The Federal Reserve begins a two-day policy meeting after which it will provide forecasts for the benchmark interest rate for the first time. The policy makers are to introduce major transparency as an innovation process with individual Federal Open Market Committee (FOMC) members providing projections of the Fed Funds rates and each to explain the quantitative factors behind the projections. It seems that investors have shunned the safety of US treasuries for a fourth straight session on hopes of deal by the Greek government is imminent. Euro-zone finance ministers agreed on the text of a treaty to create their 500 billion Euros ($651 billion) bailout fund after addressing concerns from Finland about provisions that would allow the fund to make loans without unanimous consent from the governments, The fund, dubbed the European Stability Mechanism, will have the power to make loans in emergency situations with the backing of 85% of euro-zone governments under qualified majority voting, which weights a country’s vote according to its population, This procedure will only apply when the European Central Bank and the European Commission, the European Union’s executive arm, conclude that failing to make such a loan would threaten euro-zone’s economic and financial sustainability, European officials announced.

The Foreign ministers for the 27-nation European bloc agreed to ban all new contracts to import, buy or transport Iranian crude with immediate effect, in an attempt to halt Iran’s nuclear plan. However, existing oil contracts will be allowed to continue until July 1 to give time to those countries most reliant on Iranian exports like Greece, Italy and Spain, which together buy about 450,000 barrels of oil per day. The European Union will freeze the assets in Europe of the Iranian central bank as well as eight other entities and ban the trade in gold, precious metals, diamonds and petrochemical products from Iran said in a statement yesterday. Europe is the second-biggest buyer of Iran’s oil after China. Analysts predict that China is likely to increase its purchases of Iranian oil once a full European embargo comes into force.

The Euro group officials showed optimism while other sources noted there is no willingness to give more money to Greece. As a talk of a larger firewall for the Euro area through an European Stability Mechanism (ESM) and European Financial Stability Facility (EFSF) joint bailout fund helped boost risk appetite. The Euro came on expectations that running the EFSF and the ESM in parallel may help prevent an immediate Greek led contagion spiral within the Euro zone, even if Greece’s private debt holders fail to strike a deal, which according to the officials report. Euro governments stood by an October offer of 130 billion Euros ($170 billion) for a second aid package for Greeks. Officials want to fill a deeper than expected hole in Greece’s finances by saddling investors with a lower interest rate on exchanged bonds. Greece has until February 13 to present its offer on a bond swap that would allow the country to reduce the burden of its debt. Finance ministers of the Euro zone said that negotiations between Greece and private creditors will continue with the support of the Euro group.

EUR/USD
Eur/Usd currently trading at 1.3028, slightly lower for the session, trades right underneath the opening lows at 1.3006 from where it bounced to session highs at 1.3028continued its upward movement from 1.2624 and reached as high as 1.3052. Further rise is still possible after a minor consolidation, and next target would be at 1.3200 area. Support is at 1.2875, only break below this level could signal completion of the short term uptrend. The Support levels are at 1.3006, 1.2873, 1.2834 and Resistance levels are at 1.3052, 1.3084, 1.3143.

USD/JPY
Usd/Jpy is currently trading at 77.04, The pair oscillates inside a narrow intraday range, with indicators providing to clues on the next directions, Lengthier consolidation in the range would likely be seen in a couple of days. Key resistance is at 77.32, a break above this level will confirm that the downtrend 78.21 has completed at 76.55 already, and then the following upward move could bring price to 79.00 zone. Support is at 76.55, below this level could signal resumption of the downtrend, then further decline could be seen, and the target would be at 76.00 area. The Support levels are at 76.72, 76.53 76.21 and Resistance levels 76.04, 77.34, 77.52.

S&P could assign Greece a selective default rating by the fall, Greece may eventually return to the private market for financing if the government can succeed in reforming its economy and balancing its budget. While UK won’t pull at the underlying elemental fundamental strings of the global financial markets like the FOMC has the potential to, it can nevertheless significantly alter the strength and bearing of the sterling, the two different aspects of the pound’s health are growth and financial support. The growth figures are the easiest to interpret. The consensus is for a 0.1 percent contraction in the economy through the final months of 2011 which confirms the fears of various policy makers and economist that the UK is tipping into recession while the taint of financial crisis is spreading from the Euro Zone. In Germany officials said the country’s economic upswing has only come to a temporary halt, while growth may stagnate in the first three months of the year, economic dynamism should return in the course of the year. The International Monetary Fund (IMF) yesterday forecast growth of 0.3 percent in 2012. While that’s lower than its previous estimate, it compares with contraction of 0.5 percent predicted for the euro region. Even though policy makers are still grappling with fixing the region’s debt crisis and the risk of a credit crunch is not yet banished, Germany’s biggest export partner unexpectedly rose this month. European Central Bank officials said that 2012 will be a much better year for the Bloc.

In Asia the biggest move through Yesterdays session was the tumble form the Japanese yen. It is tempting to saddle this with the easy label of manipulation and move on, but that would put on the wrong path. Bank of Japan lowers its growth forecast and while the Ministry of Finance confirmed its first annual deficit in 31 years. This is a serious issue for a trade economy. For the upcoming session, USD/JPY traders should be watching at the QE3 interest surrounding the Fed decision. If it doesn’t pan out, it could prove a long overdue bullish driver. Even so, with the population declining since 2006, indicating a trend rate of economic growth of 1 percent in coming years, policy makers are under pressure to take steps that avert a crisis of confidence in the nation’s debt. The Officials said yesterday total outstanding borrowing will probably reach 985.4 trillion yen in the year ending March 2012; Money flowing out through trade may erode investor’s confidence that Japan’s creditor status makes it a haven for investment, complicating the government’s efforts to manage the world’s largest public debt. The country is shrinking population means it will need to turn increasingly to foreign investors to buy its bonds.

GOLD
Gold is currently trading at 1669 and it is not gaining strength to rise past strongly above its Resistance at 1680. The outlook is mixed. The support levels are at 1640, 1627 and the resistance levels are at 1684, 1696

EUR/USD
EUR/USD is currently trading at 1.3030. After an early dip through the last European session, the pair was again supported to end the day in positive territory and not losing focus on next resistance area at 1.3085, if the market is unable to overcome last downtrend will remain in place. The buying dips are favored. The Support levels are at 1.3003, 1.2872, 1.2835 and the Resistance levels are at 1.3051, 1.3083, 1.3142.

USD/JPY
USD/JPY is currently trading at 77.94. A cloudy economic growth forecast by the Bank of Japan, While price still has room to run higher until faced with 78.30/40 area, in this case a deeper movement towards the 77.30 area could be expected. The Support levels are at 77.64, 77.32, 77.01 and the Resistance levels are at 78.03, 78.23, 78.52.

The global recovery is threatened by the growing tensions in the euro area rumors are spread between the traders which is predicted to announce soon by World Economic Outlook. Global GDP growth is to be cut from 4pc to 3.3pc, with drastic revisions for an arc of countries in Southern Europe.

France managed to sell 7.965 billion Euros worth of bonds out of target of 6.5-8.0 billion. The country’s 10-year bond yields fell three basis points to 3.11%. Still the most successful auction held on Thursday in the Europe was the one which took place in the UK.

The country managed to sell 4 billion pounds of debt. Bids exceeded supply twice over and 4 year bonds were sold at the lowest yield ever of 0.893%. The Negotiators working on a pact to be signed by 26 of the 27 European Union states with Britain remaining odd man out toughened up the treaty in many respects ahead of planned talks between finance ministers from all 27 states.

European Union finance ministers will meet on January 23 to discuss the draft, which waters down earlier provisions on restructuring after European Union mandated losses for Greek, bondholders helped exacerbate the sovereign debt crisis. The treaty, which is not final and could change, still calls for clauses in bond contracts that would prevent small clusters of investors from blocking a restructuring.

For now the draft says that this legal inscription should be preferably constitutional but could also be otherwise guaranteed to be respected throughout the national budgetary processes.

The European stocks gained for a fourth day, extending a five-month high for the Stoxx Europe 600 Index, as Spain and France sold bonds at lower yields and fewer Americans than forecast filed claims for jobless benefits.
Commerzbank AG (CBK) led a rally in financial shares, surging 15 percent, after outlining measures to boost capital. Spain sold 6.6 billion Euros of bonds maturing in 2016, 2019 and 2022 today, compared with a maximum target for the sale of 4.5 billion Euros.

The yields on the 2022 and 2019 securities declined, while the 2016 borrowing costs increased. Germany, the biggest contributor to bailouts and a promoter of strict fiscal discipline, has insisted on handing the court a meaningful role in policing budgets. Collective action clauses are common in U.S. and U.K. law and aren’t a backdoor way of threatening bondholders, said a European Union official on condition of anonymity.

The clauses would enable a restructuring to go ahead by a vote of a supermajority of bondholders, denying a veto right to solitary investors. Today’s rally in stocks was helped by optimism that the U.S. economy will be able to weather Europe’s debt crisis. Claims for jobless benefits last week dropped to the lowest level, pointing to an improvement in the U.S. job market that may help bolster spending in the New Year.

Bank of America Corp., the second-largest U.S. lender, swung to a fourth-quarter profit as the company sold assets and built capital faster than expected. The Dow Jones Transportation Average, a proxy for the economy, increased 1.6 percent. Gauges of diversified financial and transportation shares added at least 1.5 percent, leading the gains among 24 industries in the S&P 500.

The Stoxx 600 became overbought for the first time in last 14 months today, as the 14-day Relative Strength Index, which tracks momentum by comparing closing prices with daily trading ranges, rose to 70.47. When the RSI climbs above 70, analysts say the underlying security is likely to fall. The US and China will remain the two main growth blocs in the world economy.

It is predicted that the US will grow at an unchanged rate of 1.8pc, and China will motor ahead at 8.2pc, down from 9pc. Asian stocks rose, with a regional benchmark index heading for its fifth straight weekly advance, as fewer Americans than forecast filed claims for jobless benefits and after Spain and France sold bonds at lower yields. Japanese officials said that The European government bond auctions are going well and investors are starting to reverse their risk-avoidance stances globally.

EUR/USD

EUR/USD pair is Currently trading at 1.2966, the steady rise seen over the past three days has proven EUR short covering is finally in full motion and further room to run north is expected as longs gain confidence after the first close above, likely eyeing for an initial target around 1.3080 region with a break above shifting focus to 1.3155, Buying on dips is now favored, with bids expected at 1.2880 the Support levels are at 1.2952, 1.2923, 1.2872 and the Resistance levels are at 1.2971, 1.3014, 1.3043.

USD/JPY

USD/JPY is currently trading at 77.18; there has been an important change of sentiment since the European session, when the pair found technical support at 76.72 to top out at 77.32, breaking in the process, is now likely to have a go towards heavy stops reported just above 77.50. A break above would then target 77.52-57, with break higher encouraging more bulls to jump on board. Corporate sell-orders are clustered at 77.35, trying to prevent further gains. The Support levels are at 77.03, 76.73, 76.51 and the Resistance levels are at 77.32, 77.53, 77.91.