Friday 30/12/2011 8PM GMT 9PM CET

U.S. Stock indexes fell on Friday, with the broad S&P 500 index on track to end 2011 nearly changed from 2010's closing level and in 2011 the S&P and other stock indexes will plunge and the safe haven dollar will soar – Why?

Quite simply because - 2012 will see the world face a global recession, as the Euro zone fiscal crisis gets worse, Chinese growth hits the buffers and other emerging markets plunge. Before we look at the news, lets look at our positions.

Position Summary

AUD USD: We have been bearish since the pop up to 1.080 and saw 1.020 as good resistance to sell into but were slightly above this level today... Were holding, with a stop above today's highs and any fall on Monday is a selling opportunity on falling momentum and if we do fall, this could be one of the best trades for 2012 to just sell and hold.

GBP USD: We have been bearish since the pop up above 1.61 and the break below 1.56 has cemented the down trend – sell any rally back to this level or a break of 1.54 – target 1.50.

CAD USD: We are bearish of the CAD and have been since the pop up to 1.010 and this has been the least volatile currency recently against the dollar and a great shorting opportunity is resenting itself into 98.00 with a stop behind 99.00. Look to sell on falling momentum for new daily chart lows.

EUR USD: We have been bearish the Euro and trading the short side since the pop up to 1.42 and prices have plunged, making this a great trade for trend followers. The Euro has gone through 1.30 and any rally back to this level is a sell on falling momentum. Major resistance is now at 1.32, while the Euro could possibly test this level it won't get through it the Euro is going all the way down to 1.20 or even lower – great bear trend.

USD JYP: 77.50 is the level we have picked to lightly trade the long side but were trading right near 77.00 our stop level and we are right on this level as we write – if it holds get long on rising momentum on Monday – if it doesn't move t the sidelines.

Note: Today is the last reading day of the year and we are seeing a lot of position squaring and markets are thin – watch next weeks open closely and if the dollar does open up on the majors above, expect follow through strength.

Euro – Going Down to 1.20 or Lower

The Euro is dead in the water and while it probably won't collapse tomorrow the clock is ticking and here is a typical arrogant statement from Euro zone that all is well..

German Finance Minister Wolfgang Schaeuble said he expects Euro zone will be stabilised within 12 months and the crisis will be over. In addition, he ruled out a break-up of the single currency:

"I believe that in the next 12 months we will be so far that we will have the risk of contagion under control and will have stabilised the Euro zone," Schaeuble told the newspaper Handelsblatt today.

Really? Well he is bullish but the facts are the facts and the market does not agree with him...

A look at Italy, shows the problems Euro zone faces. Italy is the Euro zone's third-largest economy and its borrowing costs cannot be sustained at current levels. Ten-year Italian yields are above the 7 percent level which are seen as unsustainable and it has to raise a massive 450 billion Euros from debt markets in 2012 and that's a lot of cash.

Rallies in the Euro will be short, sharp and brief and simply be selling opportunities.

Comment

At present we see no solution to the problems of debt in Euro zone and see it as a sell on any rally back to the 1.30 level. We have been short the Euro since 1.42 and our latest short was on the break of 1.33 and we see 1.32 as very firm resistance – Expect the Euro to decline to 1.20 early in 2012.

Is This Guy Serious? Equities up By 20% in 2012!

Jim O'Neill, chairman of Goldman Sachs Asset Management, says 2012 poses exciting investment opportunities, with the U.S. equities market possibly rising 20 percent by year end – what?

Lets see if this one comes true! - Like the other Goldman call that China won't suffer a big contraction in growth. I know brokers have to sell stock but a 20% rise in equities with global growth contracting and Euro zone on the verge of a huge financial crisis – ok we will see - but I think that if US Equities, DON'T decline by 20% that will be a good result.

US Data Improves But ...

Rising confidence, fewer firings and gains in holiday sales, indicate the U.S. economy is picking up, in spite of a slowdown in Euro zone and the rest of the world.

A decrease in firings by U.S. companies and the prospect of more hirings, indicates the jobless rate may come down. Fewer Americans filed applications for jobless benefits in the four weeks through Dec. 24 than at any time since June 2008. Less unemployment, steady stock prices and falling gasoline prices are helping to boost confidence and this is indicated in The Bloomberg Consumer Comfort Index which reached a five-month high in December.

All good?

Yes a lot better for sure but keep in mind, that with the rest of the world in trouble the US will struggle too. Sure its better but the economy will struggle as global growth contracts. Having said this which currency would you rather own – dollars or Euro's? Dollars would be my choice and we remain long and bullish the currency on safe haven flows – but NOT on equities risning.

Aussie Dollar Up – Ignoring Chinese Bearish Data

The bull market which keeps bouncing back is the Aussie Dollar. However its rallying on bearish news and that sets up a potential crash. The Australian dollar rose 0.3 percent today to get up and above 1.020 resistance, ignoring HSB China PMI data which showed Chinese factory activity had contracted again for the month of December.

With a global economy turning bearish, we expect the Aussie Dollar to get hit hard and see it falling to 80.00 in the New Year and current levels are a sell in our view.

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