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Forex Trading Strategies USD stronger again as US rates rise and Crude oil jumps higher. USD may follow through stronger in the beginning of the New Year.
US Chicago PMI and Existing Home Sales up today as well as Energy Inventories. CAD gaining traction on energy spike.
MAJOR HEADLINES – PREVIOUS SESSION
• US Consumer Confidence for December out at 103.6 vs. 103.0 expected
• China will make significant changes to its CPI basket to include a higher weighting of energy.
• Crude oil prices on the NYMEX rose over $1.50 yesterday
USD was sharply stronger late yesterday, but eased back overnight from lows close to 1.1815.
THEMES TO WATCH – UPCOMING SESSION
Late yesterday we commented that the weak move in the USD may have been a result of thin markets and movements in JPY crosses, and the action late in the US session seemed to confirm that this was the case. With the return lower again after EUR/USD failed to pierce the final 1.1940 resistance, the setup is more clearly bearish, though a 1.1800 break is needed for further confirmation.
The key development in support of the stronger USD move was a rise in US rates yesterday - and rates may need to keep pushing higher to support the USD going forward. If we get a follow up move in EUR/USD that takes us back to the 1.1640 area next week, we'll sharpen up our projections for where the stronger USD can take us. The longer term scenario going forward is this: the market may have been too quick to price in a dovish FOMC, Bernanke could easily surprise to the hawkish side in his first few appearances as Fed Chairman, as could the US economy in the coming quarter. Further out, we see a weaker USD - but the timing is uncertain whether it will be in a few weeks or a few months.
The JPY continues to look weak - and if the strong USD theme does develop again here, the risk may be skewed again to the upside in USD/JPY, which could eventually head for a retest of the 121.00+ top if the 118.30/50 area resistance falls.
The data up today is interesting, even if it may not trigger huge moves. The Existing Home Sales number from the US is key for the general picture of housing activity in the US and the Chicago PMI is the final of the regional manufacturing surveys to be released before next Tuesday's more important nationwide ISM figure. Also interesting will be the US weekly energy supply numbers - and it was perhaps telling that the spike in energy prices yesterday didn't seem to rub off on the USD in any way.
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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