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    Weekly Technical Analysis Report week 05/01/2015

    In Europe. The euro slid to a 4-1/2 year dollar low Friday after European Central Bank President Mario Draghi indicated the bank could soon back a government bond-buying program to deal with alarmingly low inflation across the 19-nation eurozone. The currency's latest foray toward $1.20 was triggered by a warning from Draghi that the bank is now more likely to fail in its ambition to keep prices stable than it was just six months ago. "We have to avoid too-high inflation and we have to avoid too-low inflation as well," Draghi told the German financial daily Handelsblatt. "We are making technical preparations to alter the size, pace and composition of our measures in early 2015." For many in the markets, that's a clear hint from Draghi that the bank stands ready to back a full-blown bond-buying program on the lines of those undertaken by other central banks, such as the U.S. Federal Reserve and the Bank of England. Many experts think the ECB could make the announcement Jan. 22 at its next monetary policy meeting. Inflation in what is now the 19-country eurozone — Lithuania adopted the euro on Thursday — stands at 0.3 percent, far below the ECB's annual target of keeping general price rises just below 2 percent.

    European Central Bank President Mario Draghi inspired a surge in European bonds that sent yields across the region to record lows and pushed Germany’s five-year borrowing costs below zero for the first time. From Belgium and France to Portugal and Ireland, 10-year yields reached new lows after Draghi was quoted by German newspaper Handelsblatt as saying he can’t exclude the risk of deflation, fueling bets officials will soon start buying sovereign debt. With the rally extending, investors are demanding the lowest yield premium to hold Spanish securities instead of benchmark German bunds since 2010.

    In U.S.A. U.S. stocks lost ground on Friday, reversing an initial climb, as investors found few reasons to buy in the new year after data came in below forecasts. In a sign of tepid economic conditions, construction spending unexpectedly fell in November by 0.3 percent, while the pace of growth in the U.S. manufacturing sector slipped to a six-month low in December, according to the Institute for Supply Management. The U.S. manufacturing sector slowed in December to its lowest rate of growth since last January, and a gauge of employment sentiment fell, an industry report said on Friday. Financial data firm Markit said its final U.S. Manufacturing Purchasing Managers Index fell to 53.9 in December from November's final reading of 54.8. The preliminary December read for the index was 53.7.

    Global manufacturing activity expanded at its weakest pace in more than a year at the end of 2014, even though factories cut their prices at the steepest rate for nine months, a business survey showed on Friday. JPMorgan's Global Manufacturing Purchasing Managers' Index (PMI), produced with Markit, fell to 51.6 in December from November's 51.8. That was its lowest reading since August 2013. Even so, it has now been above the 50 mark that separates growth from contraction for two years.

    Wall Street ended the last day of 2014 on a down note, but notched solid gains for the year and fourth quarter. Indeed, the market has had an upward bias since mid-December, with the S&P rising in seven of the past 10 sessions, and is about 1.8 percent away from its record close. As market participants use the new year as an opportunity to adjust positions, they will be questioning whether current levels are justified.

    In Asia. Asian stocks rose on low trading volume with the region’s two largest markets shut for holidays. Chinese shares in Hong Kong jumped amid speculation the government will relax monetary policy to boost growth.

    Developers and financial firms surged, with China Vanke Co. soaring 11 percent and People’s Insurance Company (Group) of China Ltd. advancing 6.6 percent. CSR Corp. and China CNR Corp. gained at least 16 percent, extending their Dec. 31 increase after announcing a merger agreement. Atlas Iron Ltd., a Perth-based iron ore producer that lost 87 percent of its value last year, jumped 39 percent.

    The MSCI Asia Pacific Excluding Japan Index added 0.3 percent to 468.41 as of 7:07 p.m. in Hong Kong. Markets in China, Japan, New Zealand, the Philippines, Taiwan and Thailand are closed for holidays. Volume in Sydney and Singapore was about half the 30-day intraday average and trading in Hong Kong was 24 percent lower

    On the Commodities markets . Oil dropped to the lowest since May 2009 amid growing supply from Russia and Iraq and signs of manufacturing weakness in Europe and China. Futures headed for a sixth weekly loss in New York and London. Oil output in Russia and Iraq surged to the highest level in decades in December, according to data from both countries’ governments. Euro-area factory output expanded less than initially estimated in December. A manufacturing gauge in China, the world’s second-largest oil consumer, fell to the weakest level in 18 months, government data showed yesterday. Prices slumped 46 percent in New York in 2014, the steepest drop in six years and second-worst since trading began in 1983, as U.S. producers and the Organization of Petroleum Exporting Countries ceded no ground in their battle for market share. West Texas Intermediate for February delivery slipped 27 cents, or 0.5 percent, to $53 a barrel on the New York Mercantile Exchange after dropping to $52.03, the least since May 1, 2009. Volume for all futures traded was 34 percent below the 100-day average. WTI traded at a $3.66 discount to Brent.

    Gold prices rebounded in choppy trading Friday as equities stumbled in the wake of weaker-than-expected economic data, but the precious metal remained on track for a weekly loss. Gold for February delivery GCG5, -0.11% rose $2.70, or 0.2%, to $1,186.80 an ounce, with volume thin at the end of the holiday season. Still, the bounce was impressive, coming off an earlier low of $1,167.30. The rebound came as the stock market turned lower in the wake of a larger-than-expected decline in the Institute for Supply Management’s December manufacturing index, which declined to 55.5% from 58.7% in November. Economists had forecast a reading of 57%.

    JPY was the strongest currency against USD, appreciated by 0.01% on Friday (weekly basis), while USDJPY traded around 120.135 area. CHF was the weakest currency against greenbacks, depreciated by -1.38% and USDCHF was moving around 1.0008 area.

     
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