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Italy looks to bail Monte Paschi

While Italy’s leading bank Monte Paschi races to raise five billion euros of capital via placements, the Italian government will meet to authorise an increase to the national debt for a bailout package. Markets seem very comfortable that a resolution will be found over the coming weeks.

All trading involves risk. Losses can exceed deposits.
Italy
Source: Bloomberg

Coming into the Christmas period, the EUR/USD appears to have lost the 105 handle with traders squaring up or reducing position size. The EUR/USD has traded within a 0.7% range of 104.00 to 104.79 for the past three trading days. With the USD/JPY easing back under 118.00 after an extraordinary run over the past month, traders are looking to lock in profits before Christmas. Markets are divided on the outcome for USD/JPY, with 2017 estimates ranging from and even 100.00 to a high of 128.00.

With Donald Trump coming into office in less than 30 days, there is room for a significant reversion in these USD moves over the past five weeks. Momentum traders will be watching this over the holiday period. Year-end liquidity is also becoming an issue as the USD index remains firmly above 1.03 and trading into the high area of recent consolidation.

AUD/USD is at a new six-month low at 0.7242, following the S&P rating agency holding Australia’s AAA rating. The US dollar strength seems determined to its hold gains and is now trading toward the high end of the range at 103.03, and US dollar bulls remain in the market.

Tension in the South China seas has help lift gold back to the $1138 range; this seems to be a tepid move with solid resistance at $1142 inside this ongoing down trend. A price target of $1100/oz remains. With the AUD falling to six- month lows, it is still unable to lift the Australian dollar gold price back above the key $1600/oz level and is currently settling at $1569. We may see some buying gold stocks today.

Oil has settled at $52/lb and looks to be consolidating above the key $50/lb level.

The American Depository Receipt (ADR) of BHP is at $24.80 (down 29 cents), however CBA’s ADR shows $81.47, so a lower open is expected, with the futures suggesting an eight-point fall. Markets on open today will be dealing with a terrorist attack in Berlin.

The shooting of the Russian ambassador in Turkey has seen the lira slide, and it’s been a currency that has already depreciated 17% since 1 October.

In late trade, the US market recovered from the intraday lows as news of the Berlin attack came through.

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