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Currency market review (weekly) after 16th December, 2011.

Due to lack of new impetus, EURO is finding no other way than to go down. Euro is near more than 10 month lows. I think those rating agency factors in the last day may have been already discounted provided leaders have taken some new initiatives. Euro-zone industrial production data for October gave strength to the view that Euro-zone is heading for a contraction in the 4th quarter.

12/9/2011-12/16/2011 (%)
12/2/2011-12/9/2011 (%)

S.African RAND
Brazilian REAL
Mexican PESO

Asian currencies came out from the weekly declines as they strengthened this week after some good reports from US. Indian RUPEE surged from the record low levels after the steps of RBI. Swiss FRANC weakened against the major currencies but things were different against EURO.

Currency Market forecast for coming week

Many reports are coming that bet against EURO are at record level and many are positioned themselves for a possible collapse of EURO. Dollar funding cost for European banks have increased after that summit and now the threat of Fitch and downgrade of Belgium by Moody’s in the last day of the week, may create more panic in coming days.

It is sure that EURO makes a bearish pattern, now when it is going to react on that pattern is unknown. It may take more times or it may react in coming week. As I said in past weeks that it may go up to 1.15. Now the situation as it looks like in Euro-area is purely indicates that it can go up to that mark. If it makes a reversal then it can go up to 1.39 but now that is more of an expectation, so 1.34 may be best for now.
Last week I was talking about 0.98 level for AUD, it looks like it is following that range which I said. It is sure that it has a chance to react in the upside if it follows the pattern which it is making. Therefore the level that needs to watch is 1.07. But that other pattern which I talked about in last day, if it follows that then in coming future it will be hard to predict its path. So now 0.98-0.99 is the level is crucial for it.
What I was expecting about USD, becomes true. During last couple of weeks I was telling there is a chance that USD will go to test 80-81 level. Though in last two days it drops from that area but the worst level for now is 76.5. In the upside it has immediate resistance at 81.5. Considering the outcomes in Euro-area I still think that USD has more chance to go in the upside than downside, even from this level.
Japanese YEN again test that 78 level but it dropped in last two days. I still think that it will break this level. Swiss FRANC broke that 0.93 level which I was expecting in the last week, now it will get resistance at that level.
Brazilian REAL went to test the 1.90 level but last two days were different for it. What I think that it may test lower support of up to 1.78 but ultimately it has to test again that 1.90 level. In fact it is making a pattern to go higher levels from there, now it is hard to say whether it will be in coming week or later.
South African RAND broke the 8.30 level but unless it stays there it is hard to say about that move. Important level that it needs to test is 8.60. In the downside it has support at 7.80.

In past I said that there are many countries which will help Euro-area because in today’s world every nation is related to others. Now this week Russia said that it will give minimum $10bn to IMF to help struggling EURO currency, here we cannot forget that Russia is EU’s 3rd largest trading partner.
Many are saying that cut in interest rate removed one of the important pillars for EURO, because relatively high rate was incentive for many investors but now many are trying to escape from EURO denominated assets. Some are expecting that further monetary easing by ECB will make the EURO weaker.

[Rise and drop in currency (under heading currency forecast for coming week)  means rise & drop in chart figure, not currency’s rise & drop.]

NOTE :  Please see the disclaimer of this blog .


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