A standoff in U.S. budget negotiations lowered the demand for riskier assets

Good morning from windy Hamburg and welcome to our last Daily FX Report in this week. The release of a wide range of economic data and indicators of the North American business; especially, the U.S. and Canada will influence the last trading day before the weekend as well as the investor’s concerns regarding the threatening fiscal cliff on the beginning of January 2013.

However, we wish you a successful Friday and a Merry Christmas.

Market Review – Fundamental Perspective

A standoff in U.S. budget negotiations lowered the demand for riskier assets. The Republicans and Democrats stopped a definite vote on Boehner’s proposal to increase income tax for earners with more than 1 million USD a year to avoid the fiscal cliff with the justification that the measure earned too few support among the Congress’ lawmakers. The so-called fiscal cliff, which will lead to more than $600 billion tax increases and spending cuts in January, is a statutory debt ceiling to avert a national bankruptcy by indebtedness. Announced by the chamber, the negotiations will not be finished until the end of the Christmas Holidays or the early January 2013. Therefore the South Pacific currencies like the AUD and the NZD are suffering under the restraint of the investors and dropped against all of its most traded counterparts. The AUD declined 0.4 percent to 1.0443 USD, targeting a 1.2 percent weekly drop, the highest since the first week in October. Also versus the JPY, the AUD tumbled 0.6 percent to 87.89, while the NZD is set to establish a weekly fall of 0.9 percent with a yesterday’s 0.5 percent loss to 70 JPY. Yesterday, the NZD shrank 0.3 percent against its U.S. peer and was at 0.8311 USD, after touching 0.8300 USD, the lowest within two weeks. Today, the NZD might target a weekly depreciation of 1.8 percent. According to the Bloomberg Correlation-Weighted Indexes, the NZD conquered the second place behind the Norwegian krone and rallied 4.2 percent during the past twelve months. In contrast, the AUD slid 0.6 percent in the same period.
In contrast, many investors were attracted by the so-called haven currencies like USD and JPY as the current situation reduces the risk appetite. Therefore the JPY gained 0.5 percent towards the USD and traded at 83.96, while the USD added 0.4 percent to 1.3196 against the EUR, which dropped 0.9 percent to 110.78 JPY.

Daily Technical Analysis-Our Focus Currencies for Today

AUD/NZD (4 Hours)

After having failed to stay above the former support level around 1.2741, the AUD has been steadily declining versus the NZD below a bearish Fibonacci fan. At the support level around 1.2473, the fall was stopped and the rate experienced demand. Since then we could observe a recovery along a bullish trend line to the resistance level around 1.2584 by traversing the fan. If the market succeeds to cross this line, further gains are backed by the still rising RSI and the Stochastic.

Intraday Support & Resistance (4 Hours)

GBP/USD (4 Hours)

As you can see on the chart below, the GBP/USD has been strengthening along a bullish Fibonacci fan, after having gained new momentum at its low around 1.5963. But recently, the strong hurdle around 1.6296 haltered further rising and dropped the rate down to the support level around 1.6241 twice. Also narrowing Bollinger bands, a falling MACD and a decreasing Commodity Channel Index (CCI) are signs for additional losses if the support fails to keep the rate up.

Intraday Support & Resistance (4 Hours)