EUR/USD
There was little activity ahead of the new-year break with the Euro consolidating above the 1.29 level against the US dollar as there were no fresh trading incentives with the currency retreating from a brief advance to the 1.2980 area.
There was still a serious lack of confidence surrounding the Euro-zone, especially with persist fears surrounding a vicious cycle. The immediate focus was on Spain as the central bank warned that the economy probably contracted in the fourth quarter while the government warned that the 2011 budget deficit may have exceeded 8% of GDP compared with the 6% target. There will be further fears that austerity measures will further undermine growth and erode tax revenue which would prevent any improvement in the budget account as deflation pressures persist within the Euro area.
The latest Chinese PMI manufacturing data was slightly stronger than expected with the headline figure moving above the 50 level while there was also a stronger figure for the services sector. With recent US economic data also generally slightly stronger than expected, there was some relief surrounding risk appetite which curbed defensive dollar demand.
The latest IMM positioning data recorded a further increase in net Euro shorts to a fresh record high. This positioning bias will maintain the potential for short covering, especially if the currency breaks back above the 1.30 area and should help protect the Euro.
Actions from rating agencies will be watched very closely in the short term with Standard & Poor’s expected to release its latest review on Euro-zone countries during January. There was also a generally very cautious outlook towards 2012 from Euro-zone leaders in their new-year messages. A rally in risk appetite did help to push the Euro slightly higher on Tuesday with a fresh move to the 1.2980 area.
Source: VantagePoint Intermarket Analysis Software
Call now and you will be provided with FREE recent forecasts
that are up to 86% accurate* 800-732-5407
If you would rather have the recent forecasts sent to you, please go here
Yen
The dollar was unable to push back above the 78 level against the yen ahead of the weekend and came under significant downward pressure during the day with lows just below 77 despite solid data releases while the Euro also remained under pressure with a slide to test support just below 100 which was the lowest level for 11 years.
There was still an underlying lack of confidence in the Japanese economy, but global economic doubts proved more important and the yen gained support form capital repatriation flows and a reluctance to push funds overseas.
Risk appetite did improve in a very thin trading session on Monday and again on Tuesday with better than expected Chinese PMI data helping to ease immediate fears surrounding the regional economy. Significantly, the yen still failed to sustain any significant losses with the Euro trapped below the 100 level while the dollar dipped to fresh lows around the 76.75 area.
Sterling
Sterling found support in the 1.54 area against the dollar on Friday and there was a sharp rebound late in the Europeans session with a covering of short positions ahead of the year-end period. The UK currency pushed to a high just above 1.5550 before drifting weaker as the Euro was unable to hold above the 0.84 level.
There was some stabilisation in risk appetite which helped underpin the UK currency and there was also still evidence of defensive demand for UK bonds as benchmark gilt yields tested record lows.
There were still very import reservations surrounding the UK economy with anecdotal evidence that retail spending slowed sharply during the new-year period. Business confidence surveys will be watched very closely this week to assess conditions within the economy.
Swiss franc
The dollar found support in the 0.9350 area against the franc on Friday and managed to secure slight gains, although ranges were narrow. After testing support below 1.2150, the Euro recovered ground as the Swiss currency was unable to sustained the advance.
Inevitably, there was speculation that the National Bank would take action if the franc approached the 1.20 area and this discouraged any speculative buying given the potential for sharp losses. The European banking sector will remain a pivotal focus during the first few weeks of 2012.
Source: VantagePoint Intermarket Analysis Software
Call now and you will be provided with FREE recent forecasts
that are up to 86% accurate* 800-732-5407
If you would rather have the recent forecasts sent to you, please go here
Australian dollar
The Australian dollar found support in the 1.0150 region against the US currency on Friday and pushed significantly higher at the start of the new year with gains to near 1.03 on Tuesday.
The currency gained support from an improvement in the Chinese PMI data which increased hopes for a controlled slowdown in the Chinese and regional economy, especially with generally solid US data.
Although the domestic influences were limited, there was a recovery in the manufacturing PMI index to above the 50 level which helped underpin sentiment.
