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Forex Trading StrategiesMarket uncertainty continues. JPY was weaker still on Japan stock meltdown overnight - but fighting back by early European session
EUR/USD remains in a vice grip between 1.2000 and 1.2180. Lots of US data up today.
MAJOR HEADLINES PREVIOUS SESSION
UK CPI for December out at 0.3% vs. 0.4% expected - core CPI up 1.3% year-on-year
Canada Leading Indicators for December out at 0.5% vs. 0.4% expected
US Empire Manufacturing for January out at 20.1 vs. 21.0 expected and 26.3 in December
US Industrial Production for December out at 0.6% vs. 0.5% expected
US Capacity Utilization for December out at 80.7% vs. 80.5% expected
New Zealand Consumer Prices for Q4 out at 0.7% vs. 0.8% expected
US Weekly Consumer Confidence dropped sharply to -13 vs. -8 the previous week
UK RICS House Price Balance out at 8% as expected in December
Japan Leading Economic Index for Nov. adjusted down to 54.5% vs. 63.6% expected, but Coincident Index adjusted up to 70.0% vs. the original 66.7% estimate
JPY was weaker still overnight, but most of the losses were recovered by the early European session.
THEMES TO WATCH UPCOMING SESSION
It would seem the currency market would face a bit of a shakeup today with all of the nervousness elsewhere - especially the kind of uncertainty developing due to plummeting stock markets. The JPY initially took a beating on the developments in the Japanese stock market overnight where the Nikkei was down over 4% at one point. But by an hour after an early close brought on by halted trading, the JPY was faring remarkably well considering the hubbub- is this a sign that JPY will strengthen at least short term? US stock markets are also off heavily overnight on earnings news from major companies and US treasuries are pushing up against multi-month highs (and lows in yield). Meanwhile, the geopolitical scene features a belligerent Iran and spiking oil prices....
All of this adds up to a picture that is not very USD bullish - but the USD hasn't shown signs of consistent weakness because the JPY has been the currency in focus over the last week as important levels were tested and rejected. The market may have to commit on the USD view soon, however, after all of the nasty gyrations in tight ranges of late - especially in the European/US pairs. We remain bearish the USD until proven otherwise - with a close below 1.1950 a "capitulation level" for that view.
US CPI is up today as well as the TICS data (Net Foreign Securities Purchases) for November and the Fed's beige book. That last release will be an interesting test for how much the currency market cares about the last few hikes from the Fed. The TICS data is tremendously important - but the data is so old that it really has no right to move the market much - as it is the real capital flows now that are important and not what happened way back in November.
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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