CFD Markets News and Forecasts — 28-01-2011

 "Consumers have become increasingly concerned with rising food and fuel prices, and have noticed that fewer and smaller discounts are now available at stores and vehicle dealerships. If rising global demand puts continued upward pressure on prices, inflation is likely to be the source of considerable discontent among consumers. Given that consumers do not anticipate renewed wage growth, they are likely to again engage in selective spending cutbacks. Consumers are now less able to smooth consumption by using credit cards since fewer households now have credit cards and those that have them are likely to have lower credit limits."

The dollar and Swiss franc advanced against the euro as a day of clashes in Egypt between police and protesters spurred demand for the safety of the currencies.

Egypt’s pound traded at almost a six-year low against the greenback as Fitch Ratings revised the Mideast nation’s outlook to negative and its dollar bond yields rose to record highs. Israel’s shekel was the biggest loser versus the dollar among Mideast currencies.

“This seems like classic risk aversion triggered by geopolitical concern,” said Paresh Upadhyaya, head of Americas Group of 10 currency strategy at Bank of America Corp. in New York. “It’s fueling oil prices higher, gold higher and the dollar higher. You’re seeing the euro drop, and euro-Swiss has regained its safe-haven status.”

Fitch lowered the outlook on Egypt’s debt rating to “negative” from “stable,” saying the protests increase the “uncertainty” over political and economic prospects.

Egyptian police fired tear gas as thousands of demonstrators pushed into Cairo’s Tahrir Square and trucks carrying riot police were pelted with rocks. Authorities restricted Internet and mobile-phone access and detained senior leaders of the Muslim Brotherhood, the main opposition group.

Resistance 3:Y83.90            
Resistance 2:Y83.20            
Resistance 1:Y82.50
Current price: Y82.01
Support 1:Y81.80           

Support 3:Y81.80            

Comments: No major changes in the pair. The nearest support Chf0,9380 (Jan 27 low). Below losses may extend to Chf0.9300 (Dec 31 low). The nearest resistance Chf0,9480 (Jan 07 high). Above resistance is at Chf0.9520 (Jan 25 high).

Resistance 3:$1.6060         
Resistance 2:$1.5960
Resistance 1:$1.5880 
Current price: $1.5833
Support 1: $1.5830

Support 3: $1.5650

Resistance 3:$1.3820            
Resistance 2:$1.3790            
Resistance 1:$1.3720

Support 3: $1.3360

Currently gold holds at $1326.25/oz, after trading in a $1308.70 to $1326.65 range. Gold closed around $1311 Thursday that is below key support at $1315 (Oct 2010 lows). Overnight, gold fell briefly below $1310 but has sinced bounced back, along with other commodities. At Friday's low, gold was off 8.5% from the life-time high of $1430.95 posted Dec 7.

• Major central banks will have to act fast when risks seen

• Inflation expectations in advanced economies well-anchored

• Advanced economies must watch out for 2nd-rd effects

• Global growth to continue without renewed slump

• Exchange rates must reflect fundamentals; must avoid fx volatility

• If Spain continues with reforms, won't need support

• Major central banks will have to act fast when risks seen

• Inflation expectations in advanced economies well-anchored

• Advanced economies must watch out for 2nd-rd effects

• Global growth to continue without renewed slump

• Exchange rates must reflect fundamentals; must avoid fx volatility

• If Spain continues with reforms, won't need support

EUR/CHF slides under Chf1.2900 now of hedge funds sales, some linking this to worries about developments in Egypt. Cross currently holds around Chf1.2880.

The market talks how to trade events in Egypt from a risk perspective.
Barclays Capital strategists note that while the demonstrations by activists (asking for an end to Pres Mubarak's 30-year reign) "appear leaderless at present" the movement may become more organized if Nobel Peace Price winner Mohammad El Baradei (ex-director general of IAEA) takes charge.
In terms of being a US ally, "Egypt is a key partner in regional counter-terrorism and peace keeping and is seen as an essential bulwark against Iranian expansion in the Middle East," they say.
With Pres Mubarak's health in question, "there is real concern that if Mubarak were to die suddenly, with the public mood so sour, the security situation could spiral out of control," the strategists say.
In addition, another sudden run-up in food prices, would likely exacerbate
the situation.

U.S. stocks were headed for modest gains Friday, as investors digested GDP data showing personal consumption spending ticked up to its highest level since 2006.
Stocks managed to log modest gains Thursday, pushing the Dow and S&P to their highest levels since the summer of 2008. The Dow ended 4 points higher at 11,989.83 - just shy of the 12,000 mark.

Stocks are widely expected to continue edging higher for the time being, as more earnings surprise on the upside and the Federal Reserve's bond-buying plan continues to stoke investor optimism. But any unexpected changes could tip the scales.
Economy: The U.S. economy grew at a 3.2% annual rate in the fourth quarter, according to an advance reading on gross domestic product released Friday morning. That's up from 2.6% in the third quarter.
Though the figure missed economists' expectations for a slightly higher 3.5% rate, personal consumption spending rose to its highest level since 2006.
After the market opens, the University of Michigan will release its final report on consumer sentiment in January. Economists expect the index to rise to 73.2, up from 72.7 in the previous month.
Companies: Before the opening bell, Ford (F, Fortune 500) posted a fourth-quarter profit of $6.6 billion - its largest in 11 years. But shares of the automaker fell nearly 7% in pre-market trading.
Honeywell (HON, Fortune 500) posted an increase in earnings that met expectations, and raised its 2011 forecast. It also announced a deal to sell its automotive consumer products business for $950 million. Shares of the company edged 1% lower ahead of the market open.
Chevron (CVX, Fortune 500) posted earnings that easily topped Wall Street estimates, sending shares of the company slightly higher in pre-market trading.
Just minutes before the market closed Thursday, Microsoft (MSFT, Fortune 500) reported its second-quarter net income fell to $6.6 billion.
Amazon (AMZN, Fortune 500) also released quarterly results late Thursday, posting sales that topped Wall Street estimates.

EUR/USD probes some light stops below $1.3690 but pair remains for now above $1.3677 area (European hours low). Area below $1.3670 still said a concern as bids and stops accumulate. Rate currently holds near $1.3702.

EUR/USD stalled shy of $1.3725 as GDP data came in slightly below expectations and pair easing lower now for $1.3700 trade. US yields rising a touch, should underpin greenback.

The yen rose against most of its major counterparts as a decline in Asian and European stocks boosted demand for assets perceived to be safer.
“There’s an element of risk aversion kicking in as we close the week; equities are looking a little fragile,” said Jeremy Stretch, executive director of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “If there is renewed uncertainty then the dollar, the yen and the Swiss franc will continue to be net beneficiaries.”
Japan’s yen fell to a two-week low against the dollar yesterday after Standard & Poor’s lowered the nation’s credit rating one step to AA-.
“The downgrade isn’t a major issue for the yen,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s largest lender. “Virtually all Japanese government bonds are held in Japan so foreigners don’t hold much. If they did, there would be more implications for the currency.”
The dollar stayed near a two-month low versus the euro before a U.S. report today forecast to show economic growth accelerated last quarter. The pound declined after U.K. data showed consumer confidence slid the most in almost two decades as Prime Minister David Cameron reasserted his commitment to eliminating Britain’s budget deficit. The euro trimmed its third weekly gain versus the dollar, the longest winning streak since October.
The U.S. economy probably grew at a 3.5% annual pace in the three months ended Dec. 31, up from a 2.6% rate in the previous quarter. Consumer spending, which accounts for about 70% of the economy, increased at a 4% annual pace, the most since the last three months of 2006, a separate survey showed.

Stops triggered on the break below Y82.60, wakes rate out of its lethargic morning range to take it down to extended corrective pullback lows of Y82.30. There was talk earlier of decent stops sub Y82.35. Next support seen at Y82.25, a move below here to take rate back toward levels seen into Thursday's S&P downgrade announcement on Japan around Y8213. Stronger support seen from around Y82.00 through to Y81.80, with stops mixed in between Y81.85/80.

Gets shoved back above $1.5900 as cross drops back below earlier lows at stg0.8620, with market seen positioned for end month demand, with cable pushing up to $1.5930. Asian high $1.5937, above here and offers seen between $1.5940/50. A break above to open a move toward $1.5958 (76.4% $1.5991/1.5853).

• Much more confidence growth sustainable;
• Expect US to grow at reasonable rate;
• US will benefit from emerging market growth;
• US exports are gerowing rapidly;
• Inflation not high level of concern on global level;
• Weaker dollar link in emerging markets would help fight inflation;
• Confident Europe can deal with problems;
• EU debt problem weakened US confidfence;
• Share confidence euro will survive;
• Japan's main problem is growth, not debt;
• Easier for US to bring debt to a sustainable level;
• Spending will be cut gradually; won't harm growth

• Much more confidence growth sustainable;
• Expect US to grow at reasonable rate;
• US will benefit from emerging market growth;
• US exports are gerowing rapidly;
• Inflation not high level of concern on global level;
• Weaker dollar link in emerging markets would help fight inflation;
• Confident Europe can deal with problems;
• EU debt problem weakened US confidfence;
• Share confidence euro will survive;
• Japan's main problem is growth, not debt;
• Easier for US to bring debt to a sustainable level;
• Spending will be cut gradually; won't harm growth

European equities retreated on Friday, pressured by mining shares, with investors staying cautious ahead of U.S. gross domestic product data that is expected to set short-term market direction.

• We should be concerned about inflation as a result of rising commodity prices;
• Sees 2.0% French growth this year

• We should be concerned about inflation as a result of rising commodity prices;
• Sees 2.0% French growth this year