Daily Calendar

Fri
Jan 4
1:45am CHF CPI m/m
3:55am EUR German Services PMI
4:00am EUR Services PMI (r)
4:30am GBP Services PMI
4:30am GBP Net Lending to Individuals m/m
4:30am GBP Mortgage Approvals
5:00am EUR CPI y/y (p)
5:00am EUR Italian CPI m/m
8:30am USD Nonfarm Employment Change
8:30am USD Unemployment Rate
8:30am USD Average Hourly Earnings m/m
8:30am CAD IPPI m/m
8:30am CAD RMPI m/m

Currencies Update

Ahead Jobs Report...

(04/01/1/2008 - 11:00 GMT)Markets are still calm as the data to be released by the U.S. economy concerning the labor market is still due later today. The weakness of the dollar is still what is on investor's minds as dollar-backed assets rushed to record all time highs and the fact remains the Fed's will cut rates further in their next meeting.

The Euro was able to rise once again to fluctuate around the 1.4700s after it had dipped during the session to record a low of 1.4694. The high for today remains unchanged at 1.4753 which was recorded earlier today. Germany released its PMI Services for the month of December coming in at 51.2 lower than the projected reading of 52.4 and prior reading of 53.1. The Euro Zone released its PMI Services for the month of December revised down to 53.1 from the flash estimate of 53.2. The PMI Composite final reading for the month of December was unrevised and remained steady from the flash estimate of 53.3. As for the CPI Flash Estimate annual reading, it came inline with the expected reading of 3.1% but slightly higher than the prior reading of 3.0%.


After the release of strong U.K. data, the royal currency was able to regain some of its strength to soar against the dollar and take the pair up to record a new high for the day at 1.9799 and drag the EUR/GBP down from the new record low it had recorded against the Euro at 0.7485. The UK released its M4 Money Supply final reading for the month November was revised upwards to 0.5% from the preliminary reading of 0.1%. The PMI Services were released coming in at 52.4 higher than the projected reading of 51.6 and previous reading of 51.9.

The USD/JPY pair is trading within very narrow ranges at the 109.30s level. The high recorded for today was 109.58 while the low was 108.77.

Still to come is data being released from the U.S. known as the Jobs report well it might either confirm the fact that the U.S. is heading into a recession or was it just an illusion. So hang on tight and keep a close lookout on the Non-farm payrolls figure to see whether the dollar might rebound or continue it dreadful pattern.

Major Market Movers

07' Eco. Panorama

A trading year has passed us, as we stayed through the gains and losses, the hikes and cuts, growing and slowing economies, and more over we shared the anxiety and tranquility.

It was just one of those years with diversity in performance highlighting the major happenings and events that glided and swung us throughout the year.

The bullets fired this year were all across the globe, yet the nuclear explosion was on US grounds where its after-shocks hit THE WORLD… The blinds were uncovered and the bright light of truth rays blinded all, as the US housing slump spread into a catastrophic financial crisis as subprime loses mounted, massive write-down's to all mortgage backed securities hit financial institutions leading to a global sell-off.

Reappraisal of risk has taken investors by surprise as all were incapable of assessing their amounts of holdings correlated to the US housing sector. We saw new records set this year across the board and mainly they were US dollar lows; economies and world financial markets entered a new era of high voltage volatility that made futuristic dream figures just steps away, new levels were created along side a new GLOBAL ECONOMIC STORY…

Economies adjusted to the new scenario and were affected mainly by what was referred to as the "Credit Squeeze"; we saw Interbank Offered Rates soar as the lack of liquidity and faith among banks made them reluctant to lend each other, while currency fluctuation were very revealing to insecure sentiment as Carry Trades and their reversals making the Japanese Yen the gossip of the season.

The deterioration on US grounds empowered the Feds to indulge in a number of cuts on their Benchmark interest rates, followed by the Bank of England, and Canada as well; all were part of the ripple effect to the spread of the housing slump in the US and the world's financial system.

Attempts by world banks to provide liquidity exceeding lowering interest rates yet they created by conjoined efforts the Term Facility Auctions a move yet to prove its level of efficiency in calming tensed liquid thirst markets.

The dilemma was further complicated as economies started to witness signs of softness on their grounds, while new historical levels that were created in the markets agitated the situation. Record Oil prices near a three digit figure, Gold near all time high, and finally the 13 nation currency's appreciation to all time high and the complications it sprinkled to the vigilant ECB, while the extreme fluctuations for the Japanese Yen just further might weaken their economy.

As we said this year was just one of those to go on record, and still we fear 08 is to unbutton further surprises, we need to know where we're standing to be the pioneers and not fall again victims to poor risk assessment. Further materialization to losses might still be seen and the US economy needs to reflect signs of stability to exit the danger zone of recession!

All combined will affect the headings of the global economy this year, and to see ahead you must be aware of the dark past, and to that we present to you our 2007 Panorama where each major economy this year was highlighted in lines. Read thoroughly and analyze for we say to you the financial rollercoaster is about to go wild this year…

The United States

Now that 2007 had come to an end, let's go back in time to examine the major highlights of the year, as it's expected to see the outcomes of last year in the New Year, and the outlook doesn't seem pretty from where we are standing at the moment for the world's largest economy…

The U.S economy grew by 0.7 percent in the first quarter of 07, while the economy grew by an impressive 3.8% and 4.9% in the second and third quarters respectively, and is expected to drop to as low as 1.0% in the forth quarter of 07. Inflation rates entered the Fed's comfortable zone though the year making the job far easier for the Feds and giving them more cushion to focus more on downside risks to growth, yet the situation didn't persist as inflation started to hike again on increasing energy prices and impressive growth rates through out the 2nd and 3rd quarters.

The U.S Dollar depreciated against major currencies through out the year, dropping almost 12% against the Euro as the Euro was around $1.28 at the start of this year and ended trading around the $1.46 levels, while the Dollar dropped 8% against the Yen this year as investors reduced their Carry Trades heavily through 2007 in which they borrow in low yielding currencies such as the Yen and invest in higher yielding assets.

As for the U.S Futures Indexes' performance through out this year, the NASDAQ 100 was the most impressive one gaining 14.9%, the DJIA inclined 5.4% over the year, while the more diversified S&P 500 gained 2.6%. U.S Indices survived through out this year and the blue chips sector outperformed other sectors, while the energy sector also was one of the outperforming sectors in the economy.

Energy prices increased dramatically this year, edging up from as low as the $50 levels to its all time high at $99.26 in November, increasing energy prices contributed into hiking inflation rates in the last quarter of 2007, and other downside effects is seen on consumer spending as Americans now spend more off their pockets on gasoline rather than other products. Gold Prices on the other hand inclined heavily through out this year, from $650 per ounce back in January, edging up heavily to around the $840 per ounce gaining almost 20% through out 2007.

The Housing sector started to show its severe effects on the economy especially in the second half of 2007, subtracting as much as 1 percent from the third quarter's GDP estimate, and is seen to continue dragging the economy down through 2008.

The Manufacturing sector continued to show more weakness and even the depreciating Dollar which helped Exports couldn't make up for the slowing sector and the Services sector remained one of the few sectors that was still holding up.

The Trade deficit widened through 2007 on rising deficit with China and increasing energy prices, as the American Senates are still trying to push China into letting the Yuan float freely, the Average of Deficit through 2007 was 58.7 billion, edging as high as 62.7 billion in March and hitting as low as 56.9 billion in August, the Exports remained one of the main reasons contributing to substantial growth levels on the back of a depreciating dollar, but increasing concerns over the Chinese influence on the American economy is yet to have a solution. The Net Long TIC fluctuated heavily during 2007, the Feds use this indicator to cover up the trade deficit and the most noticeable thing about it was Net Sales through August by $150.7 billion and September's Net Sales of $32.8 billion.

The Labor market also was holding up thorough 2007, the Unemployment rate dropped to 4.4% thorough out the year and remained below 5.0% and those rates are considered historically low and healthy to prevent the economy undergoing recession, those healthy rates gave personal Income the momentum to remain strong and helped eliminating some of the negative effects of other underperforming sectors in the economy. Surprises were seen through out the year, but the biggest surprise was the 4000 decline which was reported in the Non-farm Payrolls back in August which at the time highlighted recession but a revision in September eased expectations of a recession in the world's largest economy though downside risks to growth and upside risks to inflation now threatens the economy with Stagflation.

The Feds announced in September their first cut on their benchmark interest rates, a 50 basis points cut took the rates from as high as 5.25% to 4.75% the Feds applied two more cuts taking the rates to as low as 4.25% and financial markets expect rates to decline by a further quarter basis point to 4.00% in their next January 30th meeting, along with that the Feds also applied a series of cuts to their Discount rates taking them from as hig

Major Technical Analysis

euro

The European currency continued in the upside direction yesterday due to the signals it had previously formed to take the euro up until 1.4780s resistance area. The technical oscillators indicated the upside potential; hence, the euro might cause a significant move if it passes the major resistance area around 1.4800.
The trading range for today might be between the key resistance level at 1.4880 and the key support level at 1.4670.
The general trend is up as far as 1. 3860 remains intact targets now at 1.5000 and 1.5230
We expect buying Euro above 1.4720 with a target at 1.4820 stop loss below 1.4670.

gbp

The British pound yesterday dropped in a strong bearish move as it couldn't breach the major resistance level located around 1.9840s area. The pound fell sharply to hit the strong support at 1.9700s, and is seen to remain weak therefore the pound is expected to progress in the downside direction.
The trading range for today might be between the key resistance level at 1.9870 and the key support level at 1.9500.
The general trend is up as far as 1.9460 remains intact targets now at 2.1170 and 2.1450

jpy

The dollar against the Japanese yen yesterday declined in a major move to hit the important support level at 108.20s and failed to progress due to the support's strength so the pair reversed back to the upside direction in the last trading sessions to close with tendency to the upside. Today the pair is expected to move in a bullish pattern.
The trading range for today will be between the key resistance at 111.00 and the key support at 107.80.
The general trend is down as far as 121.30 remains intact, targets at 112.40 and 111.20.

Currencies Update

Enigma Reveals

The US dollar extended losses against the Euro as speculation persists that the Feds will lower interest rates again this quarter amid worries over the credit markets and the US economic outlook.

There is a lot of uncertainty in the markets at the moment with concerns building that the credit market will continue to perform abnormally and not to mention the concerns that the US economy might tip into a recession. Yet a slight pick up in the US existing home sales in November did little to boost the sentiment on Monday, with analysts warning sales could weaken in the future.

The outlook for the UK economy is soft for the year and it's likely to be affected by a slowdown in the US economy more than the euro zone and this has been seen as the royal pound weakened against the euro. Investors anticipate soft UK economic data and hence leading to lower interest rates. Against the Dollar, the pound is fluctuating within narrow ranges to record a high of 1.9897 and a low of 1.9786.

Meanwhile the euro is gaining new ground as a global reserve currency. However dilemma surrounds the outlook of the euro. Some think that the Euro's triumph is however an irony wrapped in a riddle. Outside the Euro Zone the currency is on a good run giving the weakening dollar. However inside the Euro Zone from Italy to Germany, believe that it is behind the increase in the rate of inflation. The euro continues to gain against the greenback pushing the pair to the upside to record a high of 1.4699 and a low of 1.4596

As for now, the yen advanced against the British Pound in early transactions today however it slightly slipped against the US dollar pushing the pair to trade within narrow ranges to record a high of 111.98 and a low of 111.32.

Analysts suggest the economic news out from the US is likely to keep the markets attention on the growth outlook though inflationary concerns remain at a time of sky-high oil prices.

Crosses Technical Analysis

GBP/JPY

The Pound ended 2007 loosing heavily against the Yen and continued loosing ground with the start of today's trading, as investors bought the Yen back in a reversal move for carry trades, the general trend for the pair remains to the upside as far as 211.80 remains intact, but the short term technical indicators are showing the pair resides in an oversold area, and the level at 221.06 offers a strong demand point for the pair.

EUR/JPY

The Euro gained against the Yen unlike the Pound, but the pair still resides in an oversold area as indicated by the short term technical parameters, an upside potential is forming but is yet to be confirmed, but the general trend remains well to the upside for the pair, and the point at 163.07 seems to offer good demand for the pair.

EUR/GBP

The Euro continued to gain against the Pound, as the pair reached the upside targets we talked about earlier and the new target is set to be at the 0.7420s level, the general trend for the pair remains well to the upside and the short term technical indicators are still showing an upside potential even if the pair is entering an overbought area, and the point at 0.7370 seems to offer good demand for the pair.

Major Technical Analysis

euro

The European currency dropped last time massively as it passed the key support area at 1.4670s dragging the currency further down to hit the major support level at 1.4560s. This was due to the huge sell off as 2007 came to an end. Today we expect the euro to bounce back to cover some of its losses.
The trading range for today might be between the key resistance level at 1.4740 and the key support level at 1.4370.
The general trend is up as far as 1. 3860 remains intact targets now at 1.4760 and 1.4930

gbp

The British pound last time was trading with high levels of volume in the downside direction due to the huge sell off which in role allowed the pound to breach many significant support areas as 1.9970. Nevertheless, today we expect the pound to move towards the upside direction again at the start of the new year to cover some of its previous losses.
The trading range for today might be between the key resistance level at 2.0000 and the key support level at 1.9700.
The general trend is up as far as 1.9800 remains intact targets now at 2.0940 and 2.1050
We expect buying sterling above 1.9840 with a target at 1.9920 stop loss below 1.9800

jpy

The dollar against the Japanese yen last time went to the downside target at the important support level at 113.50s. However it further declined in a strong move towards the key support area at 111.20s during the morning session, before reversing later to the upside direction but still showing the tendency in the downside direction.
The trading range for today will be between the key resistance at 112.50 and the key support at 110. 00.
The general trend is down as far as 121.30 remains intact, targets at 112.40 and 111.20.
We expect selling USD/JPY below 111.85 with a target at 110.80, stop loss above 112.40