By: Nikolas Xenofontos of easy-forex
EURUSD ended 2011 at 1.2958, way down from the 1.4939 peak back in May. This was due to the ongoing Eurozone debt crisis and the indecisiveness of the European leaders in tackling a solution. Even though there had been numerous summits no firm resolution was produced and a big question mark hangs over the single currency’s future. Eurobulls aim for a solution within the year that may see the euro as high as 1.45, while Eurobears show no such optimism and target as low as 1.15.
EURCHF closed the year at 1.2167 after it had earlier reached an all time low at 1.0063. The SNB intervened in early September and placed a floor at 1.20, which - so far - has proven successful. Nevertheless, there are market participants that believe the Swiss franc is still overvalued and anticipate another intervention by the central bank, this time to raise the floor at 1.25 or even higher. On the other end there are investors that wish to test the 1.20 floor believing that the SNB will not intervene another time in the near future.
USDJPY carried on its year to year downtrend concluding 2011 at 76.89, with a post World War II low at 75.41. The past year saw the Japanese monetary authorities spend a total of 14.30 trillion yen (about $184.5 billion) on currency interventions, according to Finance Ministry data. The first intervention in May was bilateral with the G7 helping out the Bank of Japan. However, the last two interventions were unilateral, something that attracted criticism, even from G7 nations. Traders expect the downtrend to continue and yen to strengthen even more as another unilateral intervention will cause political difficulties. On the other hand, fundamental investors cite the deteriorating economy of Japan after the Fukosima earthquake and slashed exports due to strong yen, betting on a major reversal.
GOLD traders will remember 2011 for two things. One will be the record high at 1920.86 and the other will be gold’s correlation to risky assets. The latter was one of the reasons gold was considered a risk haven in situations of crisis, a major buying incentive for gold. As the precious metal closed the year at 1564.98, the question for 2012 is whether this will be the first year after 11 consecutive positive yearly returns that gold may record a negative return, or if it will carry on stronger at or above 2000. Goldbulls see 2000 USD per ounce of gold in 2012 while goldbears 1150.
OIL (NYMEX WTI Crude) has had a wild ride during 2011 going as low as 74.92 and as high as 114.78 before closing at 98.17. One side of the market focuses on geopolitical developments and cites tensions between Iran and much of the rest of world concerning Iran’s nuclear program as a reason we may see oil as high as 130 USD per barrel. The other side believes that given the poor economic climate, contracting industries and the Eurozone debt crisis with a possible EU recession looming, demand for oil will drop and this may push the black gold below 80 USD per dollar.