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Forex Trading StrategiesAUD/USD rejects break lower. JPY blasted again on the return of the carry trade overnight. USD suddenly weaker this morning.
USD flopping back and forth as we wait for next Tuesday before the market gets back to normal trading volumes.
MAJOR HEADLINES PREVIOUS SESSION
US Richmond Fed Index for December out at -2 vs. 10 expected and 9 in November
US Weekly ABC Consumer Confidence out at -10 vs. -11 the previous week. This is a four month high.
Japan Industrial Production for November out at 1.4% vs. 2.0% expected
Japan Large Retailer's Sales for November out at +0.8% vs. -0.3% expected
Japan Retail Trade for November out at -0.2% vs. +0.7% expected
Japan Labor Cash Earnings for November out at -0.2% vs. +0.5% in October
Japan Small Business Confidence out at 50.1 vs. 50.9 in November
AUD/USD rejected new lows below 0.7270 overnight and NZD was also strong overnight on Asian buying.
THEMES TO WATCH UPCOMING SESSION
Little action overnight to trigger any new views - the move in AUD/USD is interesting as we discussed the descending trend channel formation yesterday. It looks like with the rejection of new lows there that AUD/USD could find some support back toward 0.7400.
The JPY also continues to look weak - especially vs. AUD and NZD overnight as Japan is apparently still looking for high yielders to sell their currency against. Again - the JPY outlook is a bit difficult here, as another round of outflows from Japan could push it weaker again before we finally see the JPY stronger further out. The data overnight wasn't very supportive of the JPY, as Industrial Production rose less than expected and the Retail Trade data was disappointing (think of what the world would think of the US if year-on-year retail sales only grew 0.1%). Still, however, the Nikkei continues its march higher - that market beginning to look a bit scary.
EUR/USD remains in limbo between 1.1800 and 1.1910 (although 1.1940 is the bigger trigger level higher). The rate view continues to give the USD resistance and the market seems to be pricing in a bit of dovishness from the FOMC minutes next Tuesday. Is this justified? Perhaps it is as one thing that the FOMC minutes will NOT show is any possible change of psychology on inflation pressures related to the latest spectacular drop in Natural Gas prices - which is really key for consumer psychology going forward as the 25% drop will save US consumers billions in the coming months. This drop happened after the FOMC met three weeks ago (when the minutes were of course recorded).
The Richmond Fed Index was very disappointing, and follows a very positive Empire Manufacturing reading - this all shows that these regional surveys can't hold a candle to the more important and comprehensive ISM Manufacturing next Tuesday.
All in all, tough to call anything right here sandwiched between Christmas and New Year and waiting for the return of normal volumes next Tuesday (US markets are closed on Monday).
Note: the support/resistance levels used in the matrixs 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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