Overall, the market sold the dollar in the overnight session. Both the Asian and the European sessions shared strong momentum, but for the moment, it seems the market has stalled, as the majors have hit some important areas. Ahead, the market is expected to remain volatile, especially during the U.S. open, when the majors are expected to resume their trading direction.
The Euro (Eur/Usd) tested the 1.33 area in the Asian session. The pair rose nearly 120 pips overnight, but retraced most of the move just below the 50-day moving average. The 1.33 area proved to be a strong swing point in the past few weeks, when the pair just could not break any higher, despite numerous attempts.
The Euro-area current account was released at -16.0B, much worse than analysts' expectations. The previously released number, for the month of October, was revised slightly lower to -6.0B. The German IFO business climate rose to 83.0, more than the market had expected. This was the first time in the last half of year the German business expectations has improved.
In December, German import prices tumbled 4.0%, subsequent to the record pace it has risen in the first part of 2008. The released number of -4.0% is larger than analysts expectations of -2.9%. From December 2007, the index is down 5.1%, pointing to deflation
The Pound (Gbp/Usd) rallied again in the overnight session. The pair has risen nearly 500 pips this week, from which 200 pips came overnight. In addition, the pair also broke above the 1.40 area tonight, the high of the last few days of trading.
The Aussie (Aud/Usd) is trading higher for a second consecutive day, gaining 70 pips since the Asian session started. For the moment, the pair is trading just below the 50-day simple moving average and is moving closer to TheLFB R1 (0.6680).
Producer prices in Australia increased by 1.3 percent in the fourth quarter of 2008. This was mainly due to price increases in the industrial machinery and equipment manufacturing, electronic equipment manufacturing, and other transport equipment manufacturing. The National Australia Bank released the business confidence report this evening. Business confidence in Australia has fallen to -20, which is slightly better than the previous reading of -30. Consumer spending has risen slightly helping the index to rise as the effects of a government stimulus package, as well as aggressive interest rate cuts filter to the economy
The Cad (Usd/Cad) traded along-side the neutral pivot point (1.2245) in the Asian session, however, soon after the London open, the pair started to head lower. Up until now, the cad has fallen 70 pips, and is testing the low of Monday's trading session. This is the fifth day in which cad is heading lower.
The Swissy (Usd/Chf) struggled in the Asian and in the early European session to break below the 1.1330 area, the low set on Monday. During the London open, the swissy was the only pair that did not manage to pull a decent trend, while the other majors had already broke above (or below) the last day's swing areas.
The Swiss Consumption Indicator improved slightly in December. The indicator rose to 1.15, after hitting a 3 year low last month. The prospects are, however, becoming increasingly gloomy. Due to the economic downturn, unemployment is set to rise in the coming months, which will have a negative effect on consumer spending
The Yen (Usd/Yen) broke above the 89.50 resistance level in the European session, and advanced another 60 pips. The yen will soon run into the 20-day simple moving average, which proved to be a strong resistance area in the past. Tonight, the BoJ minutes pointed out that the economy might face a prolonged downturn.
The Japanese corporate services price index fell to -2.5 percent for the month, making this the third month in a row to show a decline as oil and commodities prices fall and the nation enters a recession. The advancing yen has been eroding corporate profits of exporters, which is forcing them to cut costs. Many corporations are reducing production while curtailing the workforce
Cautious Ahead Of Consumer Confidence Report
Current Futures: Dow +117.00, S&P +12.60, NASDAQ +11.25
European Trade: European markets opened lower, despite the strong Asian momentum. U.S. futures have also advanced overnight.
Asian markets were sent higher by positive U.S. news and, in addition, the Japanese government announced that it would buy stakes in privately owned companies struggling with payments, throughout state-controlled banks. The Japanese government would also guarantee any losses in case the company goes into bankruptcy, practically seal-proof the debt.
These measures have the role of stabilizing the corporate debt market, making it easier for companies to issue new debt, or re-finance current loans. The BoJ has also taken special measures to help the Japanese corporate environment, by accepting private debt for bank refinancing operations.
However, the equity markets might be affected later in the day by the U.S. consumer confidence report. Markets are waiting impatiently for this release, because almost 70% of the economy is based on consumer spending. In order to spend, consumers need to be confident, something that has been hard to come by lately. Since the unemployment number rose strong and the general business mood are at very low levels, it is not a surprise the confidence index is expected at 38.7 near the all-time record low.
In Europe, the German Dax fell 47.74 points (1.13%) to 4,161.27, while the U.K. Ftse declined 19.39 points (0.45%) to 4,307.48
Crude oil had a failed attempt to break higher, above the $48 a barrel area. Crude oil for February delivery gained $0.50 to $46.30.
Gold is acting again as a safe heaven, reaching the highest value in the last few months. Bullion for immediate delivery fell $3.30 to $905.50.
Previous Asian trade: Tonight, the Nikkei gained 378.93 points (4.93%) to 8,061.07. The Australian S&P/Asx gained 101.30 points (3.03%) to 3,444.00.