Fiscal negotiations hope to avoid destabilizing a fragile US economy
The remainder of 2012 and early 2013 has thus far been dominated by the “fiscal cliff” negotiations in Washington and the unfinished business associated with them. The repercussions of these political decisions will have far-reaching consequences on the economy, confidence, financial markets and perhaps most importantly, the US credit rating. In the immediate sense, automatic tax increases and mandatory spending cuts set to go into effect in January, amounting to as much as 5% of GDP would – if implemented – most likely drive an already fragile US economy into recession. “By contrast, a ‘kicking the can down the road; solution or underlying mentality of extending all tax cuts and forestalling any spending cuts would only simply defer many tough decisions and would likely lead to another US credit downgrade and weaker business and consumer confidence.” warns Larry V. Adam, an analyst at Deutsche Bank.
We believe that Congressional leaders will ultimately avoid these two extreme alternatives and form a compromise, however in a two- stage process. The first phase will include not extending the payroll tax cut and additional unemployment benefits into next year. The proceeds will be used as a down payment to avoid the implementation of the “sequestration” (i.e. automatic) cuts and allow the Bush-era tax cuts to be extended for an additional six months. In addition, leaders will then develop a “framework” of reduced tax deductions, possible tax increases, targeted spending cuts and entitlement reform to agree upon a more comprehensive long-term solution in a second phase of negotiations early next year. Ultimately, “assuming a fiscal cliff compromise is achieved in Washington that prudently balances growth and austerity, a recession will likely be averted.” Adam suggests. However, the US economy will grow at a tepid 2% rate over 2013 as a whole, as the “fiscal cliff,” even in its modified form, could cause a drag of approximately 1.5% to GDP.-FXstreet.com
2013-01-18 09:00 GMT
Italy. Industrial Orders n.s.a (YoY) (Nov)
2013-01-18 09:30 GMT
United Kingdom. Retail Sales (YoY) (Dec)
2013-01-18 13:30 GMT
Switzerland. Manufacturing Shipments (MoM) (Nov)
2013-01-18 14:55 GMT
United States. Reuters/Michigan Consumer Sentiment Index (Jan)Preliminar
2013-01-18 04:59 GMT
USD/JPY correction lower may not be complete – Commerzbank
2013-01-18 03:43 GMT
Euro bulls ready to rock
2013-01-18 03:37 GMT
USD/CHF surrenders gains and trading at 0.9310/13
2013-01-18 01:16 GMT
EUR/JPY rallies through 119.00 after Spain and Van Rompuy
Upwards scenario: A positive market tone dominates on the hourly chart frame and further buying interest might arise above the key resistance at 1.3394 (R1). A break through here would suggest next target at 1.3420 (R2) and if the price holds its momentum we can expect an exposure of 1.3446 (R3). Downwards scenario: Fresh low formed today limits recovery attempts for now. Next support level stays right below it at 1.3358 (S1). Break here would suggest next target at 1.3329 (S2) and any further fall would then be limited by last support at 1.3302 (S3).
Resistance Levels: 1.3394, 1.3420, 1.3446
Support Levels: 1.3358, 1.3329, 1.3302
GBPUSD
HIGH1.6006
LOW1.59636
BID1.59857
ASK1.59867
CHANGE-0.05%
TIME07:56:12
OUTLOOK SUMMARY
Down
TREND CONDITION
Downward
penetration
TRADERS SENTIMENT
Bearish
IMPLIED VOLATILITY
Medium
Upwards scenario: The short- term tendency is bearish as both moving averages are pointing up however risk of market strengthening is seen above the resistance level at 1.5989 (R1). Clearance here would open way for towards to next targets at 1.6005 (R2) and 1.6021 (R3). Downwards scenario: Fresh low, formed today is pointing to key short-term support level at 1.5963 (S1). Decline below it would suggest next intraday target at 1.5949 (S2) and any further easing would then be targeting 1.5933 (S3).
Resistance Levels: 1.5989, 1.6005, 1.6021
Support Levels: 1.5963, 1.5949, 1.5933
USDJPY
HIGH90.205
LOW89.634
BID90.049
ASK90.055
CHANGE0.21%
TIME07:56:13
OUTLOOK SUMMARY
Up
TREND CONDITION
Upward
penetration
TRADERS SENTIMENT
Bearish
IMPLIED VOLATILITY
Medium
Upwards scenario: The next hurdle on the upside lies at 90.21 (R1), any uptrend action above it would put in focus resistance barrier at 90.43 (R2) as the near-term target. Next on tap is final resistance at 90.64 (R3). Downwards scenario: Penetration below the 89.64 (S1) is liable to put more downward pressure on the instrument in the near-term perspective and start forming retracement formation. In such scenario our potential targets locates at 89.42 (S2) and 89.20 (S3).
Resistance Levels: 90.21, 90.43, 90.64
Support Levels: 89.64, 89.42, 89.20
Disclaimer
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