Dollar bulls who wanted to see growth in the labor market
and an increase in consumer spending received the latter in the form of a
better than expected retail sales report and a jump in consumer sentiment. The
bullish response by investors to the friendly retail and consumer confidence
numbers is a sign that speculators believe the Fed has enough evidence to hike
interest rates sooner than expected.
The U.S. Dollar soared to the upside to finish the week
sharply higher after the government reported better than expected retail sales
in November.The increase was more than
twice pre-report estimates.The
Greenback received an additional boost after the University of Michigan
reported a greater than expected uptick in consumer confidence.
The EUR USD turned the weekly main trend down today when it
crossed the main bottom at 1.4625.The
current break has already tested 50% of the 1.4045 August bottom to the 1.5144
November top at 1.4594.A further break
to 1.4465 is likely if downside momentum continues to build.
Besides signs the U.S.
economy is improving, the Euro was pressured all week by credit rating
downgrades in Dubai, Greece,
Spain and Portugal.
The GBP USD finished the week lower.The short-term range is 1.5706 to
1.6878.The retracement zone of this
range at 1.6292 to 1.6254 was tested this week and held.Most of the damage done this week occurred on
the daily chart.
This week the Bank of England agreed to leave interest rates
unchanged as well as its quantitative easing program. With Third Quarter GDP on
life-support, the BoE feels that the economy needs stimulus to help it turn the
corner.The major concern for British
Pound traders is the growing budget deficit and the ability to pay sovereign
debt. Traders are worried a credit rating service will downgrade U.K. debt. This
is speculation at this time, however.
After starting the week under selling pressure because of an
increase in demand for higher risk, the USD JPY was able to rebound on Friday
following the release of the bullish U.S. Retail Sales Report.The Yen also faced additional pressure this
week from a report showing Third Quarter GDP grew smaller than estimated, Core
machinery orders fell, consumer confidence was down and the government approved
a 7.2 trillion Yen stimulus package.The
unwinding of the carry trade could put additional pressure on the Japanese Yen
The Swiss National Bank announced this week that it would
leave interest rates unchanged while signaling an end to its bond purchasing
program.It also left open the door for
more interventions should the Swiss Franc appreciate too much.The SNB feels that with the economy just now
pulling out of the recession, it remains too fragile to begin hiking interest
rates. Technically, the main trend
turned up on the weekly chart when the USD CHF crossed the last main top at
The USD CAD finished a little better this week, but most of
the action was spent inside of a pair of 50% price levels at 1.0598 to
1.0537.The Bank of Canada decided this
week to leave interest rates unchanged while calling the currency too
expensive.The BoC has expressed concern
previously about the Canadian Dollarâ€™s value and its negative effect on exports.Speaking of exports, Canadaâ€™s trade
balance showed a surplus last month mainly because of the surge in gold and
silver.This news helped underpin the
Canadian Dollar late in the week.
The AUD USD closed the week lower.The news was mixed this week.Bullish news included a better than expected
employment report and Chinese export number. Falling demand for higher yielding
assets and a stronger Dollar helped put a lid on strong rallies.Technically, the Aussie has just completed a
50% correction of the .9321 to .9014 range at .9167.
A change in tone from dovish to hawkish by the Reserve Bank
of New Zealand
helped give the NZD USD a much needed boost this week.The market faltered on Friday after the bullish
U.S. Retail Sales Report, however.The
lack of follow-through to the upside following the friendly central bank
announcement is not a good sign for the bulls.A decrease in demand for higher yielding assets next week could erase
all of this weekâ€™s gains.
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