently trying to overcome this obstacle.

 

The pair is supported by the Turning line (1) and Senkou Span A (4). The Ichimoku Cloud, which has so far switched upwards, widened (3). Tenkan-sen (1) and Kijun-sen (2) are holding weak, but still “golden cross”.

 

Though the bulls seem currently unable to move the prices above the recent maximum, they are moving the market sideways and it’s quite likely that in a few weeks they will succeed and leave Kumo behind.

 

http://static2.fbs.com/upload/image/technical_analis/Ichimoky/December2011/12_12_11/1c973c026b67cca0c576d228602fc669.gif

 

 

Daily USD/CHF

 

On the daily chart US dollar continued consolidation – this time it was trading above the Turning line (1) which has so far showed itself as a good support.

 

Strong “golden cross” (3) is still in place, rising Ichimoku Cloud is widening (4), while the lagging Chinkou Span (5) finds itself above the price chart – the bullish signal. In addition, the Standard line (2) is going up – if the Turning line (1) joins it and begins advancing, that would means that the uptrend is resuming.

 

http://static2.fbs.com/upload/image/technical_analis/Ichimoky/December2011/12_12_11/5bed2d10383a7604c40e8f60f7bd6447.gif

[fallenDC]

Analysts on EU summit results and euro area's future

 

UBS: though the results of the EU summit met by the market with mixed feelings, it’s clear that the single currency will suffer from the fundamentals of recession in the euro area. As a result, EUR/USD will weaken in 2012 towards its fair value at $1.20/25.

 

BBH: the markets are still worried about the peripheral debt maturing at the beginning of the next year. As Britain refused to join new EU fiscal treaty its role as a safe haven may strengthen.

 

Goldman Sachs: many issues still are to be clarified. The ECB will eventually towards more proactive purchases on a larger scale after the EU nations confirm their agreement and specify certain regulations.

 

Citigroup: the funding needs of Italy and Spain for 2012 and a good part of 2013 seem to be covered – a good point. However, when the EFSF was established last year the markets rallied with relief, but now there’s no such reaction.

 

RBS: the policymakers failed to find solution of the crisis. European imbalances are wider than just the budget problems – the growth divergence across the euro area will increase as the peripheral economies unlike the core ones will be hit by the austerity measures. In addition, the parliaments of the European nations may be reluctant to pass new fiscal legislation.

 

http://static2.fbs.com/upload/image/technical_analis/December2011/12_12_12/.thumbs/896321081c690690408fc01b0d02837f_500_0_0.jpg

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SocGen, UBS: euro’s declining after Moody’s statement

 

The single currency dropped versus it’s the greenback to the minimal level in December in the $1.3250 area. US dollar and Japanese yen weakened versus their higher-yielding counterparts as the market’s risk aversion increased.

 

Euro weakened as Moody’s Investors Service put the credit ratings of all EU nations under review. Explaining such decision the agency said that the European countries didn’t manage to produce “decisive” measures to solve the debt crisis (on Friday, December 9, the EU leaders announced new rule which limits annual structural deficit of the member nation by 0.5% and decided to provide up to 200 billion euro in bilateral loans to the IMF for financing the problem European nations).

Another leading agency, Standard & Poor’s, warned before the Friday's summit that it may downgrade euro zone countries en masse if they fail to stem the debt crisis. The agency hasn’t given any comments on the situation yet.

 

Analysts at Societe Generale note that Moody’s move is in line with investors’ sentiment as the market isn’t convinced the European authorities have done enough to solve the crisis. The specialists think that EUR/USD may fall below $1.3145, to the lowest levels since January.

 

Strategists at UBS underline that if euro zone bonds again get under pressure, there won’t be enough positive factors to support euro.

 

Economists at Bank of Tokyo Mitsubishi UFJ think that the euro zone’s debt crisis will intensify and European currency will keep declining.

 

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[fallenDC]

S&P comments on the situation in the euro area

 

Reuters cites the comments of Standard & Poor's chief economist on the situation in the euro area made yesterday: «There is probably yet another shock required before everybody in the euro zone reads from the same page, for instance a major German bank experiencing some real difficulties on the markets, which is a genuine possibility in the near term». According to S&P, EU summit agreement was a significant step forward, but not enough.

 

Last week the ratings agency put 15 European nations on watch for potential downgrade. It usually takes the agency about 3 months to act after a warning. The agency said, however, that this time it may make the decision more quickly.

 

S&P intends to urge the European authorities to solve the crisis as the next year the region is facing significant risk of recession and credit crunch.

 

Analysts at Commerzbank claim that though much of the potential negative outcome has already been priced in, the downgrade by S&P would seriously hit the markets.

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Citigroup, BoA: expectations ahead of SNB meeting

 

The Swiss National Bank meets on Thursday, December 15. The Libor rate is released at 8:30 a.m. GMT and is followed by the central bank’s press conference.

 

The market’s widely expecting the SNB to do something to weaken franc as the officials have expressed concerns about the strength of the national currency.

 

Currency strategists at Citigroup note that the leveraged funds turned short on franc for the first time in 13 months.

 

Analysts at Bank of America Merrill Lynch claim that the market is estimating the possibility of the SNB raising floor for EUR/CHF from 1.20 to 1.25 by 25%. Some traders even talk about the floor raised to 1.30.

 

The specialists say that for further hints about Swiss monetary policy one should analyze the micro survey of Swiss business that appears in the bank's quarterly bulletin (the one for the fourth quarter is released on December 23, the previous are available here). According to Merrill Lynch, the survey deterioration in September triggered the SNB’s intervention as well as verbal interventions in January and December 2010.

[fallenDC]

UBS: forecasts on the Fed, the SNB and the ECB will act

 

Analysts at UBS believe that the Federal Reserve won’t announce the third round of quantitative easing at today’s meeting as the nation’s economic data has so far been rather strong. In their view, the Fed may reduce its discount rate and reinstate the Term Discount Window Facility in order to increase liquidity available to US banks.

 

The specialists think that the Swiss National Bank will raise the floor for EUR/CHF from the current level of 1.20 to 1.25 as Swiss CPI declined for 2 months and the nation’s monetary authorities will try to diminish the risks of prolonged deflation.

 

As for Europe, the UBS economists think that the European Central Bank will cut its benchmark interest rate by another 25 bps at its next meeting on January 12 and then once again on March 8. As a result, the borrowing costs in the euro area will slide from the current level of 1% to 0.5%. The strategists don’t rule out the possibility that the central bank will lower rated to 0.5% even earlier and that the ECB could be forced to consider such option as the quantitative easing. UBS underlines that the European economy will be under pressure from austerity measures and debt problems, so the ECB will probably be able to justify bond purchases by its mandate of maintaining price stability rather denying potential accusations in deliberate monetizing of the European debt.

[fallenDC]

SocGen: technical levels for USD/JPY

 

Technical analysts at Societe Generale expect that the level of 77.15 yen will be able to support the greenback. The specialists note that for the pair USD/JPY could experience growth in the medium term, it should overcome resistance in the 78.30/55 yen area.

 

http://static.fbs.com/upload/image/technical_analis/December2011/13_12_11/.thumbs/9d4cf9143d60ec3888ee0e04c679a5c4_500_0_0.jpg

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Mizuho: short-term recommendations for majors

 

EUR/USD (bullish, target $1.3525, stop below $1.3135)

 

Resistance: $1.3250, $1.3310 and $1.3360

 

Support: $1.3145 and $1.3055

 

http://static.fbs.com/upload/image/technical_analis/December2011/13_12_11/.thumbs/a5aa6eaaa2e2a32ee3342d333c892a41_500_0_0.jpg

 

 

GBP/USD (bullish, target $1.5795, stop below $1.5495)

 

Resistance: $1.5665, $1.5735 and $1.5770

 

Support: $1.5525 and $1.5465

 

http://static2.fbs.com/upload/image/technical_analis/December2011/13_12_11/.thumbs/f66b86268380e30c90d86c33b9defd3b_500_0_0.jpg

 

 

USD/JPY (bearish, target 76.95, stop above 78.58)

 

Resistance: 78.00, 78.15 and 78.29

 

Support: 77.49, 77.12 and 76.96

 

http://static2.fbs.com/upload/image/technical_analis/December2011/13_12_11/.thumbs/f6a2822160a7077908dd027c99b3bc68_500_0_0.jpg

[fallenDC]

J.P. Morgan on trading EUR/USD

 

Analysts at J.P. Morgan believe that the EU summit on Friday passed as usual – the policymakers achieved some results, but the markets didn’t feel relieved.

 

The specialists doubt that the European nations will be able to come up with the final by March as the previous ones took 1-2 years to prepare.

 

J.P. Morgan believes that the crisis will keep on and the European Central Bank will be finally forced to do more. As a result, the economists expect EUR/USD to decline and recommend selling the pair on rallies.

 

The specialists underline that with all the events affecting the market such as the FOMC and OPEC meetings it’s very difficult to find where to enter the market. In their view, one open shorts on euro if it reaches $1.36 targeting $1.31/30 and placing stops at $1.3820.

 

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[fallenDC]

BIS: following trend vs. carry trades during crisis

 

Economists at Bank for International Settlements claim that during the times of the crisis it’s better to use so-called momentum strategies or, in other words, to follow trends than doing carry trades.

 

The latter is borrowing in currencies with low rates to investing in the higher-yielding ones. The market players usually fund their portfolio by US dollars and buy assets in Australian dollar, New Zealand’s dollar, emerging markets’ currencies.

 

According to BIS calculations, carry traders lost 12% in January 1998 (Asian crisis) and 6% in October 2008 (global financial crisis) and suffered severe losses in August and September this year. On the other hand, those who applied momentum strategies gained during the same periods.

 

BIS specialists note that though carry trade is popular because most of the time investors are getting small but stable gains, these positions may lead to large losses – you can lose all you’ve gained in 1-2 years of average returns in 1 month when the situation becomes unfavorable.

[fallenDC]

CME Group: technical comments for EUR/USD

 

The single currency is trading versus the greenback around 2-month minimum in the $1.3160 area.

 

Technical analysts at CME Group claim that the pair EUR/USD will consolidate in the short term as it’s currently a bit oversold, while in the medium term the specialists are bearish on euro thinking that the crisis is far from being over. Such forecast is confirmed by the negative picture on the daily Ichimoku chart.

 

According to CME, support for euro is situated at $1.3142, $1.3070 and $1.2965, while resistance is found at $1.3215, $1.3280 and $1.3335.

 

http://static.fbs.com/upload/image/technical_analis/December2011/13_12_11/.thumbs/d929d237d9dd1471f96cdbe111e6a4e1_500_0_0.jpg

[fallenDC]

JPMorgan Chase: euro may renew 2011 low

 

The single currency fell versus the greenback diving below October minimums to the levels in the $1.3010 area.

 

Technical analysts at JPMorgan Chase claim that EUR/USD breached important support at $1.3047 (61.8% Fibonacci retracement from a 4-year minimum reached in June 2010) and may retest 2011 low at $1.2873 hit on January 10.

 

In their view, the pair’s trading within downtrend and the outlook for euro will remain negative as long as it stays below $1.3145/3212.

 

http://static.fbs.com/upload/image/technical_analis/December2011/14_12_11/.thumbs/dc5a5ac05908a7b09a95bc6d43b902b1_500_0_0.jpg

[fallenDC]

Westpac: advices on trading euro

 

Analysts at Westpac believe that the single currency is on the way down to $1.2860. In their view, euro will weaken versus US dollar due to the risk that the rating agencies downgrade European nations and high probability of the region’s falling into recession.

 

At the same time, the specialists underline that there are now too many short positions on euro, so they don’t recommend selling euro at the current levels. According to the bank, it’s necessary to wait for a short squeeze back toward $1.3400 before going short on EUR/USD.

 

In addition, Westpac advised selling Australian dollar against its New Zealand’s counterpart as the Reserve Bank of Australia is more likely to reduce the interest rates.

 

http://static2.fbs.com/upload/image/technical_analis/December2011/14_12_11/.thumbs/c4ec60c2a1d19018aa36c510b00dbe80_500_0_0.jpg

[fallenDC]

Commerzbank: technical comments for the majors

 

EUR/USD: the pair went below the October 4 minimum at $1.3145, the next downside target lies at $1.2860 (2011 minimum) and at $1.20 in the longer term. The key resistance is situated at $1.3355.

 

http://static2.fbs.com/upload/image/technical_analis/December2011/14_12_11/.thumbs/bcf9a77b5d96dc73e2ab043202617365_500_0_0.jpg

 

 

USD/JPY: the pair recovered from support in the 77.11/21 area (55- and 100-day MA). Resistance is found in the 78.28/30 zone (last week maximum and 8-month resistance line), 78.66 (4-year downtrend resistance line) and 80.12 (55-week MA).

 

http://static.fbs.com/upload/image/technical_analis/December2011/14_12_11/.thumbs/c72fb77dd5831c2a44ce6da2262eb1f9_500_0_0.jpg

 

 

USD/CHF: the pair reached the maximal levels in 10 months and managed to rise above 0.9399 (50% Fibonacci retracement of the decline in 2010-2011). If US dollar closes above 0.9400, it will be able to advance to 0.9776/84 (2011 maximum) and then to 0.9950 (61.8% Fibonacci retracement of the decline from 2010).

 

http://static2.fbs.com/upload/image/technical_analis/December2011/14_12_11/.thumbs/8ad3f3a62508d3ce178be0c3d1389682_500_0_0.jpg

[fallenDC]

BoA: sell Aussie versus loonie

 

Analysts at Bank of America Merrill Lynch advise traders to sell Australian dollar against its Canadian counterpart.

 

In their view, AUD will weaken as the prospects of Australian currency for the next few weeks seem rather dim:

 

- Shanghai Composite Index has breached important support levels (Aussie is extremely vulnerable to the deterioration of the economic situation in China as the latter is Australian key trading partner).

 

- Continuous Commodity Index has also dropped below key support (commodities represent the key part of the Australian economy, so AUD will likely suffer).

 

The specialists propose to sell Aussie versus loonie because though Canadian dollar is also a commodity currency, it’s not affected by the dynamic of commodity prices as Australian dollar is. Moreover, AUD/CAD is facing the long-term resistance level which has been in place since the 1980s.

 

According to the bank, it’s necessary to open shorts on the pair at 1.0440 stopping above 1.0660 and targeting 0.9840.

 

http://static.fbs.com/upload/image/technical_analis/December2011/14_12_11/.thumbs/fee3c7752a320fd94691120e23dc719b_500_0_0.jpg

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FOMC: results of the meeting and analysts' comments

 

FOMC (Federal Open Market Committee) repeated its pledge to keep the interest rates at the minimal level near zero at least until the middle of 2013 and maintained Operation Twist, the operation which allows the central bank to lengthen the maturity of Treasuries in its $400 billion portfolio. Note that Chicago Fed President Charles Evans once again called for additional easing.

 

The Fed’s Chairman Ben Bernanke claimed that the European debt crisis may affect US economy, so that further monetary stimulus measures will be needed.

 

Despite the fact that the unemployment level unexpectedly dropped in November to the minimal level since March 2009 of 8.6%, the FOMC said that this number is still “elevated” and that the jobless rate will decline “only gradually”. Although some recent data was quite positive (CB consumer confidence, ISM Manufacturing PMI), the Fed underlined that the pace of business fixed investment growth is still low and housing market “remains depressed”.

 

Analysts’ comments

 

Analysts at BNP Paribas expect that the central bank could unveil measures aimed to support growth and improve the public understanding of Fed’s policy already at the next meeting on January 25-26. In their view, the Federal Reserve will launch QE3 in the second quarter or even earlier, in January or March, in case economic conditions worsen. The specialists also expect the central bank to publish their forecasts for the federal funds rate and define the levels of economic growth and unemployment which would allow it to tighten monetary policy.

 

Strategists at ING also point out that due to the annual rotation the hawks – Federal Reserve presidents Charles Plosser of Philadelphia, Richard Fisher of Dallas, and Narayana Kocherlakota of Minneapolis – and their place will be taken by the doves – San Francisco Fed President John Williams, Atlanta Fed President Dennis Lockhart and Cleveland Fed President Sandra Pianalto.

 

 

Some analysts think that the Fed is already conducting QE (that explains low yields of the Treasuries) without announcing that officially. At the same time, economists at UBS, Barclays, Citigroup, Deutsche Bank и JP Morgan Chase believe that the central bank will be buying only mortgage bonds. Anyway the Fed’s decision will likely be based on the inflationary expectations and the fact that last month the inflation forecasts were lowered speaks in favor of the potential QE.

 

Pay attention to the fact that Bernanke will hold press conference on January 26 after the meeting, an event that occurs quite rarely.

[fallenDC]

December 15: key economic events and data

 

Released data:

 

- Tankan survey: business sentiment deteriorated;

 

- China’s HSBC Flash Manufacturing PMI rose from 47.7 in November to 49.0 in December.

 

Market’s talk:

 

- Investors are speculating about potential downgrade of France’s credit rating. All euro zone’s nations are exposed so such outcome after the warnings of S&P and Moody’s, but France is considered to be especially vulnerable. French Foreign Minister Alain Juppe claimed today that for France to lose its triple-A debt rating would be bad news but “not a cataclysm”. Be cautious during today’s US session.

To watch today:

 

- The SNB’s 3-month Libor rate and press conference at 8:30 GMT. According to Goldman Sachs, the central bank could lift EUR/CHF floor from 1.20 to 1.30 due to deflationary risks, though not at today’s meeting. The analysts say SNB’s statement “will leave the door open for such a move at a later stage during the first quarter of next year”. One can’t rule out the possibility of surprises;

 

- European flash PMIs;

 

- British retail sales (9:30 a.m. GMT);

 

- US data (1:30 p.m. GMT);

 

- Spanish bond auction;

 

- 11:00 GMT — ECB President Mario Draghi speaks in Berlin on «Last Resort ECB? Monetary Policy Leeway In The Social Market Economy».

[fallenDC]

Westpac, E&Y: Europe’s heading to recession

 

The majority of experts sound pessimistic on the prospects of the euro area's economic growth. Analysts at Westpac claim that the austerity measures will lead the region into a “fully blown recession”.

 

Economists at Ernst & Young also believe that European economy’s going to contract and add that the actions of the EU authorities haven’t completely eliminated the risk of the euro area’s breakup.

 

In their view, the currency union’s GDP will drop in the current and next quarters and the rebound will begin only by the end of the next year, while the 2012 growth won’t exceed 0.1% (in 2013 the situation might improve – the analysts project 1.5-2% growth). The unemployment level is seen above 10% until 2015.

 

E&Y reminds that the next year the large amounts of sovereign debt will require refinancing. As a result, the debt turmoil is likely to continue and the ECB will likely have to consider acting as a lender of last resort and keep buying government bonds.

[fallenDC]

Nomura: EUR/USD is sliding to $1.20

 

Analysts at Nomura who have been bearish on euro this year still think that the single currency is going to weaken versus its US counterpart.

 

The specialists note that if in the longer term it’s possible to see some light ahead, the short-term picture looks rather dim.

 

According to the bank, EUR/USD will hit $1.20 by the end of the first quarter of 2012. Nomura says that the pace of euro’s decline will depend primarily on the results of the upcoming bond auctions in Europe and the 3-year ECB money tender which is launch on December 21.

 

In addition, the strategists claim that one shouldn’t rule out the possibility of the pair’s drop to the parity level the next year.

 

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