Daily Market Report 05/01/2012
The risk rallies over the first few sessions of 2012 have now faded and the risk aversion appears to be reasserting as ongoing concerns over the health of the euro zone and its impact on the global macro economy continue to dominate. Despite Spain looking to recapitalize its banking sector and Greece working hard to secure bailout funds, it doesn’t look like investor’s confidence is to be restored anytime soon. The gains FTSE 100 logged in the first days of the year are slowly being eaten away this morning with the UK blue chip index drifting below 5.669 to 5644 at the time of writing.
The Euro reversed Tuesday’s gains against the US dollar and is set to challenge the strong support level of 1.29. The single currency is likely to hover around 1.2850- 1.2950 until 15th January, as important decisions for Greece are to be taken by then. The Cable can’t seem to maintain any traction above 1.600 as it’s drifted sideways to slightly downwards in the past sessions. At 1.5597 this morning, key levels to watch are 1.5402 to the downside and 1.6169 to the upside.
Oil prices surged on the European Union preliminary agreement to ban imports of Iranian oil with Brent crude up for the second straight session yesterday. At the time of writing black gold is hovering around $114. Further strength can’t be ruled out if tensions continue to mount. Next resistance level for the bulls to watch is sitting at €115.48. As with oil, gold also has the wind in its sails as the precious metal was dragged back above the 1.600 level. Gold investors are awaiting the French bond auction later in the day to gauge the scope of the euro.
Today’s economic calendar is highlighted by December ADP employment report with consensus estimates calling for the addition of 175K private sector jobs. As US data continues to improve traders will be further focusing on the FED’s announcements after yesterday’s minute revealed that the committee is now intending to release forecasts on interest rates in an effort to provide further transparency to the market. During the European session investors will be eyeing the French auction where about €7.5 billion will be on offer at 9:50 GMT and the release of the EU PPI figures for November.