U.S. Consumer Sentiment Soars

A report released by Reuters and the University of Michigan on Friday said that U.S. consumer sentiment in the month of December to a six-month high. The index has enhanced by more than expected to 67.7 in December from the final November reading of 64.1 while, Economists had been expecting the index to rise to 66.0. Moreover, U.S. imports and exports both fell in October, but a more significant drop in imports resulted in a decrease in the size of the U.S. trade deficit. According to figures released Friday by the Commerce Department, U.S. exports of goods and services were estimated at $179.2 billion, a 0.8 percent drop from September levels. However, imports fell by a full 1 percent to $222.6 billion, resulting in a decline in the trade deficit to $43.5 billion, 1.6 percent below the revised September deficit of $44.2 billion. Following the European agreement for closer fiscal union, Treasury 30-year bonds fell for a second consecutive week and reports confirmed U.S economic recovery.

The Treasurer Wayne Swan said during the weekend that Australia’s economy is growing firmly and capital expenditure by businesses is forecast to rise 32 percent to a record 158 billion Australian dollar ($161 billion) this financial year. While in China, the customs bureau said on Friday that the world’s second-largest economy’s export growth slowed as overseas shipments rose 13.8 percent in November from a year earlier. The trade surplus narrowed to $14.5 billion from $17 billion the previous month and import growth slowed to 22.1 percent.

The two days of the European Union summit ended on Friday and EU Leaders has failed to boost confidence in debt plan. Among the 27 EU member states, 26 signaled that they would sign the intergovernmental treaty on tightening the fiscal union while UK is the only EU country which will not take part in drafting the new rules on fiscal discipline. British PM David Cameron said in his press conference that it was a tough decision, but a right one, because the treaty was not to UK's best interests. However, he expressed his hope that the Euro-zone manages to solve its problems.

The President of the European Council Herman Van Rompuy confirmed that EU countries will provide the IMF with 200 billion euros, although he did not specify how will these resources be used exactly and said that EFSF firepower will be boosted as soon as possible, with the aim of activating it by July 2012. He also added that the issue of Eurobonds remained unsolved, but works on the matter will be continued. Following these news Italian government bonds rose for a second week, leading advances among the euro area’s higher-yielding government securities but after ECB announced that he will be buy the bonds as part of their minimal SMP program brought those government bond yields back down.

EUR/USD:

Euro against the USD opened today’s session on a bearish note in Asia and gave up nearly 48pips since the beginning of the session. Investors’ sentiments remain cautiously bearish as the EU leaders failed to boost confidence with their debt plan. The pair is currently trading in the narrow range of 1.3380 – 1.3332. The current support level might be at 1.3315 and the resistance level is at 1.3386. It seems that the pair will continue to its bearish momentum for a while to reach the expected short term target of 1.3300 mark or even drop below this psychological level as everyone eyes is not focussing on the credit agency calls, especially S&P, which has last week warned the Euro-Zone countries were at risk of more downgrades if a more compact fiscal was not implemented during the two days of the EU summit.




USD/JPY:

The pair is trading slightly higher today on the Asian market above the 77.55 level. The pair seems to have taken the outcomes from EU summit, which produced an agreement among EU leaders to introduce tougher fiscal rules for the 17 euro-zone nations and provide up to EUR200 billion in IMF loans on Friday. The pair support level is at Friday’s low of 77.47 and the resistance level might be at Thursday highs of 77.78. The risk sentiments are keeping the pair strong and we might further increases in the pair intra trade. Investors should remain very cautious as the U.S. economy will release the Monthly Budget Statement for November at 19:00 GMT where the deficit is expected to wider to $150 billion from $98.5 billion. A lower than expected reading could generate a bearish run for the USD.

AUD/USD:

The statistics bureau announced in Sydney early this morning that Australian home-loan approvals rose by 0.7 % in October. The figure was higher than expected and at the same time positive for the AUD. The pair registered some minor upward movements but not enough for investors to have a clear picture of the direction that the pair will take. The pair is currently trading in the narrow range of 1.0200- 1.0160. The support level might be at 1.0112 and the resistance level might be at 1.0112. Prudence is recommended on the pair.

WTI

Oil: The commodity jumped by $2.52 to trade in the region of $99.90 a barrel on Friday after the European leaders agreed to sign the treaty on tightening the fiscal union. However, Oil was on the back foot this morning in Asia as the latter is trading lower around the $99.00 level. Investors will continue to monitor the latest developments from Europe and wait for more the credible efforts of European nations, where we expect volatility to persist through the sessions this week. It seems that price of oil will suffer a few corrections today after the rapid increases of Friday.





S&P 500:

U.S. stocks rose, sending the Standard & Poor’s 500 Index to its first back-to-back weekly gain since October, after European leaders agreed to boost a rescue fund and reports spurred optimism about the economy. The index peaked at 1.260.08 points on Friday but today the index is trading lower in the area of 1252.88 points. Its seems that there will be some corrections on the Index today and huge volatility is expected throughout the week as the index is highly subjected to news in the Euro zone.