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Forex Trading StrategiesEUR/USD stays supported as US rates drop heavily again on weaker than expected Philly Fed.
EUR/USD could rally to key resistance in 1.1830/70 zone. JPY still weak with Bush headed to China this weekend.
MAJOR HEADLINES – PREVIOUS SESSION
• US Industrial Production for October was out at 0.9% vs. 1.0% expected and Capacity Utilization was out at 79.5% vs. 79.6% expected
• US Philadelphia Fed Survey for November out at 11.5 vs. 15.5 expected
• New Zealand October Home Sales out at 8513 vs. 9186 in September.
• Crude prices fell sharply to new recent lows yesterday
GBP continues to be weak while JPY weakened again overnight vs. EUR and USD.
THEMES TO WATCH – UPCOMING SESSION
EUR/USD edging above 1.1700 again gives us a little technical fuel for an extension of the rally to the 1.1830/70 resistance zone - but we can't expect anything beyond that until we see it - as the trend is clearly down for the moment. The short term interest rate futures still strongly suggest a well-supported EUR/USD.
Practically nothing on the calendar to offer a catalyst for any action, but...
One might consider buying some short-term options protection for any long USD positions (or consider taking long USD positions off ahead of the weekend) with Bush zipping around Asia for the weekend. In current market conditions, seems like the surprise-side risk would be for a big fall for the USD considering that the whole world is bullish - USD/JPY is the key danger.
Gold has been on a tear - and we think this could have relevance for the FX market since it is probably central banks that are doing a lot of the buying - this may suggest that they are tiring of accumulating USD and are loooking for ways to diversify (recently, a Russian reserves manager said that it would be reasonable for Russian to double the amount of gold in its reserves t0 10% of total reserves). Once the over-leveraged hedge fund accounts and repatriation flows slow (not to mention the flight of capital from Japan) we could hear one of Ross Perot's "giant sucking sounds" on the USD. It's all a question of timing, as always, of course.
i>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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