We have seen five attempts to develop a ‘comprehensive’ solution to the Euro-area’s fiscal and financial troubles since Greece first succumbed to its debt load in the second quarter of 2010; and each has failed to maintain sentiment in turn. The most recent effort between the European Union and ECB couldn’t event muster the sense of shock-and-awe of previous program, and the market responded by quickly undermining the effort and selling the euro. While there are still options available to policymakers to fend off doomsday scenarios; there isn’t a palatable scenario for a strong euro performance through the immediate future. The status quo involves active but uncertain ECB purchases of government debt and general expectations for funding programs that haven’t really caught traction. The very real threat of an important downgrade to a AAA-rated EU country or the EFSF rescue program itself represents a looming peril that can fully undermine flimsy sentiment. Ultimately, the rules can always be changed to allow for a Greek default or some other pressure relief; but in the meantime, pain will be constantly at hand.
Swiss Franc Held Hostage by Euro Troubles, SNB’s Persistence
There are two very intense and contrasting forces keeping the Swiss franc anchored: the Euro-area financial crisis and the SNB’s remarkable intervention effort. However, once again, between the extreme depth of the entire market and the limited resources of the central bank, the latter will win every time. That means the spread of the financial strain from Europe to the rest of the world will inevitably swamp the EURCHF’s floor at 1.20 as investors desperately seek safety. However, this is exactly the scenario whereby capital controls and negative rates will be adopted.
Japanese Yen: Government Dependence on Debt to Hit Record 49 Percent
It was reported after the close that Japan’s new budget would require a record 49 percent debt. This gives new meaning to deficits and government leverage. Nevertheless, the yen has maintained its position as a safe haven currency despite developments like these through 2012. Should the European crisis continue to spread to the Asian-region, demand for the yen will remain supported until the BoJ acts.
British Pound: When Will the Market Heed the Bearish Words of BoE’s King?
Over the past months, there has been a warning of the risks that the UK faces that has grown louder and louder. The pessimistic forecast hasn’t come a retired policy maker or some analyst but from Bank of England Governor Mervyn King himself. At the end of this past week, King stated in an official forum that the markets were showing “extreme risk aversion” and that the UK is highly exposed. When will the market pay attention?
Canadian, Australian or New Zealand Dollar Best for a Weakened Carry Trade?
A strong carry currency isn’t just one that will advance when risk appetite is rising. It is also a currency that will curb its decline when the urge to liquidity builds. Between the Australian, New Zealand and Canadian currencies (collectively the comm bloc), the loonie has the best potential for stable performance in a risk-off environment. Already sporting a lower rate, this country is also linked to the preferred safe haven – the US.
Gold Maintains its Fundamental Appeal of an Anti-Currency, But It’s Still Expensive
Gold as an asset is a good hedge to inflation, a unique alternative store of wealth and can avoid the warping influence of policy manipulation. This is a strong resume in these market conditions; so why has it been under pressure through the second half of December? Because it is expensive. When we must liquidate, we unwind the most expensive exposure first to raise capital.
ECONOMIC DATA
Next 24 Hours
| GMT | Currency | Release | Survey | Previous | Comments |
| 0:01 | GBP | Hometrack Housing Survey (MoM) (DEC) | -0.2% | UK housing prices expected to continue weakness as credit tight | |
| 0:01 | GBP | Hometrack Housing Survey (YoY) (DEC) | -0.2% | ||
| 17:00 | EUR | French Jobseekers – Net Change (NOV) | 34.4 | French job market still weaker as growth slows | |
| 17:00 | EUR | French Total Jobseekers (NOV) | 2814.9K | ||
| 23:50 | JPY | Corporate Service Price Index (YoY) (NOV) | 0.1% | Price deflation still seen to continue |
SUPPORT AND RESISTANCE LEVELS
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CLASSIC SUPPORT AND RESISTANCE
EMERGING MARKETS & SCANDIES CURRENCIES 18:00 GMT
| Currency | USD/MXN | USD/TRY | USD/ZAR | USD/HKD | USD/SGD | Currency | USD/SEK | USD/DKK | USD/NOK | |
| Resist 2 | 16.5000 | 2.0000 | 9.2080 | 7.8165 | 1.3650 | Resist 2 | 7.5800 | 5.6625 | 6.1150 | |
| Resist 1 | 14.3200 | 1.9000 | 8.5800 | 7.8075 | 1.3250 | Resist 1 | 6.5175 | 5.3100 | 5.7075 | |
| Spot | 13.8500 | 1.8970 | 8.1673 | 7.7778 | 1.2944 | Spot | 6.8861 | 5.6998 | 5.9764 | |
| Support 1 | 12.6000 | 1.6500 | 6.5575 | 7.7490 | 1.2000 | Support 1 | 6.0800 | 5.1050 | 5.3040 | |
| Support 2 | 11.5200 | 1.5725 | 6.4295 | 7.7450 | 1.1800 | Support 2 | 5.8085 | 4.9115 | 4.9410 |
INTRA-DAY PROBABILITY BANDS 18:00 GMT
| \Currency | EUR/USD | GBP/USD | USD/JPY | USD/CHF | USD/CAD | AUD/USD | NZD/USD | EUR/JPY | GBP/JPY |
| Resist. 3 | 1.3232 | 1.5775 | 78.80 | 0.9514 | 1.0327 | 1.0316 | 0.7871 | 103.19 | 123.16 |
| Resist. 2 | 1.3184 | 1.5731 | 78.61 | 0.9479 | 1.0296 | 1.0275 | 0.7839 | 102.84 | 122.82 |
| Resist. 1 | 1.3136 | 1.5688 | 78.43 | 0.9443 | 1.0265 | 1.0233 | 0.7807 | 102.49 | 122.47 |
| Spot | 1.3040 | 1.5600 | 78.06 | 0.9373 | 1.0203 | 1.0150 | 0.7744 | 101.79 | 121.79 |
| Support 1 | 1.2944 | 1.5512 | 77.69 | 0.9303 | 1.0141 | 1.0067 | 0.7681 | 101.09 | 121.10 |
| Support 2 | 1.2896 | 1.5469 | 77.51 | 0.9267 | 1.0110 | 1.0025 | 0.7649 | 100.74 | 120.75 |
| Support 3 | 1.2848 | 1.5425 | 77.32 | 0.9232 | 1.0079 | 0.9984 | 0.7617 | 100.39 | 120.41 |
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