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Daily Market Review for 17th January 2012
The Standard & Poor’s ratings are intended as an assessment of creditworthiness, instead of eroding the value of American government debt, the U.S. has loss of its AAA grade from S&P in 2011 has sparked financial market turmoil that made Treasuries favorites among investors, with 10-year note yields dropping to a record low. The European Financial Stability Facility, the euro area’s bailout fund, lost its top credit rating at Standard & Poor’s after earlier downgrades of France and Austria. S&P stripped France and Austria of their top ratings and cut seven other euro countries in a move that left Germany with the only stable AAA grade. This shrugged off the judgment on Europe, with France’s borrowing costs dropping at its latest debt sale. S&P officials announced yesterday that that governments may currently be exploring credit-enhancement options and that if the European Financial Stability Facility (EFSF) adopts enhancements sufficient to offset its now-reduced creditworthiness, it would likely raise the rating to AAA. Germany, France, the Netherlands, Finland, Austria and Luxembourg were the top-rated nations backing the fund, and Germany is now the only euro nation with a stable AAA rating. The yen and dollar weakened against most of their major counterparts after China’s gross domestic product expanded more than economists estimated and as advances in Asian stocks reduced the appeal of haven currencies. Declines in the yen and dollar were limited before the European Financial Stability Facility, Spain and Greece sell bills today amid concern rating cuts by Standard & Poor’s will sap demand for European debt. The Bank of Korea officials, which kept its benchmark rate at 3.25 percent unchanged four days ago, said that they will need to proceed cautiously to the given instability in external economies, Risks to South Korea’s economy are increasing and inflation may ease at a moderate pace as growth slows for some time before picking up. The decline in French borrowing costs helped European stocks gain yesterday, with the Stoxx Europe 600 Index adding 0.8 percent. The euro snapped two days of losses, rising 0.5 percent to $1.2731 today in Tokyo. Oil rose to the highest level in three days as France pushed for faster enforcement of a ban on Iranian imports; Oil Futures climbed as much as 1.7 percent in New York to above $100. Saudi Arabia aims to stabilize the average of crude prices worldwide at that level in 2012; France is seeking a shorter exemption for crude contracts with Iran even as other EU members favor a six-month delay
EUR/USD is currently trading at 1.2744; intraday bias is turned neutral for the moment. Some consolidations could be seen but near term outlook will remain bearish it is still far from suggesting any upward reversal may be in place. Asia saw consistent heavy action in stop loss hunting; although current corrective up leg should be seen as opportunity to add shorts should price action agree. Technically, the engulfing candle reaffirms the bearishness of the pair. While break of recent lows confirms 1.2582 is next level to be touched, only above 1.2849 a stronger recovery may be considered. The Support levels are at 1.2672, 1.2624, 1.2579 and the Resistance levels are at 1.2728, 1.2769, 1.2802
USD/JPY is currently trading at 76.61 for now there is no sign of long term trend reversal in the pair yet even though downside momentum is diminishing with bullish convergence. The Pressure continues to build for an eventual break of 76.50 as every rebound is responded by solid offers, thus keeping the upside still very top-heavy. Further pressure may also come from strong selling interest in the ahead of large option. As long as below 77.20, focus is for selling strength, although only above the area of 77.50 buyers will really start to regain confidence. The Support levels are at 76.48, 76.22, 76.03 and The Resistance levels are at 77.02, 77.18, 77.48.