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Forex Trading StrategiesJPY suddenly weak again as bad US Philly Fed and Housing Data fails to hit the USD. Will today finally see a range breakout?
USD/CAD in massive reversal yesterday ahead of Monday's election.
MAJOR HEADLINES – PREVIOUS SESSION
• US Weekly Energy Inventories show large crude and gasoline build
• US Philly Fed for January out at 3.3 vs. 13.0 expected
• New Zealand Nov. Retail Sales out at +0.9% vs. +0.4% expected
• Australia Q4 Export/Import Prices at 2.2%/0.4%, respectively
JPY reversed from strength to weakness yesterday and the USD reversed from weakness to strength. NZD saw a relief rally.
THEMES TO WATCH – UPCOMING SESSION
The USD has survived a number of fundamental negatives being thrown at it over the last 24 hours - negative housing data, spiking crude prices, a negative Philly Fed - and yet keeps managing to pull back to the stronger end of the range - suggesting there are suprisingly strong and persistent bids out there. Definitely a wait and see, however, on whether those bids can push the USD strong enough to take out key resistance levels that have kept it in the range for two and a half weeks now.
JPY has turned from strength to weakness suddenly since the early North American session yesterday. The weakness there may be caused by concerns over the stability of the Japanese stock market with the Livedoor scandal, a bank of Japan that continues to announce it will provide lots of liquidity (and widening yield differentials with rate rises elsewhere in the world - JGB's were sharply up from their open overnight), and the continued rise in oil prices (Japan imports all of its oil and has seen a sharp rise in electricity usage due to a very cold winter this year).
But the most spectacular move yesterday was the reversal in USD/CAD. We leaned strongly to an upside resolution there - and seemed to be getting it as the market was likely over positioned and stops were taken out on the break above 1.1750. But the break didn't hold and the fresh positions put on after the break were sent bolting for the exits late yesterday. Needless to say - this is a sign that CAD strength is more likely to continue - though one might want to tread carefully with the election up on Monday (the larger the margin of the Conservative victory, the better for CAD theoretically)
Today offers few points of interest on the calendar, with the highlights being the UK Retail Sales at 09:30 and US University of Michigan Confidence later in the day at 14:45 GMT. The latter may disappoint if we are to take the huge drop in the latest weekly US confidence results into consideration.
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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