28th of December 2010 - Fundamental Forex Market Overview

DAILY Fundamental Forex Market Overview
28 December 2010 – 8:00 GMT
Tuesday

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Market Analysis Desk
Foreign Exchange Research: www.fibosignals.com/5585/resources.html
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FUNDAMENTAL ANALYSIS at 0800 GMT

USD

Forex markets remain extremely illiquid as holiday conditions, together with snowstorms in the US, keep trading activity subdued. Unsurprisingly, the price action over the past 24 hours has been driven mainly by stop-loss triggering. During the Asia session EURUSD traded 1.3127- 1.3255, and USDJPY traded 82.48-82.93, falling quite sharply to a three-week low and provoking further interventionist rhetoric out of Japan. Asian equities were slightly weaker after US stocks closed virtually unchanged. The Dallas Fed's index of manufacturing activity came in below expectations at 12.8 (cons. 17.0, prev. 16.2). Today, the consensus expects consumer confidence to reach a 7-month high of 56.4 (prev. 54.1), while the S&P/Case-Shiller index is expected to show a moderation in the rate of house price decline m/m. IMM positioning data, released overnight, showed that speculative short dollar positions were trimmed by about 9% in the past week.

EUR

The ECB said it settled EUR1.121 bn of bond purchases under its Securities Market Program last week, almost double the EUR0.603 bn settled the week before. This brings the total stock of purchases to EUR73.571 bn. No upper limit has been set on the size of the program.

Italy's treasury announced its intention to auction up to EUR8.5 bn in bonds and notes on Dec. 30.

JPY

For a third consecutive day, Japanese officials sounded warnings about yen strength. Finance Minister Noda observed that FX moves in the past week have been one-sided, and said there has been no change in the government's stance to take decisive action on FX when needed.

Economy Minister Kaieda said that sharp yen rises need to be avoided and he will continue to watch FX market moves carefully. He added that the government wants to work as one with the BoJ to tackle the yen's rise.

A. M. Negrin Bautista, CFA

Chief Analyst at Fibosignals.com

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