Order flows dropped during the Asian session as traders square positions into the close of the week. Japanese markets were officially closed and many other regions saw lower volumes as the Christmas holiday approaches. Market attention today centered on a report from the Wall Street Journal which said that the US Federal Reserve is currently revising its policy stance (relative to the FOMC meeting statement released in August) and that US interest rates could be boosted before the 2013 benchmark that was discussed previously.
Because of this speculation, the FOMC meeting scheduled for January 25th will attract more attention than it would have otherwise, and could potentially set the tone for equities and forex traders for the first quarter of 2012. According to the Wall Street Journal article, any alterations in the policy statement would likely suggest that the previous date of 2013 be pushed back (perhaps even past 2014) and if this does actually come to fruition, expect the market reaction to be bullish the S&P 500 and bearish for the US Dollar.
In Europe, we saw the European Central Bank release comments (following the implementation of its three-year refinancing stimulus program) saying that quantitative easing could be used at a later date if deflationary conditions become apparent in Eurozone economic data. At the moment, the market consensus is not expecting this (even the ECB’s own forecasts do not predict a need for QE stimulus), so the comments seem to be aimed at calming markets and assuring against worst case scenarios. Any actual QE stimulus from the Eurozone would weigh heavily on the EUR/USD currency pair.
In the US, third quarter GDP data was released, coming in at a weaker 1.8% rise for the yearly figures. The University of Michigan sentiment survey was also a disappointment, falling to 68 but initial jobless claims helped balance this and continued its post-summer decline (a positive for the labor market). Ahead today, the main data will be seen with the quarterly GDP report out of Canada and Durable Goods/Personal Income figures out of the US. Trading volumes are likely to remain low but there is a chance of enhanced volatility if any major players are looking to take the market by surprise.
The AUD/USD is continuing its strong short term bounce into the close of the year but there are some significant technical levels that are likely to keep the pair from extending much further. The first major obstacle comes with the convergence of 100 and 200 day EMAs in the 1.0180 region. A break here targets the previous Fibonacci and historical resistance levels above 1.03. A failure here, however, will put 0.9880 back into focus.
The FTSE is still positive after bouncing off of key Fibonacci support at 5280 and prices are now headed for a test of historical levels at 5490. A break here would have some psychological significance as well and most likely lead to an upside break of the symmetrical triangle seen on the daily charts. The MACD reading is ready to cross into positive territory as well, so any further upside will help confirm the bullish argument.