EUR/usd
The markets are still in dissonance. Yesterday the single currency was appreciating while the US stock exchanges were on the decline. The EU markets were closed and will be back to work only today. The thin pre-holiday currency market was warmed up to the degree that triggered stop-orders. As a result, the daily minimum was set at 1.3180 at the beginning of trades and then with short hitches the pair got to 1.3250. Anyway, the pair didn't manage to grow higher – instead traders got down to collecting their profits and activity started to gradually subside. This day promises to be more active, since Europe returns from holidays. However, we believe that for the most part the market will be moving down. As a rule, after holidays the market returns to the pre-holiday levels. In this case, real money will be back in the market only after the New Year's Day. There's no hope that democrats and republicans will come to an agreement, so we shouldn't expect a miracle even from Obama's early return from the holidays. Treasury Secretary Geithner warned that the US debt ceiling, allowed by the Congress, will be reached approximately on December 31 and then using reserves and special manipulations the Treasury has a chance to hold out for another couple of months. It should be enough to agree on the fiscal cliff issue. But in these months we expect a high pressure on the dollar for simple technical reasons. The Treasury will reduce its loans which in its turn will make capital inflows in the dollar minimal. And it's all about quite a big sum of money. The budget deficit makes about a trillion per year, it's more than 80bln a month. Of course, the Fed will buy 45bln of treasury bonds a month, but this is just a partial compensation.
EUR/GBP
The British pound is in poor shape even during the holidays. EURGBP grew to 0.82 after consolidating around 0.8130 last week. It's quite possible that the upward move will continue, since the sterling now gets fewer assets, seeking refuge from the sovereign debt crisis in Europe. The pair only now is entering the overbuy zone on daily candles, so growth may continue for a while. The nearest zone of consolidation may be found at 0.8250 – the level of April's trading ranges.
USD/JPY
The only currency, which stands out against the general holiday trend, is the yen. It is steadily decreasing day after day, hour after hour. By now usdjpy has risen above the highs of April 2011 (the BOJ's intervention after the earthquake and tsunami) and hit 85.50. The structural selling of the yen may be far from the end, so you'd better avoid retracement or rebound plays now.
AUD/USD
The Japanese traders, selling the yen, are no longer interested in holding long positions in the aussie and Kiwi. These Oceanian currencies, so much loved by Japanese investors for so many years, are facing hard times now. The Australian dollar made a few attempts to return above 1.04 against its US counterpart yesterday, but failed. Today the pair was pushed back to 1.0350. AUDJPY is at an interesting crossroads now, but read about it in our next review.
