Dukascopy Morning Forex Overview

Dukascopy Fundamental Analysis

“A new fiscal compact would be the most important signal from euro area governments”
– Mario Draghi, head of the ECB
The new head of the European Central Bank Mario Draghi hinted on Thursday that the bank is ready to take more decisive action if political leaders agree on tighter fiscal policy among member countries next week.

They [unemployment claims] are not in a danger zone, but the trend is not becoming healthier
– Pierre Ellis, an economist at Decision Economics
The number of Americans claiming for unemployment benefits rose to 402 thousand last week from 396 thousand the week before, said the Department of Labor on Thursday. Economists expected the reading to decline to 390 thousand.

“The manufacturing engine has run out of steam”
– Rob Dobson, senior economist at Markit
U.K. manufacturing sector contracted modestly in November, according to the data published by the Markit agency on Thursday. The manufacturing purchasing managers’ index slid to 47.6 in November from 47.8 in October. A reading below 50 signals contraction.

“[Swiss economy] is entering a difficult phase, with a very low and possibly even slightly negative growth rate”
– Thomas Jordan, Vice President at SNB
Swiss gross domestic product rose moderate 0.2 percent in the third quarter of 2011 and at the slowest pace since 2009, the Federal State Secretariat for Economic Affairs said on Thursday.

“The action by the central banks is an effective way to address the current critical situation”
– Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co
Japanese stocks rose on Thursday after six central banks agreed to lower rate on U.S. dollar liquidity swap arrangements by 50 basis points. The Nikk ei 225 rose 1.93%, or 162.77 points, to 8,597.38, while the broader Topix gained 1.59%, or 11.55, to 740.01.

Dukascopy Technical Analysis

“A satisfactory fiscal compact agreed upon at the summit next week should open the door to ECB quantitative easing, which we expect could come as soon as Q1 2012”
– BNP Paribas (based on CNBC)
EUR/USD is expected to extend its correction up to 1.3608/15. Should the rally come through the latter level, the next tough resistance is at 1.3835/60. Longer term outlook remains nega tive with the focus on support located at 1.3209.

“Downside risks to the economic outlook have increased”
– Mario Draghi (based on Reuters)
For now EUR/JPY is advancing and is anticipated to effortlessly pierce though 104.93, 55 day ma. Should the price climb above 105.10, the currently rally may continue until 106.80/107.00 is reached. Dips should be limited by supports at 102.70/48 and 101.95.

“Expor ts orders, which U.K. manufacturers are increasingly dependent on, continue to decline as the euro-zone crisis impacts demand in U.S. and Asia as well as Europe”
– CIPS (based on WSJ)
After a short stop at 1.5747, 55 day ma, the cable is likely to continue progressing up to 1.5883/88, although a strong resistance at 1.5965 may halt further advancement. From below the pair is supported by levels located at 1.5645 and 1.5500.

“The [US] labor market is gradually healing. It’s a glacial pace, but we are taking small steps in the right direction”
– Moody’s Analytics (based on Reuters)
Since supports at 77.18/03 and 76.76/57 are unlikely to let USD/JPY to tumble, there is a great chance of the currency pair going as high as 79.46. In case the bullish momentum does not vanish then and 80.31 is overcome, further advancement is possible.

“If U.S. employment data are good, stocks are likely to rise, pushing down the dollar”
– Ueda Harlow Ltd. (based on Bloomberg)
US D/CHF has just violated support at 0.9170 which implies an increasing chance of the pair dropping down to 0.8950. Additional support is situated at 0.8730/0.8683, being 200 day ma. The initial resistance is at 0.9252, followed by 0.9331.

Expert Commentary

“Finland’s bond rating is still positive, political willingness to savings also pretty good.”
Dukascopy carries on interviewing the experts from Scandinavia. Today Anders Löflund, Professor of Finance at Hanken School of Economics in Helsinki, unpicks for us the economic situation in Finland, being a part of the Eurozone, and reflects on how the potential breakdown of the euro could shake the Scandinavian countries.  >>

“You can never get any speculation on the potential default of Norway, so there is no reason to sell the Krone”
While the investors speculate on the Eurozone currency’s dependence on the sovereign debt crisis, Dukascopy decided to have a look at the Scandinavian currencies who maintain their “safe-haven” status for quite a long time now and, according to IMF, are still in a very good shape. Today we have put the Norwegian Krona under scrutiny with the help of an expert in macroeconomics and monetary policies, Professor Kjetil Storesletten

What To Read Today

Franco-German Push for Budget Policing Meets Resistance
Germany and France are pushing for closer economic ties among euro nations and tougher enforcement of budget rules to counter the debt crisis, snubbing investor pleas to back an expanded European Central Bank role.

Friday’s Jobs Report: Investors Betting on Positive Surprise
November’s employment report is expected to show improvement over last month but still portray a very weak hiring picture.

Asia & Pacific
Labor market seen improving, but pace glacial
China’s manufacturing activity fell to a 32-month low in November, hurt by a slowdown in the global economy.