EUR/usd
Yesterday the markets finally pulled back. The continuous growth, lasting for almost 8 days, stumbled over a quite expected obstacle yesterday. On the way to consensus Obama and Boehner passed from mutual concessions to mutual threats. The president promised to veto the republicans' plan for the budget and fiscal policy. We already warned that this was likely to happen. Common sense prompts that a compromise will be eventually reached, however the way to it won't be smooth. Also most economists consider that for now it will all end with a temporary agreement, which will help to avert the fiscal cliff at the beginning of the year, but will waive a part of important issues until later. Anyway, we still believe that the Fed's hard-working printing press won't let the markets stay pessimistic for long, except for short periods of profit-taking though. One of such was observed yesterday. eurusd dipped below 1.32 for a while last night after it had hit 1.33 earlier that day. It's quite possible that today traders will continue taking their profits before the holidays and the end of the year. But nothing more than that. The US housing statistics remain favourable. The number of building starts made 899K in November. We see that in the second half-year this indicator has significantly improved. For example, housing starts in May totaled 706K and in October they hit the peak of 888K, thus having grown by ¼ in this time span. The same with the building permits. Since the beginning of the year they have grown by 31%. Today data on Existing Home Sales will be released. Have Americans started to buy houses more actively after the reduction of mortgage rates by the Fed? Let's see.
EUR/GBP
The British pound suffers almost the same pressure as the euro, having failed to break the key resistance at 1.63 on the first try. As has been mentioned above, it is a matter of time since market participants are simply taking their profits. EURGBP also failed to break an important resistance – it tried to consolidate above 0.8160, but then dropped down for a while. Apparently, the bulls won't loosen their grip and will make a new attempt shortly – retail sales release seems to be the right time for it. They will hardly be impressive.
USD/JPY
It's well known that the Japanese don't like to hurry with decisions and changes. We've emphasized this more than once. Thus the QE programme has been extended by ¥10 trillion. Yet, the Bank hasn't revised its inflation target from 1% to 2% and just promised to return to this question later, at the next meeting in January. The market being disappointed, usdjpy has returned below 84 and we believe that the decline may continue in the coming days. There is a risk that the bears will be eager to join the selling on the realization that even the tête-a-tête meeting of the future premier and the CB's head won't make the Bank change its policy at once.
AUD/USD
The Australian dollar is more sensitive to the changing environment than most other currencies. Yesterday it was depreciating against its American counterpart almost all through the day and only today, after the drop below 1.05, the bulls stepped in the game. The aussie has gone quite far away from its 200-day MA and come close to the upper bound of the 1.02 -1.06 range, so the current weakness is not very surprising.
