Markets are continuing their overriding trends that were in place last week, with the US Dollar holding onto its gains and equity markets (and risk currencies) still under pressure. There are a few events adding to a general tone of uncertainty to start the week, as the death of North Korean leader Kim Jong Il has led to speculation of possible tensions between North and South Korea and weekend headlines showing that Fitch downgraded the credit outlook in France from “Stable” to “Negative” and added that this move could be seen in 6 more European countries (Spain, Italy, Ireland, Belgium, Cyprus and Slovenia).
In the US, the data calendar is light, with on the NAHB Housing Market survey on schedule. Corporate earnings will come from Shiloh Industrials, Red Hat and Pantheon. Credit downgrades from S&P put pressure on Geokinetics share prices yesterday (as the company’s rating was lowered by two levels) and while the price activity has not has a substantive influence on equity indices as a whole, markets will start to look at these stories as a signal of what’s to come next year. There are no top tier earnings releases from the Eurozone today but we will see some macro data with the Current Account figures on schedule for today.
In the UK, Rightmove Housing Price data showed a rise of 1.5% for the month of December (on a monthly basis) and this is being considered alongside figures out of China, which showed that new household prices for a majority of China’s larger cities declined during the month of November and some analysts have started to project that this will continue into next year (with some expecting drastic declines of roughly 15%).
In New Zealand, ANZ Bank released a report showing that less than 20% of regional corporations forecast a favorable economic climate during the next year (i.e. growth expansion), and this is a drop from the previous survey. This type of corporate survey is indicative of what has recently been seen in the region, so the likely result is that these corporations are unlikely to commit heavily in new investments to spur growth internally in 2012.
We are expecting volatility to slow in the EUR/USD as we approach the new year, so we will take a look at the longer term charts to plan a bias for the next year. The most glaring inconsistency that we see here is the force of the latest move alongside a relatively neutral indicator reading. This essentially suggests that the bear move is far from over and the next level to the downside comes with the historical support seen at 1.2880. A downside break here removes all bullish arguments and targets a sub 1.25 test in the longer term.
The DAX is now caught in a symmetrical triangle on the longer term charts and while we are at mid levels inside the formation, indicator readings are rolling over in bearish territory and moving average resistance is coinciding with historical levels at 5800, so we are expecting prices to be contained within this limitation. Support comes in at 5610 and if this goes, we are expecting the triangle to break to the downside.