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Forex Trading StrategiesUSD stronger still on reports of strong beginning to US Christmas shopping season. EUR/USD may challenge 1.1640 support.
USD/JPY knocking on big psychological level at 120.00. Busy week ahead with ECB and US numbers.
MAJOR HEADLINES – PREVIOUS SESSION
• Friday: Germany nationwide CPI for November comes in at –0.5%
• Friday: Switzerland has strong KOF Swiss Leading Indicator in November
• Japan Large Retailers’s Sales drop –3.4% (year-on-year) in October and Retail Trade as a whole falls –0.3% (month-on-month)
• Initial reports suggest that traditional first weekend of Christmas shopping in the US was very strong. (Friday after Thanksgiving + the weekend)
USD/JPY pushed through to new highs at 119.85 and EUR/USD fell under 1.1700 at its lowest overnight.
THEMES TO WATCH – UPCOMING SESSION
A 22% increase this year in US holiday shopping over the extended Thanksgiving weekend has the market gunning for more USD strength. Very interesting to see that kind of number with all of the reports of terrible consumer confidence and a potentially slowing housing markets. Clearly, it will take even more than what we've seen so far in terms of bad news before we see any effect on American consumption. The most followed monthly US consumer confidence survey is released tomorrow - and is expected to have improved sharply to 90 from the two-year low posted in October. The strong retail reports over the weekend suggest that the optimistic expectations for this number are justified.
A very busy week ahead of us with the ECB forecast to raise rates by 25 basis points on Thursday. The market is nearly unanimous in its expectations of a quarter-percent increase, with only a few extremists suggesting that the ECB will move a half percent. We're in the 25 bp camp. Also up, we have key US housing data, with US Existing home sales for October already today. We're seeing increasing anecdotal evidence of a slowing housing market in many of the hot markets in the US - let's see if this number, which actually the only US housing-related number that hasn't begun to show weakness, finally shows a few cracks as well. US New Home Sales is up tomorrow.
Other US data this week includes the Fed Beige Book on Wednesday, which may give key clues on how close the Fed is to applying the brakes in the rate hike regime (we're debating whether the next meeting will see the last Fed hike or whether they will also hike at the "hand-off to Bernanke" meeting on Jan. 31). In any case - we expect a clear signal on the monetary policy statement at the Dec. 13 meeting. Also on Wednesday we have the US Chicago PMI. On Thursday we'll see the US ISM Manufacturing data, Construction Spending, Personal Income and Spending, and the PCE inflation data - the Fed's favorite inflation gauge. On Friday we have the US unemployment and payrolls data as well as a gaggle of Fed speakers at various times.
Technically, we lean to the strong side on the USD once again, now that EUR/USD swung back below 1.1730. Of course, a move through 1.1640 is an even clearer sign that the downtrend is still on and that we're headed to 1.1500 - our default scenario for now. USD/JPY also looks like it wants to peek above 120.00.
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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