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Forex Trading StrategiesUSD strength keeping impressive head of steam. Will it keep chugging higher through US PPI and Retail Sales today?
Germany and EuroZone ZEW Surveys up for the European session
MAJOR HEADLINES – PREVIOUS SESSION
• New Zealand Retail Sales for September out at -0.8% vs. -0.5% expected
• UK RICS House Price Balance for October out with a reading of -9% vs. -18% expected
• China Industrial Production rose 16.1% in October on a year-on-year basis vs. 16.3% expected
• Japan Tokyo Condominium Sales for October rose 8.9% vs. 16.2% in September
USD maintained its strength in a quiet Asian session.
THEMES TO WATCH – UPCOMING SESSION
No sign at all overnight that this USD strength will abate - so we look for new targets out in uncharted territory. It was interesting to see that a Chinese newspaper explicitly warned speculators that they would be disappointed on the Yuan revaluation issue if they were expecting something to happen in connection with Bush's visit over the weekend. At the same time, a PBOC vice governor was out overnight talking about the need to make the Yuan more flexible to iron out imbalances between production and consumption. What this all means is that it is likely very soon that we should expect a significant widening of the band from China - probably right when no one is looking. Be prepared for this eventuality. It will likely spell the end of the general JPY sell-off (even if that is driven by a different phenomenon) as the USD will need to adjust weaker whenever this event unfolds. China has been unpredictable with its timing, so this could happen tomorrow or in three weeks.
Up today we have the Germany and EuroZone ZEW Surveys, both of which are expected to improve from the previous month's levels. In general these surveys are trending upward and showing a European economy on the mend, so a disappointing reading would be very disappointing. Later, we have the first US Retail Sales number (for October) that is likely mostly free of the hurricane effect we've seen in other data - expectations are for a reading of +0.3% less Autos. The US PPI for October is out at the same time, and is expected at 0.0% and 0.2% ex Food and Energy. Interesting to see the fixed income sell-off yesterday with those kinds of expectations. Also up is the first of the regional manufacturing survey numbers - the US Empire Manufacturing number, which is expected at 15.5 vs. 12.1 in October.
Note: the support/resistance levels used in the matrix’s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.
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