The European debt crisis continued to weigh on the single currency last week, despite rather weak volatility on the Forex markets. Moreover during the weekend, Moody’s announced that the continued and rapid worsening of the debt crisis and the situation of the banks in the euro zone could threaten the credit rating of all its members. It is more the weakness of the institutions, hampering the resolutions, that worry Forex investors and rating agencies, than the economic and financial strength of the euro zone.
To prepare for this and to keep their triple-A rating, Germany and France are working on the possibility of issuing joint bonds with other triple-A Eurozone countries like Finland and the Netherlands. The new stability pact, which would indicate the beginning of a two-speed Europe, could see the creation of “elite bonds” which would be used to finance the euro zone bailout fund in order to help the weakest countries of the euro zone. The project will surely be subjected to propositions ahead of the European summit on the 9th December.
Furthermore, the IMF dismissed rumors of a 600 billion life line in loans to help Italy.
US Black Friday retail sales hit record
In the meantime, retail sales in the United States hit a record 7% on Black Friday which kicks-off the shopping season. Despite the economic crisis, Americans proved once again to the markets that they remain big consumers.
From a technical point of view, we believe that the current slowdown of the single currency should continue in the coming days to reach 1.3000 on the EUR/USD while 1.3460/1.3560 levels should offer a strong resistance.
The SNB determined to contain the franc’s strength
From its side, the Swiss National Bank has reasserted, through vice president Jordan, its determination to fight against a strong CHF. Last month’s intervention on the Forex markets reduced somewhat the risks for the Swiss economy while the president of the SNB already declared in November that the franc would continue to weaken in time.
For the current week, we advise however to sell the EUR/CHF towards 1.2365/1.2400 for new testing around 1.2240/1.2260. Any rise above 1.2500 would jeopardize this scenario.
For the other majors, USD/JPY should be contained between 78 and 77 for this week while the GBP/USD shouldn’t go beyond resistance levels at 1.5560/1.5650 while we anticipate a drop towards 1.5320.
This article has been prepared by Frederic Gay, CEO - Realtime Financial Technologies. Translation by C. Kodomaris