EUR/usd
As expected, it wasn't easy to break through 1.30. The active European session resulted in selling the euro, partly because investors don't believe that the EU debt crisis will be resolved now and partly because there's no progress in the fiscal cliff issue. Difficulties on this path aren't surprising and we spoke about this in our previous reviews. Obama seeks the support of small business to preserve tax benefits for the middle class. However, everyone understands that such benefits put a heavier burden on the rich. Republicans are against this. Probably, in the short term the markets would favour the victory of Republicans since it will help to increase spending and keep up the economic growth. The fact that it will aggravate the situation with the government debt doesn't bother the markets. Hardly anyone doubts solvency of the USA. For instance, Italy's debt is over 100%, yet the country's problems are a result of the pernicious effect the “Greek virus”. The common currency has lost about 90pips over the recent 24 hours. Also it's quite possible that this decline will continue today. The dollar after a certain retracement may again get support as the country's economic sentiment is likely to improve on the sharp contrast to the suffering Europe. For example, as was reported by Conference Board yesterday, the consumer confidence is now at the highest level in the last 4.5 years. The good performance in November was indicated by another index of consumer sentiment – by Michigan University. The progress in the US housing market is also worth mentioning. The Case-Shiller Home Price Index showed that the yearly price growth rate has risen to 3.0% in September against 1.97% a month before. This is a good rate. However, we've seen such price levels before and each time it ended with a decline. This wandering of prices, where the index moves up and down within the range of 10%, has been seen since the spring of 2009. Now the threat of a decline is posed by the expected fiscal cliff. The unsuccessful deal may spoil the situation in the housing market and cancel out the recovery observed so far.
EUR/GBP
Just like the euro, the British pound was depreciating against the dollar yesterday. Even the news that the GDP estimate didn't entail the economic slowdown in 3Q was of no help here. It's been confirmed that the economic growth in the third quarter makes 0.1% y/y. Yet the estimate of growth against the third quarter 2011 has been slightly revised down. Instead of stagnation we now have a decline by 0.1% y/y. The “healthy” consumer activity and increase in business investments are good news. The growth of exports against the decrease in imports also looks encouraging. Yet, largely the improvement in the foreign trade was caused by the drop of commodity prices. EURGBP was falling yesterday due to the weakness of the euro, but still managed to stay above its 200-day MA.
USD/JPY
The market pessimism gives strength to the bears in usdjpy. Yesterday's temporary growth changed into further selling. As a result, the pair is now at 81.70. The strong support is only to be seen at 81.40, which is the level of the Fibonacci retracement after the rally on 13-22 November and also of the consolidation on 15-20 November. The market pessimism may force the pair to test this level today or tomorrow.
EUR/CHF
The risk-aversion in the markets is so strong that the Swiss franc is back in favour of the market players. The euro/franc has been far away from the SNB's defense line (1.20) for more than two months, however now it is gradually coming up to this mark. The purchases of the franc are supported by positive statistics from the country. Earlier we learnt about the growth of the trade balance to 2.82bln, the second record level since 2009. Also, yesterday's UBS report showed recovery of the consumer activity.
