Forex Technical & Market Analysis: January 16 2013

MARKET OVERVIEW

2013-01-16 06:09 GMT

Fitch warns it might cut US rating

Much to the chagrin of investors, a fresh warning from the ratings agency Fitch was issues, stating that a debt ceiling failure would likely cause a ratings review. “…With no legal authorization for net debt issuance, the Treasury would be forced to immediately eliminate the deficit – a fiscal contraction twice as great as the recently avoided ‘fiscal cliff’ – arrears on such obligations would not constitute a default event from a sovereign rating perspective, but very likely prompt a downgrade even as debt obligations continued to be met.” As such, Fitch Ratings’ expectation – along with that of the American public and general contingent of market participants – is that Congress will raise the debt ceiling, thereby leaving the risk of a U.S. sovereign default as extremely low. “Nonetheless, a, failure to raise the debt ceiling in a timely manner will prompt a formal review of the U.S. sovereign ratings.” notes Joe Wiesenthal.

According to Fitch analysts, the debt ceiling is an ineffective and potentially dangerous mechanism for enforcing fiscal discipline – it does not prevent tax and spending decisions that will incur debt issuance in excess of the ceiling while the sanction of not raising the ceiling risks a sovereign default and renders such a threat incredible. Never mind that the statutory limitation on federal debt is a long-standing feature of the U.S. fiscal framework and applies to nearly all Treasury debt, whether held by the public or in government accounts. The fact of the matter is that any protracted debate prior to increasing the debt ceiling is not an exceptional event, however against the backdrop of unprecedentedly large peacetime budget deficits and outstanding debt, any delay in raising the limit would pose ever increasing risks to the ability of the federal government to honor its obligations in a timely fashion. The last time Congress approved an increase in the debt ceiling in August 2011, the federal government came precariously close to being in a situation where, in the words of the Treasury Secretary, it would be unable “to meet our commitments securely”.-FXstreet.com

Forex Economic Calendar

2013-01-16 10:00 GMT | E.M.U. Consumer Price Index (YoY) (Dec)
2013-01-16 13:30 GMT | United States. Consumer Price Index (YoY) (Dec)
2013-01-16 15:30 GMT | United States. EIA Crude Oil Stocks change (Jan 11)
2013-01-16 19:00 GMT | United States. Fed’s Beige Book

Forex News

2013-01-16 05:28 GMT | GBP/USD little changed above 1.6050
2013-01-16 05:10 GMT | EUR/GBP back to flat for the week; above 0.8250
2013-01-16 04:14 GMT | AUD/JPY dips below 93.00, finds 200-hr EMA
2013-01-16 03:40 GMT | GBP/JPY dealing with weekly lows around 141.70

TECHNICAL ANALYSIS

EURUSD

HIGH: 1.33173 | LOW: 1.32788 | BID: 1.32870 | ASK: 1.32876 | CHANGE: -0.13% | TIME: 08:00:18

OUTLOOK SUMMARY: Down
TREND CONDITION: Downward penetration
TRADERS SENTIMENT: Bearish
IMPLIED VOLATILITY: High

MARKET ANALYSIS – Intraday Analysis
Upwards scenario: Potential is seen for break above the 1.3318 (R1) today. In such scenario we suggest next target at 1.3345 (R2) and any further appreciation would then be targeting last resistance level at 1.3371 (R3). Downwards scenario: If it fail to go higher, we might see further retracement development below the key support at 1.3262 (S1) with next target in focus at 1.3240 (S2). Final target locates at 1.3217 (S3).

Resistance Levels: 1.3318, 1.3345, 1.3371
Support Levels: 1.3262, 1.3240, 1.3217

GBPUSD

HIGH: 1.60803 | LOW: 1.60513 | BID: 1.60544 | ASK: 1.60555 | CHANGE: -0.06% | TIME: 08:00:19

OUTLOOK SUMMARY: Down
TREND CONDITION: Sideway
TRADERS SENTIMENT: Bearish
IMPLIED VOLATILITY: Medium

Upwards scenario: Market having failed to establish directional movement yesterday and we expect some volatility increase ahead. Possible strengthening might arise above the next resistance level at 1.6067 (R1). Next targets holds at 1.6079 (R2) and 1.6090 (R3) levels. Downwards scenario: Our focus now shifted to the next support level at 1.6031 (S1). Extension of losses below it might push price towards to our targets at 1.6019 (S2) and 1.6007 (S3) by forming downtrend formation.

Resistance Levels: 1.6067, 1.6079, 1.6090
Support Levels: 1.6031, 1.6019, 1.6007

USDJPY

HIGH: 88.87 | LOW: 87.946 | BID: 88.156 | ASK: 88.162 | CHANGE: -0.69% | TIME: 08:00:20

OUTLOOK SUMMARY: Down
TREND CONDITION: Downward penetration
TRADERS SENTIMENT: Bearish
IMPLIED VOLATILITY: Medium

Upwards scenario: We do expect some pull-backs on the upside and place our next resistance level at 88.28 (R1). Break here would enable next targets at 88.47 (R2) and 88.64 (R3). Downwards scenario: Significant retracement during the Asian session established negative market sentiment for today. Possible depreciation below the next support level at 87.95 (S1) would suggest next targets at 87.76 (S2) and 87.58 (S3).

Resistance Levels: 88.28, 88.47, 88.64
Support Levels: 87.95, 87.76, 87.58

Prepared/Published By FXCC Forex Trading Blog.