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FOREX: Euro Under Pressure, Aussie and Kiwi Rise as 2011 Winds Down

By , Currency Strategist
30 December 2011 06:45 GMT

Talking Points

  • Euro Under Pressure Overnight After Italian Bond Auction Falls Short
  • Australian, NZ Dollars Rise with Asian Stocks on US Economic Data
  • SNB to Release Balance Sheet, May Shed Light on Intervention Outlook
  • FX Price Action Likely to be Muted in the Last Trading Hours of 2011

Currency markets produced mixed results in overnight. The Euro lagged as sovereign risk fears remained a headwind after an Italian bond auction failed to meet its target, raising only €7.02 billion versus the €8.5 billion sought by the government. Average yields fell on both the three- and ten-year notes on offer but bid-to-cover readings fell compared with an analogous auction in November, highlighting weak demand and showing investors remained reluctant to lend to the Eurozone’s largest (so far) debt crisis victim.

Meanwhile, the Australian and New Zealand Dollars outperformed as stocks rose, boosting the sentiment-linked currencies. The MSCI Asia Pacific regional equity benchmark index added 0.4 percent after US Pending Home Sales rose nearly five times more than economists expected in November. An increasingly robust willingness to commit to big-ticket purchases such as homes speaks of improving consumer confidence, a boon for Asian exporters acutely sensitive to demand world’s largest economy. Regional data registered nominally better results as well, offering sentiment a slight boost. Japan’s Markit/JMMA PMI reading inched back above the 50 “boom-bust” threshold, showing manufacturing grew in December. Meanwhile, China’s HSBC Manufacturing PMI rose to 48.7 over the same period, showing factory-sector growth contracted at a slower pace than in the previous month.

Looking ahead the final hours of 2011 appear likely to produce a muted outcome. The European and US economic calendars offer very little in terms of scheduled event risk. The Swiss National Bank will publish its November balance sheet, which may prove interesting as traders comb through the data for clues to gauge policymakers’ ability maintain downward pressure on the Franc despite increasingly acute Eurozone solvency worries. With that in mind, liquidity is almost certainly evaporating as market participants wind down for the New Year holiday, meaning any significant directional moves will likely wait until 2012. S&P 500 stock index futures are flat, putting risk appetite trends in neutral.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:15

JPY

Nomura/JMMA Manufacturing PMI (DEC)

50.2

-

49.1

23:30

AUD

RPData-Rismark House Px Raw (NOV)

-0.2%

-

-0.3% (R-)

23:30

AUD

RPData-Rismark House Px s.a. (NOV)

0.1%

-

-0.6% (R-)

0:30

AUD

Private Sector Credit (MoM) (NOV)

0.3%

0.3%

0.2%

0:30

AUD

Private Sector Credit (YoY) (NOV)

3.5%

3.6%

3.5%

1:35

CNY

MNI December Business Condition Survey

52.78

53.65

54.64

2:30

CNY

HSBC Manufacturing PMI (DEC)

48.7

-

47.7

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

-

EUR

German Retail Sales (MoM) (NOV)

0.2%

0.7%

Medium

-

EUR

German Retail Sales (YoY) (NOV)

0.7%

-0.4%

Medium

7:00

GBP

Nationwide House Prices s.a. (MoM) (DEC)

0.0%

0.4%

Medium

7:00

GBP

Nationwide House Prices n.s.a. (YoY) (DEC)

1.5%

1.6%

Medium

8:00

CHF

SNB Publishes November Balance Sheet

-

-

High

9:00

EUR

Italian Producer Price Index (MoM) (NOV)

0.1%

-0.2%

Low

9:00

EUR

Italian Producer Price Index (YoY) (NOV)

4.4%

4.7%

Low

9:30

GBP

BOE Housing Equity Withdrawal (£) (3Q)

-9.0B

-9.1B

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2891

1.2998

GBPUSD

1.5360

1.5474

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow me on Twitter at @IlyaSpivak

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30 December 2011 06:45 GMT