The US policy makers were ultimately able to avert the so called “fiscal Cliff” after the signing of the accord as a short term measure to stall the automatic tax rise and the spending cuts that were to take effect at the beginning of the near year. However, like the Japanese yen, the dollar which is a highly liquid currency bought in the times of market stress or economic turmoil came under pressure and declined against the euro and the Aussie. It is anticipated that further selling will weigh on the USD as more traders and investors with new budget allocations come back after the holidays.
The markets have turned to more risk seeking soon after the worst of the “fiscal cliff” was ultimately avoided. But that has left the dollar and the yen much weaker and it is going to be rather difficult to contain the trend in the near future.
The passing of the bill to avoid the so called “Fiscal Cliff” of tax rises and spending cuts by US policy makers has brought in relief and the euro rose to its peak against the yen at 115.995 on the trading platform EBS, which is regarded at its highest against the Japanese currency since July 2011. Following trimming of the gains, the euro was approximately about higher 0.9 percent for the day at 115.48 yen, with option barriers cited at 116 yen.
The German Bunds declined on Wednesday after the approval of the US budget deal that had earlier threatened to tip over the largest economy in the world into its next recession.
The US deal spurred a rally in riskier assets such as equities and peripheral euro zone debt, driving the Italian Ten Year yields to their lowest level in just over two years.
Analysts have cautioned that further gains for the euro may possibly be limited if concerns about the Eurzone economy recur.
The EUR/USD near term may with great effort build on its gains above $1.33 with traders potentially looking to take profits at current levels.
After US decision makers passed the bill to avert the so called “fiscal cliff” of tax rises and spending cuts, the yen declined to an eighteen month low in against the euro and at the same time the USD hesitated against the growth linked currencies on Wednesday.
The euro rose by 0.5 percent at $1.3273, not far from the 8-1/2 month high of $1.33085 hit on Dec. 19. Traders initiated stop loss buy orders above $1.3310 with option barriers at $1.3360. Bids could be seen at $1.3220/40.
Crude oil prices soared soon after US decision makers passed the budget bill, boosting the outlook for earnings growth. Crude oil rose as much as 1.8 percent to $93.44 a barrel as of 8:32 am in New York yesterday.
Elsewhere in Asian, crude oil is trading at 92.58, 0.9% which is higher from Monday’s close, after the official reports revealed that manufacturing activity in China strengthened at a quicker pace in December, signifying that the economy is rebounding.
Crude oil is predicted to find support at 90.84, and a fall through could take it to the next support level of 89.10. The first resistance may be at 93.48, and a rise through could take it to the next resistance level of 94.38.