December 4 2012
The world economy is in a better shape after three years of lack lustre performance. The reason behind the sudden improvement could be the fact that the Chinese economy is currently doing well. China is the biggest consumer of all commodities in the world. Also the U.S. discussions show signs that the fiscal cliff could be avoided. The only gloomy place in the world right now is debt ridden Europe. On that note, here are our market insights to keep in mind when binary option trading this week.
The global equities markets witnessed inflows despite a slower pace compared to the preceding weeks. Markets in the U.S. were kept floating by fund buying activities as the markets got busy rebalancing the last session of the year for MSCI Index. This week, the focus is back on the negotiations going on to prepare a strategy for the fiscal cliff. The negotiations that started right after the Presidential elections have not shown signs of ending with a quick resolution. But overall things seem very positive about an outcome being reached by the end of this year. If the fiscal cliff negotiations fail, the U.S. will face severe spending cuts and the taxes would rise to about $600 billion. This could prove to be a major blow to an economy that has recently shown positive signs of recovery.
All the major sectors including housing, manufacturing and consumer indexes improved significantly through the last month with consumer confidence rising for the third continuous month in a row.
Things are not looking good in debt ridden Europe. Europe continues its bad run at the markets despite Greece obtaining a relief package from Germany. Last week’s German consumer climate report suffered criticism last month as data relating to the downside was found missing in the report. The European unemployment held steady at 11.7% even as Italy’s monthly unemployment rate rose from 10.9% last month to 11.1%. The inflation however, seems to be under control and there is a good chance that the ECB may decide to inject additional funds.
The DJIA showed an increase by 0.1%, Standard and Poor’s rose by 0.5%, NASDAQ by 1.3% this week.
The forex market is presently one of the most uneventful markets with almost all traders side lining the currencies. USD flat lined last week and many of the major currencies swayed between +0.3% and -0.4% as the markets closed last week. The only thing that could probably breathe a life into the Forex market would be the fiscal cliff negotiations. The NZD/USD pair volumes are at the lowest since 15 years and the USD/JPY rally gained strength last week. The focus is completely on the Japanese elections due to take place on 16th of this month. It is expected that the LDP party would regain power and lead the Japanese economy by a weaker policy concerning Yen. The rally has now reached a value of 5% and is in its 8th week. This has had an impact on the Nikkei stock index with a 6.5% rally.
Further devaluation of Yen could be required to solve the insolvency problem faced by most exporters in Japan, with Panasonic and Sharp getting a reduced bond rating from S&P.
Last week, GBP/USD fell to 0.1%, EUR/USD fell to -0.2%, AUD/USD rose to 0.1% and USD/JPY also rose to 0.1%. The currencies are very much a mixed bag that could swing either ways.
The ongoing political negotiations regarding the U.S. fiscal cliff led to several precious metals nose diving last Friday. The uncertainty looming around the discussions might have driven several investors to draw profits from the rising silver prices before it’s too late, and as a result the silver prices spiralled on Friday. Copper however, is doing very well as it experienced a 2.9% rally on Friday. As copper is often used as a measure of growth in future, we could possibly derive from this that the investors might be expecting a better GDP repost this month. Oil prices too rose significantly on Friday despite the stressful situation concerning the fiscal cliff negotiations.
This week, both Gold and Silver slipped to 2.1% and Copper rose to 2.9%. It would be advisable to trade only on Copper as the rally might continue for the week as Oil, Gold and Silver could swing in any directions based on the outcome of the fiscal cliff negotiations. Make sure to keep an eye on the news; if the negotiations conclude with favourable results, there is a good chance that almost all the commodities will experience a rally.