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Contributors British ASJ: Euro Trend Analysis November 14, 2011

Over the past weekend there emerged a few small market pressures, most notably the Italian Senate’s approval of their new budget bill. The motion in the House finally passed, removing the former political obstacles. This led to Prime Minister Silvio Berlusconi stepping down to allow for the formation of a new coalition government.  Foundations have been laid for the implementation of more reforms in response to the debt crisis.

Once the news came out, the risk tolerance of the market substantially increased and the euro immediately rose across the board.  Up until the middle of the US trading day, the euro continued to rise into the heavens along with risky assets.  With the Euro’s rise throughout the day exceeding 1.30%, it can be seen that the market’s risk tolerance is continuing to heat up.

During the day, the rate on Italy’s ten year public bonds steadily fell below 7%.  France’s 10 year public bond rates fell as well, as the panic resulting from this past weekend’s events slowly subsided.  Before the American markets opened, Italy’s Senate smoothly passed the country’s 2012 budget, further increasing risk tolerance in the market and causing the European stock market and Dow Jones futures to begin a fast increase.  At the same time the American dollar index fell sharply, further strengthening the appreciation of the Euro.  The further increase of short-term positive news regarding the Euro is helping the currency to rally, making it a smart investment choice for the moment.

As Saturday and Sunday approached, Greece’s transitional government was established, with former European Central Bank Vice President Lucas Papdemos serving as Prime Minister.  After holding urgent meetings with many important politcal leaders from the different parties, Italian President Giorgio Napolitano officially appointed Mario Monti as Italy’s next Prime Minister, giving him the responsibility of establishing the country’s transitional government.

 

Silvio Berlusconi fulfilled his last commitments as Italian Prime Minister on Saturday (November 12), steadying the country’s financial situation by getting a tightened budget bill to pass in the House of Representatives. Berlusconi submitted his resignation after the bill was passed. As the 2012 Italian budget was approved over the weekend, Italy set up a provisional government and avoided early elections.  The market sentiment is expected to further improve early this week, temporarily bringing the chaos in Greece and Italy to a close.

The amount of data being released today is very small, with the the Eurozone Industrial Production numbers for September being released at 10:00. Currently, the Euro is set for the rebound with more bullish news. For now, when conducting market operations, be sure to pay attention to strict stop losses.

Euro short-term resistance
1.  1.3805
2.  1.3851
3.  1.3896
Strong resistance at 1.3950

Euro Short-term Support
1.  1.3745
2.  1.3700
3.  1.3680
Strong support at 1.3650

Special Note: Being Monday, there is not much data being released today.  The market sentiment is heavily guarded towards whether the U.S. Federal Reserve will implement more quantitiative easing policies as part of QE3.  The market is also highly concerned about the development of the situation in Greece and Italy.  For now, proceed with caution.

Important economic data being released today:

07:45 France September Current Account Balance

Previous Value of -29 billion euros
08:15 Switzerland October Producer / Import price index

Previous Value of -0.1% / month, -2.0% / year;

Market Impact ★
10:00 Eurozone Industrial Production in September

Previous Value of 1.2% / month, 5.3% / year;

Market Impact ★ ★

11:00 OECD Leading Indicator for September

 

The above information is given for reference purposes only.  Currency trading involves significant investment risk.  Careful analysis and selection is required.

 

英国ASJ国际金融

British ASJ Financial Services Ltd

Yang, Chief Analyst

2011.11.14

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