Fundamental market overview
EUR
Italy’s Senate passed austerity measures to reduce budged deficit on Friday in an effort to restore investor confidence and clear the way for a new interim government that may be headed by Mario Monti, a former European Union Competition Commissioner.
USD
U.S. consumer confidence advanced to highest level in five months as consumers became more optimistic on the outlook of the country’s economy, said the Thomson Reuters/University of Michigan on Friday. An index of sentiment rose to 64.2 points in November from 60.9 points in October.
GBP
U.K. producer prices declined to the lowest level in five months in October, the Office for National Statistics announced on Friday. Producer inflation eased on lower row material costs and faltering global demand.
CHF
Swiss stocks gained, after Italy approved austerity measures on Friday. The Swiss blue-chip index SMI, a measure of the largest and most actively traded companies, advanced 1.50%, or 83.25 points, to 5,649.03. The broader Swiss Performance Index rose 1.53%, or 77.67 points, to 5,146.15.
JPY
Japanese stocks closed mixed on Friday amid uncertainty over the economic situation in Europe and weaker than expected earnings from local corporations. The Nikkei 225 advanced 0.16%, or 13.67 points, to 8,514.47, while the broader Topix erased 0.16%, or 1.17 points, to 729.13.
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Market expectations
EUR/USD
EUR/USD is considered bearish, as it is expected to slip down to 1.3380/60 in the near-term. Its further movements will target subsequent levels located at 1.3145, 1.2860 and eventually 1.20. Rallies should be capped by a resistance line at 1.3870.
EUR/JPY
For as long as resistances situated at 106.80 and 108.50 are untouched, the price is likely to trade off down to 104.75/26 and then erode it. Lower levels are at 103.08 and 100.77 – they should be able to halt any further dips.
GBP/USD
From above the price’s upward movement will be limited by resistances at 1.6087, 1.6139 and by 1.6139 as well. Therefore the initial target for GBP/USD is at 1.5842, which would give a way for a further decline to 1.5632 and 1.5272.
USD/JPY
USD/JPY currency couple has penetrated 77.40 and is now headed towards 76.93/87, from where the recovery might commence. While advancing the pair will encounter resistances situated at 79.44, 80.44 and 85.53.
USD/CHF
Despite the fact that resistance at 0.9157 has initially repelled USD/CHF, this level will be conquered by the pair once the price bounces off from 0.8884. Above 0.9157 USD/CHF should surge up to 0.9317, then 0.9341/99.
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Most important events of the day
Europe
New Prime Ministers in Greece and Italy are currently forming new governments in their countries; investors hope that newly elected top officials will bring their national economies back to shape.
Merkel: EU Must Move Toward Closer Union
German Chancellor Angela Merkel said it’s time to move toward closer political union in Europe to send a message to bondholders that euro-area leaders are serious about ending the sovereign debt crisis.
USA
The US economy indicates it is getting steam again: with accelerating CPI, inflation rate, purchases of durable goods and industrial orders, the labour market started gradually taking off, reducing the unemployment rate to 9.0%. The Fed expects it to reach 8.6% by the end of 2012.
Fed’s Williams says financial system still at risk
The U.S. financial system remains susceptible to panics and runs, and policymakers may need to use monetary policy to keep the situation stable, a top Federal Reserve official said on Friday.
Asia & Pacific
The Bank of Japan decided to proceed with the continuation of Quantitative Easing: the central bank will purchase more government bonds and keep the benchmark rate on hold. Last week it intervened in the financial markets.
Japan’s GDP grows annualized 6% in July-September
Japan’s economy returned to growth after three quarters of contraction, with the Cabinet Office reporting Monday that gross domestic product rose an annualized 6.0% in the July-September period.
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