Euro/USD: Euro remains weak at the end of the week

Forex analytics: The pair EUR/USD continues to be traded downward At the Forex currency market on Friday morning, remaining at the lows of March. 
By 9.25 Moscow time the Euro is at 1.4220 against closing level of 1.4245 yesterday.
Investors are still apprehensive to revert to risk due to the instability at the global capital markets. The data on GDP in Eurozone will be made public today and investors expect the ...

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AUD: Australian Dollar remains under pressure

Forex analytics: At the Forex currency market the Australian Dollar rate continues to be the target of bears’ attention
Forex forecast: MACD indicator is in the positive area for the pair AUD/USD and keeps on declining, giving a pair sell signal with the volumes slightly above average. Stochastic Oscillator falls in the neutral zone, giving a similar signal.
Forex recommendations: in case of breakdown at the ...

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Euro/USD: Euro remains in the range

Forex analytics: At the Forex currency market the pair EUR/USD continues to move slightly downward on Wednesday morning, remaining in the previous range.
By 9.00 Moscow time the Euro is at 1.4802 against closing session level of 1.4824 yesterday.
Investors are still interested in the safe currencies, moving away from risk amid ambiguous sentiments of investors in the global capital markets.
Authorities of ...

Stocks Decline, USD Remains Weak Following Soft US GDP Release

Asian markets declined after US economic growth saw a slowdown with GDP growing 1.8% less than the 2% expectations while Japan remained closed on account of bank holiday. Speculation of drop in earnings reports and South Korean industrial production also led to decline in the markets. US equity markets closed

Stocks Decline, USD Remains Weak Following Soft US GDP Release

Asian markets declined after US economic growth saw a slowdown with GDP growing 1.8% less than the 2% expectations while Japan remained closed on account of bank holiday. Speculation of drop in earnings reports and South Korean industrial production also led to decline in the markets. US equity markets closed

Libyan Rebels Approach Gaddafi Hometown, Portugal Remains in Crisis

The weekend has been heavy in terms of activity, and Monday 28^th is more active than a typical first day of the week would be.

In Portugal, it is expected that the President will meet with party leaders in order to determine the date of the oncoming early elections, which will end the current parliament`s tenure two year before the legal term. The outgoing PM Jose Socrates has been insisting that Portugal does not need a bailout yet, since it remains in possession of enough cash to meet redemptions of Eur 4.5 billion bonds due April 15th. There seems to be some agreement among Portuguese authorities that June redemptions of a similar size pose a different risk, and the next election will probably take place that month in order to face the turmoil with a strong and responsible government in place. Yet, whether it is a good idea to place these two events in such close succession is up for debate, and this is reflected in the market reaction as well, where traders demand a yield of 7.66%, or a spread of 260+ for funding the government`s 10 yr borrowing. Spain seems to have escaped similar treatment for now, perhaps due to the ruling government`s commitment to bring the deficit back to 6% of GDP from 9.2% in 2010.

In Syria, where demonstrations have caused deaths and a massive outpouring of anger in the south of the country, the Assad regime has adopted a very measured approach, no doubt sobered by what is happening to the Colonel in Libya. Promises of widespread reforms are flying in the air, but since similar promises were made in the past too, and never fulfilled, it remains to be seen how credible the latest pledges will seem to the people. Still, the Arab Revolution is a real and serious threat to the survival of these regimes, and as Basshar Assad has proven himself to be a reasonably flexible leader in the past, there is some hope that that bloodshed of the kind seen in Libya or Yemen recently can be averted. From a trader`s point of view, Syria is a tiny country with only a limited economic role in the region, but its pivotal situation and role in the Arab-Israeli conflict make it an important component from a strategical point of view. In Yemen, after yet more clashes and protests, the U.S. ally Ali Abdallah Saleh is reported to have agreed to leave the country, but not immediately. His ruling party has also declared its support for him.

Finally, in Japan, there is worrying evidence that the nuclear crisis is getting deeper and harder to control, as reports of radiation leakage into the sea, and radiativity levels reaching up to 100,000 times the natural norms frighten the Japanese people. Authorities have declared it likely that the resolution of the issues will last for months, and an influential advisor to the PM has suggested that Japan be decentralized in order to avoid similar events when Tokyo is hit by an expected earthquake-tsunami combination sometime in the future.

In consequence of these developments, global stocks showed a mixed performance, while the USDJPY and AUDJPY pairs appreciated, and the Euro fell in reaction to Portugal concerns. Gold and oil were lower. This is probably due to the rapid advance of rebel forces in Libya this weekend, which brought them close to the Colonel`s birthtown, raising hopes that the crisis and the war may reach a conclusion earlier than expected. There is not much that can be said on this matter, since conditions are volatile, and it is difficult to predict what kind of surprises may be awaiting both sides.

EURUSD Poised to Test 50-Day SMA as Bullish Trend Remains Intact

The final Euro-zone PMI manufacturing report jumped to 57.1 in December amid expectations of 56.8 to mark the highest level since April 2010. Indeed, the euro lost ground during the overnight trade as trades return to their desks; however, the selloff was short-lived as the euro reversed course at the overnight low of 1.3249.

FOMC Remains Committed to QE, Moody`s Threatens a Future Downgrade

It is not surprising that the FOMC has decided not to restrict the scale of asset purchases so soon after they were initiated,  and yesterday`s dismal data on home prices certainly reinforces the notion that the Fed is not being too hasty in pumping liquidity into the system. The situation of the residential real estate market in the U.S. remains grim, and it is likely to get worse under the impact of judicial processes that could drag on for a long time. The Fed`s buying of Treasuries, if it does help to reduce mortgage rates, will certainly help alleviate the pressure on the economy. Yet this is far from being certain, because the market in question is enormous, and even if the bank temporarily manages to keep it afloat by engaging in quantitative easing, it is possible that a dosage of the medicine will need to be administered continuously in order to keep the sector afloat.

And that is the main problem, of course. The market is not so pessimistic that the Fed cannot engineer a jolt to growth for the near term, and its capability of boosting inflation somewhat for a limited time period is not a matter of great doubt. But there is no indication that such a short term program will deliver the necessary impetus to sustain a longer term reversal of course leading to elimination of the masses of the unemployed, and creating a self-sustaining momentum that can prevent asset price depreciation, and encourage Americans to spend. Although, on the basis of the demographic trends in the U.S., one may argue that the chances of such a plan succeeding over a considerable period of time are better than many would admit, the uncertainty surrounding the trajectory of U.S. public finances, and the USD during the implementation of this project depresses the enthusiasm of market participants.

The threat of the Moody`s rating agency, that it may place the U.S. on negative outlook if the present policy stance is maintained was not heeded by the markets today, and  the CDS market was mostly bullish, as traders seem to have some confidence in the notion that the Fed`s easing scheme will eventually contribute to an improvement in the economic situation. While there is no sign yet that the market is planning to abandon the U.S. government at any time soon, there are events that can make the market give up on U.S. assets. The degree to which the democratic process is effective in the U.S., the extent to which the best opinions are freely propagated to the public, will determine whether we`ll become witnesses to such events in the near future. The results of the November elections do not look discouraging in this respect.

Ultimately, the outcome for the public debt of the U.S. and the dollar is dependent on the outcome for the rest of the world. Those who espouse an overly pessimistic point of view on the U.S. economy are failing to place the country in a global context within a wider analytical framework. While it is true that the U.S. management monetary and fiscal policy is too adventurous and extreme in many ways, there is hardly a nation in the world that cannot be made subject to similar criticisms with a little bit of effort. Due to the increase in the velocity of money on a global scale over the past two decades, governments are unable to respond in a timely and effective manner to challenges created by capital flows. This is as true fo the Fed and the U.S. as it is for China, Brazil, the E.U. or any group of nations that is operating a sufficiently liberal economic system. The challenge is to the existing system, and not to any nation. With all its handicaps, the U.S. still enjoys a favorable status as it  has the unique advantage of possessing a powerful reserve currency that almost no one wants to depreciate, enjoys a well-established and healthy system of alliances, and dominates economic and political institutions around the world. Its media channels enjoy almost uncontested supremacy in the world, which contributes to the maintenance of a reasonable positive image. It is beyond doubt that Americans possess the means to destroy all these by foolish choices over the next years, but the background for the dollar-death scenario that people continue to speculate about is a remote possibility for now.