Low Volume at the Start of the Week, Mortgage Stocks Surge

The U.S stock market started the week on a positive note, ending the session with mild gains. Even though the intraday session was characterized by choppy trading, the indices received a boost towards the end of the session, backed by individual stocks from the housing sector.

Positive sentiment already came during morning hours, as China stated that its growth could reach 10% by next year. China, known for its massive surplus, expanded throughout 2009, by a whopping 8.5%, as various stimulus measures helped to boost the economy. Chinese Premier Wen Jiabao said yesterday the national economy had improved and was back on track to reach the growth target during 2010. Furthermore, he mentioned that policy makers do not intend to change the management of the Yuan.

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A Lack of Economic Data Sent the Indices Higher, USD/CAD returns to test its break-out

The shortened week started off on a positive note, as Asian indices climbed higher. Positive sentiment quickly spread to Europe and the U.S, sending all the major indices to higher levels. One must note that the Nasdaq closed the session at a new high at 1828.79, after breaking through strong resistance.



The economic calendar lacked market-moving data yesterday, therefore traders turned to previous price action, continuing Friday’s trend. Even though the indices bounced at the start of the session, they presented a lackluster session, consolidating up until the close.

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A wave of Data Led to Further Consolidation

Inflation data was scrutinized by investors ahead of the rate decision to see if there would be any changes to the wording of the FOMC statement due to the numbers. The Federal Reserve Statement displayed little change from prior statements and alerted that market that monetary easing would continue for a substantial period of time. These comments were expected by market participants and the reaction was already baked into the market’s price.
Employment data also grabbed market participant’s attention as Thursday’s first-time jobless claims rose by 7,000 to 480,000, defying expectations of Wall Street’s economists that the number would drop. The less volatile four-week average of new claims, however, fell by 5,250 to 467,500, maintaining a healthier trajectory.



The week ended with the Bank of Japan's policy meeting. The board voted unanimously to leave its policy rate unchanged at 0.1%, as it studies the effects of a measure announced earlier this month to try to lift demand. One must note that the BOJ offered up to 10 trillion yen ($111.2 billion) in short-term funds to the market. The policy board also said in a statement that it decided to "further disseminate" the BOJ's thinking on price stability, and made it clear that the board won't tolerate on-year falls in the consumer price index.

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Dollar Bulls are Still in Control, USD/CAD and AUD/USD now in the Spot Light

The U.S stock market inched higher yesterday, closing with an average gain of 0.2%, after the Fed released its important interest rate decision. While some were expecting a more hawkish statement, market participants managed to read between the lines, understanding that the Fed is now acknowledging the recent economic rebound. Even though the Fed stated that they intend to maintain a low rate policy, the bank touched recent developments in the job market and financial markets, mentioning minor improvement.

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Consolidation on the Forex Market, Stocks Creep Higher

After climbing at the start of the session, the U.S stock market remained in range up until the closing bell. Economic data was the major culprit yesterday, as data from the U.S showed a mixed picture.

Similar to last week’s increase Initial jobless claims jumped more than expected to 474.00k. The Georgia department said that 72,298 laid-off workers filed initial claims for state unemployment insurance benefits in November, a 2.4% increase from October. Even though the news wasn’t inspiring, it didn’t have much of an effect on the intraday session as the U.S Trade Balance Index showed a slight improvement of -32.90B, compared to a previous-35.70B figure. According to the data, October’s exports were $3.5 billion more than September’s exports, while imports increased just $0.7 billion.

From a technical point of view the major indices continued to trade in range, led higher by consumer Discretionary and Utilities.



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The Dollar Showed Mixed Signals Around its 50 Day Moving Average

The Dollar followed Friday’s trading day and continued higher throughout yesterday’ session. Even though during the start of the session, the Greenback presented minor weakness, Bernanke’s mixed speech helped to drive the Dollar to higher ground.

In a speech before the Economic Club of Washington D.C, Fed chairman Ben Bernanke hinted that interest rates should stay at low levels for an extended period of time. The Fed Chairman commented on the recent recovery, mentioning that that even though the U.S economy is slowly bouncing back, it still has various obstacles to overcome, ones which could weigh on the current recovery, causing slow economic growth. In addition, Bernanke touched on the financial situation, stating that their remains credit problems under the surface.

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The Dollar Strengthens on Better Than Expected Data

The Dollar/Yen had a turn for the better on Friday as investors began to speculate that the decrease in unemployment could lead the Fed to raise interest rates sooner than expected. Friday’s session was a classic “buy the rumor, sell the fact”. Furthermore, news earlier last week mentioned that the Bank of Japan plans to introduce new liquidity measures to combat falling prices. Under the new program, the BoJ will provide JPY10 trillion of three-month loans to commercial banks at a fixed rate of 0.1%. In exchange, banks will provide regular BoJ collateral. The decision was unanimous but the BoJ had come under heavy pressure from the government to cooperate in battling deflation. The USD/JPY surged on Friday, to break trend line resistance at 89.50.



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Good Data Didn't Drive the Markets Higher (Video)

The Dollar Trades Steady

On individual pairs, the USD/JPY came up to prior resistance, as investors grabbed the low levels for a quick profit. In addition officials helped to boost the value of the Dollar after mentioning that they intend to further help the Japanese economy. According to recent news, the BOJ intends to inject an additional 1 trillion yen ($11.5 billion) into short term money markets.

The EUR/USD and GBP/USD also traded steady after economic data showed a mild improvement. Construction PMI came out as expected at 47.00, while the Euro-zone’s PPI figure increased by 0.2% on a monthly basis, higher than analyst’s expectations of 0.1%.

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