US Stocks decline, Yen weakness broadens

Market Brief

The weekly positive momentum persisted overnight in Asia. All Asian markets closed the year’s last week in the green zone. Hang Seng index was up by 0.09%, Shanghai’s composite added 1.24%, Kospi and Taiex advanced by 0.4881% and 0.6680% respectively. The MSCI Asia Pacific Index, excluding Japan, increased by 0.4711% this week, while the Nikkei 225 index climbed for the fourth consecutive day and closed the week up by 4.5786%. In Japan, the CPI figures came in line with the forecasts. The yearly CPI increased to -0.2% from the previous -0.4%, the CPI excluding food was at -0.1% and the CPI exluding food and energy at -0.5% as anticipated. Japanese government keeps the markets fed by minor reminders as “Beating Deflation is the most Important Priority of Abe's Government” stated by the Japan Cabinet Sec Suga. USDJPY hit 86.64, its highest level since July 2010, while EURJPY and GBPJPY rallied to 2011 highs. EURUSD touched the 1.3284 resistance, yet failed to break through. As of this morning, EUR tested 1.3255 levels before consolidating back to 1.3221. We keep the next resistances at 1.3241 (yesterday’s support), then 1.3284. The next supports are eyed at 1.3200 (psychological level) then 1.3144 (Dec. 17 support). Oversees, the US initial jobless claims were released at 350K yesterday, better than the expected 360K (and the previous 361K), while the continuing claims were in line with expectations. (actual: 3206K, vs. expected 3200K, prior 3125K). As a reaction the earlier futures advanced, yet failed to add to their gains as the US consumer confidence came in lower than the expectations. According to the Bloomberg survey, the market anticipated a fall to 70 (from the previous month’s 73.7), yet the actual reading came in even lower, at 65.1. We believe that the “fiscal cliff” issue is the main driver in the decline of the US consumers’ confidence. Couple fo minutes after the consumer data release, the US stocks wrote-off the earlier gains. The S&P500 index collapsed to 1,401.80 and closed at 1,418.10 (losing another 0.1218% for the sixth consecutive day), while Nasdaq and Dow Jones index lost 0.1421% and 0.1394% respectively. President Obama will host a meeting with Reid, McConnell, Boehner and Pelosi today at White House as reported by a White House aide, while the US House plans a session in Dec. 30, the very last day of the year. Today, the markets will focus on the GDP and PPI releases in the Eurozone (which came in line with expectations), the US Chicago Purchasing Manager forecasted at 51.0 (vs. the prior 50) and the US pending home sales, expected to fall to 1% from the previous 5.2%).

Currency Tech

• S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot