Fitch and Moody's Warn US on the Upcoming Fiscal Cliff
German Industrial Production data and ECB's Mario Draghi were not the only reason for mass 'bull-execution' in yesterday's session in EUR/USD and the leading indexes. Market is now focusing on the US fiscal cliff that will kick in at the beginning 2013. Fitch credit rating agency warned that US President, Barack Obama needs to take immediate action in order to address the fiscal cliff and avoid raising the debt ceiling should the tax-relief, unemployment insurance re-authorisation and job creation act programs be extended. Budget negotiations may be rather difficult as the Republicans hold the majority in the House of Representatives. Fitch summarized that failure to avoid the cliff and raise the debt ceiling limit in a timely manner would result in a US credit rating downgrade in 2013. If you have read my past market reviews there is a speculation that Fitch will take action against the US and slash its precious AAA rating.
Moody's credit rating agency also issued a statement in regards to the US cliff. Failure to avoid it could result in a sovereign rating downgrade from AAA to AA1.
Greece Votes 'YES' to New Austerity
Following the heavy selling in EUR/USD where a US investment house was reported to have sold €1.0 billion in the FX market, the pair did find some comfort as the Greek Parliament approved the austerity bill by garnering 153 'YES" out of 299 votes. There will be another vote on Sunday, 11 November to pass the 2013 budget. If everything goes as planned the Greek government is expected to receive €31.5 billion, the next tranche of the bailout funds. Fair support noted at 1.2940.
Spain Bond Auction and Key Fundamentals for Today's Session
Immediate focus in the European session will be on Spain's Tesoro Publico as a new 4.50% Jan
2018 Bono will be auctioned as well as the tapping of the 3.75% Oct 2015 Bono and the 5.75% July 2032 Obligaciones for indicative size of €3.5 - 4.5 billion.
Auction results are due around 09:40am GMT.
Focus will naturally shift to the UK as the BOE announces its monetary policy at 12:00 GMT. There appears to be a great pressure on the BOE to expand its QE program (knwon as asset purchase facility). Do not be surprised if any action is taken in today's session or hints it may be the case in December.
The ECB will announce its monetary policy at 12:45pm GMT followed by a press conference at 13:30pm GMT that includes a live web-cast to investors across the globe. The market is aware that this is Draghi's first anniversary as ECB President and expects more details on the OMT program. Attention will also be given to the German Finance Minister Schaueble and ESM chief Regling at a press conference in Hamburg.
EUR/USD Technical Analysis
EUR/USD 1hr technical analysis is in great risk to the upside. Positive divergence noted on 4hr charts and the possible reversed Head-And-Shoulders (H&S) suggest a break above 1.2777 may take Euro-dollar as high as 1.2812 in today’s session.
Outside Market News
Global investors may be pleased to hear that China approved a new financial product in the futures market, glass. Zhang Yujun, assistant chairman of the China Securities
Regulatory Commission said several measures are still required in order to introduce glass futures trading into global markets.
The Spanish airline, Iberia is struggling and continues to post substantial losses. High risk for restructuring the Spanish airline group with as many as 7,000 jobs in jeopardy as a result.
Forex Daily Review: EUR/USD Risk Remains to the Upside in Today’s Trading Session
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Tito Gfx
