Fundamental Headlines• Hungary Credit Rating Cut to Junk at Moody’s – Bloomberg• Spain’s Rajoy Seeks Proposals for Bad Bank – Bloomberg• Euro-zone Considering End to Future Private Sector Involvement – Reuters• Dollar Surges as Italian Yields Rise – WSJ• Italian Yields Jump after Poor Auction – WSJ European Session Summary Despite persisting light liquidity conditions, concerns have not abated over Europe. The Thanksgiving holiday week typically provides relief for markets; seasonality trends dictate the last few weeks of November and the month of December are bullish for higher yielding currencies and risk-correlated assets. This year has proven different, however, at least at the beginning of this typically bullish period: the U.S. Dollar (Ticker: USDOLLAR) is up 1.71 percent this week thus far. USD/CHF 1-minute Chart: November 25, 2011 Charts created using Strategy Trader– Prepared by Christopher Vecchio Fueling the drive to the U.S. Dollar have been lingering liquidity concerns as funding costs rise for financial institutions in Europe. Although the Euro was supported for the early part of the week, with Asian and European traders firmly in control as their American counterparts sat on the sidelines, holdings were dumped in favor of the ‘less-sick’ and more liquid U.S. Dollar. With the EUR/USD trading at its 7-week lows, the demand for safe assets hasn’t been this high in some time. EUR/CHF 1-minute Chart: November 25, 2011 Charts created using Strategy Trader– Prepared by Christopher Vecchio Recognizing this, the Swiss National Bank appears to be ready to make a move. With less than one hour until trading in New York opened for the holiday-shortened trading day, rumors came across the wire that the SNB would be holding a special 15:00 GMT meeting. Speculation has arisen that this would be to announce a higher floor for the EUR/CHF, which has been under pressure the past few days as the Euro has fallen. Market talk suggests the new floor at 1.2500 or even 1.3000; the 1.2000 floor has been in place since September 6. 24-Hour Price Action Key Levels: 14:00 GMT Thus far, on Friday, the Dow Jones FXCM Dollar Index is higher, trading at 10058.34, at the time this report was written, after opening at 10034.10. The index has traded mostly higher, with the high at 10074.42 and the low at 10026.21. --- Written by Christopher Vecchio, Currency Analyst To contact Christopher Vecchio, e-mail firstname.lastname@example.org. Follow him on Twitter at @CVecchioFX To be added to Christopher’s e-mail distribution list, send an e-mail with subject line "Distribution List" to email@example.com.
updated Nov 25, 2011
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