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Contributors British ASJ: Euro Trend Analysis November 17, 2011

Yesterday (Nov 16), alternating good and bad news coming out of the Eurozone made the foreign exchange markets very volatile.  However, there was no really significant news released throughout the day, so the Euro followed the stock market’s recovery from the day’s lows, with its highest level reaching 1.3556.

But near the end of the US trading hours, global ratings agency Fitch said in a statement that the sudden spread of the European debt crisis threatened Bank of America’s rating.  This statement caused a sharp decrease in market sentiment and the Dow fell 200 points in less than half an hour.  Before this there was a small rebound after the Euro retraced all its gains from trading during the American trading period.

The spreading of the debt crisis in Europe has been the main focus of the market this week.  The market’s first reaction was a general increase in the euro area countries’s bond rates, with the Italian 10-year Treasury bond yields exceeding 7%.  This was followed by France’s AAA rating being questioned by the market.  Meanwhile the President of the Euro Group and Prime Minister of Luxenbourg Jean-Claude Juncker believes that the German debt level, which is higher than that of Spain, is also a cause for concern.  If the spread of the debt crisis to the core euro area countries has not really caused significant market panic, could it spread to the U.S. banking industry?

In today’s increasingly interconnected financial markets, the countless ways in which the US and European banking sectors are related is making it very difficult for American banking to escape the troubles of the European debt crisis.  In a statement made towards the end of the US trading day, Fitch gave a very serious reminder that the spreading of the European debt crisis is already a very serious issue.  Therefore, we should carefully consider the situation and give it our full attention.

There is not much European economic data being released today, with UK retail sales in October being released at 09:30 and Eurozone construction spending for September being released at 10:00.  What is important is the US data- data on UK retail numbers, American seeking employment and new housing numbers will all be released during the day.  If US employment and new housing numbers go against the British data then it may have some impact on market sentiment.  However the market’s focus is still concentrated on the risk of a spreading of the European debt crisis.  If the market continues to see contradicting news, the euro will continue to follow its current downward trend in shock.  Therefore, one must pay close attention to the current market and gauge the fear of a spreading global debt crisis.  If such fear is present, the euro will face increased selling pressure as more traders unload their positions in these selling rallies.  In these conditions, pay attention to strict stop losses.


Euro Short-Term Resistances:

1.  1.3480

2.  1.3508

3.  1.3550

Strong resistance at 1.3650


Euro Short-Term Supports:

1.  1.3420

2.  1.3380

3.  1.3350

Strong support at 1.3250


Special Note:  The current market speculation is that the debt crisis has become increasingly difficult to control.  If a serious deterioration in the European debt problems were to affect the U.S. banking industry it would lead to market swings.  For now, pay close attention to news, and exercise caution when dealing in the markets.


Important economic indicators being released today:


09:30 UK Retail Sales in October
Market Impact ★

10:00 Eurozone Construction Output in September
Previous Value: 0.2%/ month, 2.5%/ year
Market Impact ★

10:00 Switzerland ZEW Index of Economic Status for November
Market Impact ★

10:00 Swiss ZEW Investor Confidence Index for November

13:30 U.S. October Housing Starts
Previous value 658,000
Market Impact ★

13:30 U.S. Building Permits in October
Previous Value: 594,000

13:30 U.S. Building Permits in October (Month-over-Month)
Previous Value: -5.0% / month
Market impact ★

13:30 U.S. November 12, Initial Jobless Claims for the Week of November 11
Market Impact ★

15:00 U.S. November Philadelphia Fed Manufacturing Index
Previous Value: 8.7


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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