Forex Market Update
The US Dollar picked up steam after Federal Reserve minutes from its latest policy meeting indicated that few policymakers favored ending asset purchases set to stimulate the economy sometime this year.
The minutes revealed disparity over quantitative easing programs to prop up the US economy, after some FOMC members indicated that ongoing asset purchases would likely be needed until about the end of 2013, while a few others thought they should end sooner.
The spotlight now turns to December's US Employment report. Expectations call for nonfarm payrolls to rise 150,000 compared with an increase of 146,000 in the prior month. Next week, all eyes are likely to turn to Washington, DC anew as Congress takes up negotiations to raise the US statutory borrowing limit.
The 17-nation Euro-zone's economic downturn eased somewhat in December, according to a final purchasing managers' index reading for the month released today morning, but the region still saw a contraction in private-sector activity for the eleventh consecutive month. Meanwhile, Germany's services PMI rebounded into positive territory at 52.0, while France, Italy and Spain remained in contraction.
The Australian Dollar took a break against the greenback, as risk aversion increased among investors after the release of minutes of the US Fed's latest meeting and amid disappointing data from China and Australia. Data from the Australian Industry Group/Commonwealth Bank Australian revealed that Australia's services sector contracted at a faster pace for December. In China, the HSBC, purchasing managers' index (PMI) fell to 51.7 in December, compared to 52.1 in the previous month.
The greenback traded higher in the New York session yesterday, against the key currencies.
EUR USD
This morning at 10:40 GMT, the EUR is trading at 1.3015 against the USD, 0.27% lower from the New York close, as investors shrugged off data showing that retail sales in Germany rose by 1.2% in November, beating expectations for a 0.8% increase, after a 1.3% decline in the previous month. Investors remained cautious after the minutes of the Fed's December policy meeting indicated that policy makers began debating an end to bond-buying as early as this year. During the session, the pair traded at a high of 1.3054 and a low of 1.3002. Yesterday, the EUR traded 0.37% lower against the USD in the New York session, and closed at 1.3050.
The pair is expected to find its first support at 1.2971 and first resistance at 1.3091.
GBP USD
At 10:40 GMT, the GBP is trading at 1.6030 against the USD, 0.47% lower from the New York close. In the UK, the service sector activity fell unexpectedly in December, followed by a drop in M4 Money Supply in November. Meanwhile, the mortgage approvals rose more-than-expected in December. Meanwhile, the Bank of England yesterday indicated that low productivity may have been a bigger factor behind Britain's slow economic recovery than previously thought, with potentially stark implications for monetary policy. During the session, the pair traded at a high of 1.6109 and a low of 1.6025. Yesterday, the British Pound traded 0.30% lower versus the Dollar in the New York session, and closed at 1.6106.
The pair is expected to find its first support at 1.5969 and first resistance at 1.6148.
USD JPY
The USD is trading at 88.24 against the JPY at 10:40 GMT this morning, 1.12% higher from the New York close. During the session, the pair traded at a high of 88.35 and a low of 87.24. In the New York session yesterday, the USD traded 0.46% higher against the JPY, and closed at 87.26.
The pair is expected to find its first support at 87.22 and first resistance at 88.80.
USD CHF
This morning at 10:40 GMT, the USD is trading at 0.9293 against the Swiss Franc, 0.27% higher from the New York close. During the session, the pair traded at a high of 0.9302 and a low of 0.9260. In the New York session yesterday, the USD traded 0.44% higher against the CHF, and closed at 0.9268.
The pair is expected to find its first support at 0.9237 and first resistance at 0.9326.
USD CAD
At 10:40 GMT, the USD is trading at 0.9917 against the CAD, 0.40% higher from the New York close, over indications that the US Federal Reserve could end its quantitative easing program sometime this year. The pair is expected to find its first support at 0.9866 and first resistance at 0.9945. Yesterday, the USD traded 0.10% higher against the CAD in the New York session, and closed at 0.9877.
The pair is expected to find its first support at 0.9866 and first resistance at 0.9945.
AUD USD
The AUD is trading at 1.0404 against the USD, at 10:40 GMT this morning, 0.59% lower from the New York close, after the minutes of the US Federal Reserve's December policy meeting revealed that the US central bank might end its stimulus program earlier than expected. Meanwhile, ANZ Bank chief economist, Warren Hogan, has warned that the Reserve Bank of Australia will be forced to cut interest rates by as much as 100 basis points in 2013, if the Australian Dollar continues to remain stubbornly high. During the session, the pair traded at a high of 1.0471 and a low of 1.0402. AUD traded 0.33% lower against the USD in the New York session, and closed at 1.0466.
The pair is expected to find its first support at 1.0361 and first resistance at 1.0489.
Gold
At 10:40 GMT, Gold is trading at $1629.44 per ounce, 2.07% lower from the New York close, as the greenback strengthened, after the Federal Reserve policy makers stated that they would probably end asset purchases this year. This morning, Gold traded at a high of $1664.25 and a low of $1627.45 per ounce. In the New York session yesterday, the yellow metal traded 0.87% lower, and closed at $1663.85.
Gold has its first support at $1609.81 and first resistance at $1666.70.
Silver
Silver is trading at $29.26 per ounce, 2.99% lower from the New York close, at 10:40 GMT this morning, weighed down by weak trend in the overseas. Sentiments on industrial metals turned extremely bearish after gold tumbled in global markets, as the Federal Reserve policymakers indicated that would probably end asset purchases this year. This morning, Silver traded at a high of $30.17 and a low of $29.24 per ounce. Silver traded 2.13% lower against the USD in the New York session, and closed at $30.16.
Silver has its first support at $28.66 and first resistance at $30.44.
Crude Oil
At 10:40 GMT, Oil is trading at $91.65 per barrel, 1.30% lower from the New York close, after the US Federal Reserve officials raised doubts about possible side effects of its stimulus programme. Minutes from the Fed's December policy meeting unsettled oil traders, as some policymakers were of opinion to end asset purchases this year. Late Yesterday, the American Petroleum Institute (API) reported that the US Crude-oil supplies dropped 12 million barrels for the week ended December 28. This morning, Oil traded at a high of $92.92 and a low of $91.52. Yesterday, Oil traded 0.10% higher in the New York session, and closed at $92.83.
It has its first support at $91.01 and first resistance at $92.79.
Economic Snapshot
UK mortgage approvals climbed in November
In the UK, mortgage approvals for house purchases rose to a seasonally adjusted 54,036 in November, the highest in 10 months, and up from 53,071 in October. Additionally, consumer credit increased by £0.1 billion in November, following a decline of £0.3 billion in October.
UK services PMI contracted in December
In the UK, the seasonally adjusted purchasing managers' index for the service sector dropped to 48.9 in December, from 50.2 in November. Market had expected the index to remain unchanged at 50.2.
UK M4 money supply declined in November
The UK M4 money supply declined 0.2% (MoM) in November, following a 0.2% rise in October. Market had expected a 0.3% rise. On an annual basis, M4 money supply fell 2.8% in November, compared to a 3.1% drop recorded in the previous month.
Euro-zone services PMI rose in December
In the Euro-zone, the services purchasing managers' index (PMI) climbed to a five-month high of 47.8 in December from 46.7 in November and unchanged from the earlier flash estimate. Additionally, the composite output index rose to 47.2 in December, from 46.5 in November.
Euro-zone CPI remained unchanged in December
The Euro-zone consumer price index (CPI) remained unchanged at a seasonally adjusted annual rate of 2.2% in December, from 2.2% in the preceding month.
German final services PMI came in at 52.0 in December
In Germany, the purchasing managers index (PMI) for the services sector rose to 52.0 in December, slightly lower than 52.1 estimated earlier, and compared to 49.7 in November.
German retail sales rose in November
In Germany, retail sales increased 1.2% (MoM) on a seasonally-and-calendar adjusted basis in November, compared to a 1.3% drop in the previous month. The outcome was better than the expected 0.8% growth.
French services PMI fell in December
The French services purchasing managers' index (PMI) fell to a seasonally adjusted 45.2 in December, compared to earlier estimate of 46.0.
Spanish services PMI advanced in December
Spanish service sector activity rose to 44.3 in December, compared to 42.4 in November.
Italy's service sector contracts at slower pace in December
Italian services purchasing managers' index rose to 45.6 in December, compared to 44.6 in November. Market had expected the index to fall to 45.0.
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