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Contributors British ASJ: Euro Trend Analysis November 16, 2011

Although there was news yesterday that the Euro area is continuing to buy Italian government bonds, the market rumors still point towards a decrease in the rating of Italy’s bonds, with the ratings on 10 year government bonds once again rising above 7%.  At the same time, the rate on Spanish bonds is also increasing past 6.35% to reach their highest rate in years.

The concerns in Italy have not dissipated, and as the debt crisis spreads from Greece to Italy, there is an increased risk of it spreading to Spain as well.  Yesterday, the spread between France and Germany’s 10-year bond yields widened to its highest level since the euro’s creation.  Italy, Spain, and Belgium’s cost of debt default insurance rose to a record high.  Yesterday morning, the euro continued to decline throughout the Asian and European trading hours, falling once again to a level near 1.3500.

With a lack of sustainable debt, the risk of the euro’s disintegration, possible downgrades of countries’ national debt, and the widening spreads between bond yields and default costs, the European debt crisis seems to moving towards increased confusion.  There is severe deterioration in the direction of development, which will certainly affect market sentiment and create a setback to the euro’s short-term success.

There is a large amount of data being released today for Europe and the US, with the UK unemployment rate for October being released at 09:30, the Eurozone Consumer Price Index for October at 10:00, the Bank of England’s quarterly inflation report at 10:30, the US October Consumer Price Index at 13:30, and the US net foreign security purchases (TIC flows) for September at 14:00.

The economic data being released today is very important.  One should pay close attention to the current market for fear that the Eurozone’s debt crisis will spread and the euro will face increased selling pressure.  When conducting operations in these selloff markets, pay attention to strict stop losses and tactics.

Euro: Short-term Resistances
1.  1.3500
2.  1.3530
3.  1.3550
Strong resistance at 1.3650

Euro: Short-term Support
1.  1.3430
2.  1.3400
3.  1.3380
Strong support at 1.3300

Special Note: The current market speculation is that the debt crisis is becoming increasingly difficult to control.  Because of worries that the Eurozone economy may fall into recession, the European Central Bank may further cut interest rates.  Pay close attention to the news, and exercise caution.

Important economic indicators being released today:

09:30 UK October Unemployment Rate
Previous value of 5.0%
Market Impact ★

09:30 UK Jobless Claims Rate Changes in October
Previous Value 17500

10:00 Eurozone Consumer Price Index in October
Previous value of 0.8% / month, 3.0% / year
Market Impact ★ ★

10:00 Eurozone Core Consumer Price Index in October
Previous Value of 1.6% / year

10:30 Bank of England Quarterly Inflation Report;
Market Impact ★

12:00 U.S. MBA Mortgage Applications for the Week of November 11

13:30 U.S. October Consumer Price Index
Previous Value of 0.3% / month, 3.9% / year
Market Impact ★

13:30 U.S. October Core Consumer Price Index
Previous value of 0.1% / month, 2.0% / year

14:00 U.S. September Net TIC Flows
Value of $ 89.6 billion Previous;
Market Impact ★ ★ ★

14:00 U.S. September Net Long-Term TIC Flows
Previous Value of $57.9 billion

14:15 U.S. Industrial Production in October
Previous Value of 0.2%
Market Impact ★

14:15 U.S. Capacity Utilization in October
Previous Value: 77.4%

15:30 U.S. EIA Crude Oil Inventories for the week of November 11

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


British ASJ Financial Services Ltd

Yang, Chief Analyst

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