The EUR/USD was slightly changed to 1.2743

Good morning from rainy Hamburg and welcome to our first Daily FX Report in this week. Currently the actions in Japanese politics are probably the most important driver for the JPY. Beyond that foreign Minister Guido Westerwelle will travel to Israel and try to conclude an immediate cease-fire between Hamas and Israel.

Anyways, we wish you a great start into a new trading week.

Market Review – Fundamental Perspective

Today speculation came up that in Japan the opposition party, which is advocating more aggressive monetary easing measures, may take power in the next month’s election. Liberal Democratic leader Shinzo Abe might consider asking the Bank of Japan to buy directly Japan’s construction bonds if he becomes the next prime minister in the upcoming election. Last week Prime Minister Yoshihiko Noda dissolved the parliament and surveys showed that his Democratic Party of Japan may lose. Today the Bank of Japan is going to hold a meeting while the JPY dropped versus nearly all of its most traded counterparts. The JPY depreciated more than 0.1 percent to 81.48 versus the USD and is close to a seven month low. The EUR/JPY advanced 0.1 percent to 103.70 and the EUR/USD was slightly changed to 1.2743.

Tomorrow the euro-area Finance Ministers are going to meet in Brussel for the second time in a week. German Finance Minister Wolfgang Schaeuble said yesterday he is confident that he and his colleagues will reach an agreement to close Greece’s financial gap. He also said that Greece must return to the market in 2020 or 2022 and that Greek debt write-offs from public institutions are legally unworkable. Seven days ago the finance chiefs agreed to keep Greece’s bailout aid flowing. They will try to re-engineer the current bailout without asking taxpayers to put up more money. Last week thousands of Europeans protested against austerity measures and unemployment while a report had shown that the euro-area’s economy was pushed into recession in the third quarter 2012. This month the EUR already declined 1.7 percent against the USD.

After Barack Obama said that he is confident to reach a budget agreement with the Congress Asian Stocks, oil and the AUD climbed. The AUD/USD rose to 1.0357 while the MSCI Asia Pacific Index appreciated 0.7 percent and oil increased 0.8 percent.

Daily Technical Analysis - Our Focus Currencies for Today

EUR/USD (4 Hours)

After the EUR declined nearly 350 pips versus the USD since the end of October, it succeeded to cross the bearish trend line in the middle of the last week. We might not yet observe a clear trend reversal as the EUR/USD rebounded at the resistance around 1.27892. But based on the bullish Stochastic further gains of the EUR might be possible if the bulls continue to have control of the pair.

Intraday Support & Resistance (4 Hours)

XAU/USD (4 Hours)

Ten days ago the resistance level around 1738.78 was too strong to be crossed. Although XAU/USD tumbled towards the support line around 1704.49 it currently crossed the moving average and we might see further upward movements based on the bullish MACD.

Intraday Support & Resistance (4 Hours)