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Forex Trading StrategiesEasing yields give the USD some resistance - but the JPY can't seem to find any support at all.
US CPI up today - core number will be closely watched as energy prices continue to fall.
MAJOR HEADLINES – PREVIOUS SESSION
• UK Leading Indicator Index for September out at 0.3% vs. 0.1% in September.
• US Weekly ABC Consumer Confidence out at -18 vs. -19 last week
• Australia Westpac September Leading Economic Index rose to 230.9 from 230.1
• Australia Q3 Wage Price Index out at 1.0% as expected
EUR/USD remained above 1.1700 and JPY weakened again overnight, with EUR/JPY posting new recent highs above 139.50.
THEMES TO WATCH – UPCOMING SESSION
Bernanke's confirmation hearing went smoothly - and no new developments there as Bernanke recognizes that it is his job to express continuity and reassurance at this point as the transfer of power to a new Fed chairman is a tectonic shift for markets to deal with. Importantly, despite Bernanke's expressed wish to move toward more explicit inflation targeting, he also said that such a move would only come if a consensus within the Fed could be built.
More interesting was the reaction to the data yesterday - the story about the divisiveness within the ECB on whether to move on rates in December initially pushed EUR/USD lower - but the recovery of the single currency despite strong US numbers shows that the market prefers to focus on interest rates after all. And looking at the short end of the curve - the last two weeks have seen practically no moves in the yield differentials.
Still, the return to resistance of USD/JPY overnight was impressive as the JPY weakness continues to boggle the mind and yesterday's small reversal in EUR/USD may have been more of a sign of EUR resilience rather than USD weakness.
Up today we have the US CPI reading. With oil prices some 20% off their peak - and gasoline prices falling even faster - we could see a very low reading today - both core and headline . And if this continues to boost US treasuries, we could see the USD gains capped for the short term. Focus most attention on the core inflation, however, as another negative reading would complement yesterday's -0.3% PPI reading and set up a very important November report next month - as the market may begin to question the intense focus on inflation if all of these readings are low and energy prices are low for two months in a row.
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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