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Forex Trading StrategiesUSD on the ropes again despite higher US rates and booming stock market. EUR/USD en route to 1.2450?
US Trade Balance up today. GBP gets relief as GBP/USD recovered from test of 1.7520 support
MAJOR HEADLINES – PREVIOUS SESSION
Chinese government think tank warns of deflation later this year in the Chinese economy due to overcapacity
Yesterday's Auction of $13 billion of US 5-year Treasury Notes saw the lowest demand for treasuries since last April.
US weekly Crude Supplies dropped more than expected, but gasoline and especially distillate inventories rose sharply. US Crude prices ended the day higher.
Iran announced the removal of seals on a nuclear facility in order to continue "research work"
USD moved weaker across the board, but especially vs. European currencies.
THEMES TO WATCH – UPCOMING SESSION
Very interesting development with the anemic demand for more US government paper - as the 5-year treasury auction yesterday may be key for the USD outlook going forward if foreigners continue to show reduced appetite for US debt. Another $9 billion of paper goes on the block today - this time in longer term TIPS notes. This development allowed the USD to weaken despite higher US interest rates. A bit surprising, though, to not see the JPY following through more as it is normally Asian buying that is associated with Treasury purchases.
Up today we have the US Trade Balance number for November - a woefully old number (if China can calculate a Dec. figure for Trade, why can't the US?) that will undoubtedly continue to show a desperately large deficit - though its chances of outdoing the record October number of almost -$69 Billion are doubtful. Still, the market expects about a -$66 Billion shortfall. How can the world continue to finance these kinds of numbers? It boggles the mind.
In the end, we need a break of the 1.2180 highs thus far in EUR/USD to get this weak USD trend moving again. If we do, we'll post new targets for the major crosses, starting with 1.2450 for EUR/USD. A simultaneous puncturing of 113.80 support in USD/JPY really builds a head of steam for the USD lower as well.
CAD traders - watch out for Canadian trade data out today as well - USD/CAD is in danger of failing even lower if we see anything much below 1.1550
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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