Being contained by resistance of the upper border of the falling price channel on 4-hour chart, USDCHF pulls back from 1.0291, suggesting that a short term cycle top is being formed. Consolidation in a range between 1.0200 and 1.0291 is expected later today. Key resistance is now located at 1.0291, a break above this level will indicate that the fall from 1.0507 has completed at 1.0132 already, then the following uptrend could bring price back towards 1.0507 previous high.
By GCI Fx Research
Fundamental Outlook at 1500 GMT (EDT + 0500)
€
The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4335 level and was capped around the $1.4395 level. French President Sarkozy was quoted on 7 January as saying the global foreign exchange systemn is in a state of “disorder” and eurozone finance ministers today said Sarkozy “has a point.” G7 finance ministers will convene in northern Canada in early February and are expected to press China to liberalize its exchange rate regime further. The euro remains top-heavy on account of ongoing Greek fiscal problems. Dutch finance minister Bos today said the Greek government will need to address its budget problems without intervention from other European Union members. Greece’s draft budget for 2010 has its budget deficit falling below 3% of GDP by 2012 after having reached an estimated 12.7% last year. There are lingering concerns that Greece’s credit ratings could be slashed further and possibly make the country’s debt ineligible for collateral repurchase operations. The ECB is expected to restore its previous threshold of A- for collateral it will accept for funding operations later this year and Greece could in theory lose access to funding from the central bank. Germany’s IW Institute said Germany’s 2011 federal budget can sustain planned tax cuts if the government implements an aggressive consolidation plan this year. The European Central Bank today reported it will stop providing Swiss franc liquidity at the end of this month, the latest unwinding of its quantitative easing measures. Around €442 billion in funds from the ECB’s first emergency twelve-month operations will expire in June without the banks having an opportunity to “roll over” the funds automatically. In U.S. news, liquidity was dry during North American dealing on account of the U.S. market holiday and will return to normal overnight. Traders will pay very close attention to earnings data from Citigroup, Morgan Stanley, Bank of America, Goldman Sachs, and Wells Fargo this week. Euro bids are cited around the US$ 1.3885 level.
¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥90.60 level and was capped around the ¥91.05 level. Traders are paying very close attention to a funds scandal involving Prime Minister Hatoyama and the Democratic Party of Japan. This scandal has been brewing for several months but some traders believe the problems are worsening and could prevent the government from enacting needed reforms and budget agreements. Data released in Japan overnight saw November industrial production downwardly revised to +2.2% from +2.6% m/m. Bank of Japan lifted its economic assessment in four of Japan’s nine regions, noting the economy “picked up in all regions…many regions continued to point to the low level of economic activity.” BoJ Governor Shirakawa reported “The Bank of Japan recognized its is a crucial challenge for Japan’s economy to overcome deflation and return to a sustainable growth path with price stability. The central bank is aiming to maintain an extremely accommodative financial environment.” There is increasing speculation the central bank will extend its near-zero per cent interest rate policy and possibly ramp up fund injections into the economy. Group of Seven finance ministers are expected to discuss exchange rates in Canada when they convene on 5-6 February. The Nikkei 225 stock index lost 1.16% to close at ¥10,855.08. U.S. dollar offers are cited around the ¥94.75 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥130.05 level and was capped around the ¥130.95 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥148.90 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥88.75 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8268 in the over-the-counter market, down from CNY 6.8269. China International Capital Corporation reported China attracted US$ 48.7 billion of “hot money” in December, the largest amount in eight months. Some economists are predicting China’s inflation rate could accelerate to as high as 8% in 2010, requiring probable monetary tightenings by People’s Bank of China. PBoC last week decided to lift reserve requirements at commercial banks by 50bps from 15.50% to 16.00%, effective today. It is expected that China’s consumer price inflation may have expanded by as much as 1.4% last month. China is expected to release December inflation, investment, industrial output, retail sales, and Q4 gross domestic product data on Wednesday.
₤
The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.6375 level and was supported around the $1.6250 level. Sterling gained ground after Rightmove reported January house prices climbed +0.4% this month. At the same time, there was an increase in the number of people looking for new property and this added to cable’s gains. Bank of England Monetary Policy Committee member Miles today saw U.K. banks should hold triple the amount of equity. Data released in the U.K. last week saw the November leading indicator index decline 0.9%. Bank of England Monetary Policy Committee member Posen last week called for additional business lending while MPC member Barker said she does not expect the economy to gather steam in the first six months of the year. Barker also indicated she sees first half growth prospects as “patchy.” MPC member Sentance moved the markets last week when he said “At some point you have to say we have increased the amount of stimulus enough. It doesn’t mean you are going to withdraw it but you don’t have to keep adding to it. The Bank is approaching the point where we need to hold back and wait and see how that’s flowing into the recovery.” Cable bids are cited around the US$ 1.5730 level. The euro lost ground vis-à-vis the British pound as the single currency tested bids around the ₤0.8780 level and was capped around the ₤0.8830 level.
CHF
The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0235 level and was capped around the CHF 1.0290 level. Swiss National Bank President Hildebrand reported he will “resolutely prevent” an “excessive” strengthening of the franc. He also said SNB must “carefully and gradually” normalize its monetary policy. Data released in Switzerland last week saw December producer price inflation up 0.1% m/m and decline 2.5% y/y. The OECD today called on Switzerland to keep interest rates unchanged until the economic recovery takes hold. U.S. dollar offers are cited around the CHF 1.0420 level. The euro moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.4735 level while the British pound gained ground vis-à-vis the Swiss franc and tested offers around the CHF 1.6790 level.
Forex Daily Market Commentary provided by GCI Financial Ltd.
GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.
DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.
By CountingPips.com
The U.S. dollar and Japanese yen have fallen lower today in the forex markets on the U.S. federal holiday celebrating Martin Luther King Jr. The U.S. stock markets are closed today and trading in the forex market has been on light volumes.
The US Dollar has been declining versus the euro, British pound, Japanese yen, Australian dollar, Canadian dollar, Swiss 
franc and the New Zealand dollar as of 2:01 pm EST in the U.S. session. The British pound’s strength has continued into this week as the GBP has advanced on the dollar today by roughly 40 pips after gaining on the dollar by almost 250 pips last week. The New Zealand and Australian dollars have also gained by approximately 40 pips on the dollar today while the Canadian dollar and Swiss franc have advanced by over 30 pips.
The Japanese yen, meanwhile, has also been on the defensive today versus the other majors will declines against the euro, British pound, Canadian dollar, Australian dollar, New Zealand dollar and the Swiss franc while the JPY has gained against the U.S. dollar. Last week, the Japanese yen advanced against all of the other majors despite calls for the currency to decline from Government officials.
Normal forex trading will kick off again on Tuesday with a number of economic releases coming out. See the economic highlights below.
Tuesday, January 19th:
Time Release
9:30 GMT GBP Consumer Price Index
9:30 GMT GBP Retail Price Index
10:00 GMT German ZEW Survey
13:30 GMT CAD Leading Indicators
14:00 GMT Bank of Canada Interest Rate Decision
14:00 GMT US Net Long-term & Total Net TIC Flows
21:45 GMT NZD Consumer Price Index
By Fast Brokers – The USD/JPY is consolidating above Friday lows as we recognize consolidating patterns across the FX market. The U.S. markets are closed today, meaning volume could be sparse today. However, we have seen volatility pick up on low volume, so investors may want to keep an eye on the markets. Although the USD/JPY’s technicals deteriorated last week, BoJ Governor Shirakawa reiterated the central bank’s intent to fight deflationary pressures. Therefore, it seems the BoJ’s loose monetary policy could be in place for quite some time. Shirakawa’s dovish monetary stance could limit downward movements in the USD/JPY for the near-term. Furthermore, should conditions really deteriorate for the USD/JPY Shirakawa and Kan could become more vocal in defense. On the flipside, should investors make a return to the risk trade the USD/JPY could really benefit since investors are anticipating a loose monetary stance from the BoJ. Meanwhile, activity should pick up in the FX markets with pricing data on the way from the UK and U.S. along with China’s GDP and Industrial Production data during Thursday’s Asia trading session. As a result, investors could have the ammo necessary for making directional commitments, meaning investors should keep a close eye on technicals of the USD/JPY and its correlations as the week wears on.
Technically speaking, the USD/JPY has our 1st and 2nd tier uptrend lines serving as technical cushions along with intraday lows and the highly psychological 90 level should it be tested. As for the topside, the USD/JPY faces multiple downtrend lines along with 1/14 and 1/12 highs.
Present Price: 90.74
Resistances: 90.75, 90.91, 91.15, 91.38, 91.55, 91.84
Supports: 90.54, 90.37, 90.24, 90.05, 89.86, 89.72
Psychological: 90, January highs and lows
(click to enlarge)
Market Commentary provided by Fast Brokers.
Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.
Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.
By Fast Brokers – The Cable is trading off of intraday highs after setting new January highs. The Cable continues to hold strong technically after the Pound outperformed last week amid positive UK data flows. However, the Cable has remained within the confines of our trend lines as we notice range-bound behavior in the EUR/USD and gold as well. This behavior tells us that investors are still having a directional debate due to the negatively mixed U.S. economic data so far this month. However, activity should heat up as the weak progresses. The earnings season will kick into first gear and we’ve got a slew of economic data on deck. The UK will release CPI data along with the BoE’s Inflation Letter. The BoE seems intent on using inflation as a barometer guiding its monetary policy. Therefore, a larger than expected increase in prices could boost the Cable as investors speculate a more hawkish monetary stance from the BoE. On the other hand, sluggish pricing data could take some of the wind out of the Pound’s sails and test the resilience of our uptrend lines. Additionally, the U.S. will release PPI and Building Permits data on Wednesday followed by China’s GDP and Industrial Production numbers during Thursday’s Asia trading session. Hence, volatility could really pick up as the week wears on.
Technically speaking, we recognize the Cable’s trend lines are approaching inflection points, a signal that heightened volatility could be approaching. Meanwhile, the Cable is still trading above 1/04 and 1/15 lows with multiple uptrend lines serving as technical cushions. As for the topside, the Cable faces multiple downtrend lines along with intraday and 12/16 highs. Our 4th tier downtrend line runs through December ’09 highs. Therefore, an eclipse of our 4th tier could yield a more sizable leg up.
Present Price: 1.6310
Supports: 1.6281, 1.6262, 1.6238, 1.6214, 1.6184, 1.6161
Resistances: 1.6318, 1.6340, 1.6360, 1.6379, 1.6407, 1.6431
Psychological: 1.60, 1.65, January highs and lows
(click to enlarge)
Market Commentary provided by Fast Brokers.
Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.
Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.
By Fast Brokers – The EUR/USD is consolidating above Friday lows as markets take a breather after last week’s large pullback in the Euro. We notice the EUR/GBP and gold are hunkering within their trading ranges as well, implying investors are waiting for further fundamental data before making a more definitive directional decision. The EU will release its ZEW Economic Sentiment data tomorrow along with UK CPI and an Inflation Letter from the BoE. Furthermore, we’ve got a slew of important data from the U.S and China on Wednesday. Hence, activity could really pick up as the week progresses and we could witness a break in the EUR/USD from the comfort of its trading range. That being said, although the EUR/USD has had a downward inclination lately, the currency pair has managed to bottom above 1/8 lows and our 2nd tier uptrend line. Therefore, the EUR/USD has the potential to pop back into its uptrend should upcoming fundamentals support the risk trade. On the other hand, the EUR/USD is presently hovering close to some key technical supports. Therefore, the currency pair could take another sizable step down should technicals deteriorate further.
Technically speaking, the EUR/USD has bottomed nicely above 1/8 lows and our 2nd tier uptrend line. Hence, although the uptrend is presently in a weak state it’s still in play. That being said, the EUR/USD has our 1st and 2nd tier uptrend lines serving as technical cushions along with December ’09 lows should they be tested. Our 1st tier uptrend line runs through January lows. Hence, a failure of our 1st tier could yield a more protracted leg down. As for the topside, the EUR/USD faces multiple downtrend lines along with 1/7, 1/5, and 1/14 highs. Furthermore, the psychological 1.45 level could serve as a technical obstacle should it be tested.
Present Price: 1.4372
Resistances: 1.4400, 1.4427, 1.4460, 1.4474, 1.4499, 1.4520
Supports: 1.4351, 1.4328, 1.4310, 1.4295, 1.4270, 1.4233
Psychological: 1.45, December highs and January lows
(click to enlarge)
Market Commentary provided by Fast Brokers.
Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.
Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.
By Anton Eljwizat – In last week’s trading, the EUR/GBP experienced much bearishness, as it now stands at 0.8790. However, it seems that this trend may be coming to an end. I will illustrate below that the EUR/GBP may very well be heading for a reversal. Forex traders have the opportunity to wait for the upward breach on the hourlies and go long in order to ride out the impending wave.
• The technical indicators that are used are the William Percent Range, Relative Strength Index (RSI), and MACD.
• Point 1: The Relative Strength Index (RSI) indicates that the price of this cross currently floats in the oversold territory, signaling upward pressure.
• Point 2: The Williams Percent Range has peaked near at the -100 marker, which means that there may actually be a strong level of upward pressure.
• Point 3: The MACD indicates an impending bullish cross, signaling that the next move may be in an upward direction.
EUR/GBP 8-Hour Chart
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.
Source: ForexYard
After consistently dropping last week, the Dollar’s downtrend appears to be halted. The Dollar is currently rising against the Euro, and considering Crude Oil’s surprising drop, it seems that the Dollar has the potential to rise further. However, as a week packed with economic publications from the U.S. begins, it seems that the direction of the Dollar will be determined by the results of this data.
The Dollar dropped against most of the major currencies during last week’s trading session. The Dollar saw a 200 pips slide against the Yen, and a similar drop against the Pound. Throughout most of the week, the Dollar fell against the Euro as well. Yet it managed to rebound close to the weekend.
The Dollar’s bearish trend came as a result of several poor U.S. economic indicators. The U.S. Trade Balance showed that the U.S. deficit has widened more than expected in November, mainly due to increased Oil imports. This shows that the imports are climbing in a faster pace than exports. Investors saw this result as a warning sign that the economy is yet to be recovering, and thus the Dollar began to slide. The U.S. Retail Sales data which were also released last week showed that the total sales at the retail level have decreased by 0.3%, failing to reach expectations for a 0.4% rise. This has added to investors woes that the American economy might not reach out of recession as soon as expected. In general, it appears that the Dollar becomes more fragile than usual lately, and the impact of each news release from the U.S. economy is becoming greater than usual.
As for the week ahead, several major economic publications are expected from the U.S. Traders are advised to follow the Long-Term Purchases on Tuesday, the Building Permits and the Producer Price Index on Wednesday and the weekly Unemployment Claims on Thursday.
The Euro slid against all the major currencies during last week’s trading. The Euro started the week with a rising trend vs. the Dollar, however as the week progressed the trend reversed, and the Euro fell. The Euro also dropped over 300 pips against the Yen and about 200 pips against the Pound.
The main reason for the Euro’s drop appears to be the European Central Bank (ECB) decision to leave Interest Rates at 1.00%. This is clearly shown on the EUR/USD pair. Until Thursday, the day of the Minimum Bid Rate announcement, the Euro kept strengthening against the Dollar. However, as soon as the ECB announced that the Euro-Zone Interest Rates for January remains at 1.00%, the EUR/USD began to fall, and dropped from 1.4515 to 1.4335. It seems that many investors have expected the ECB to hike rates, mainly due to the extraordinary German economic recovery lately, and when the rates remain at 1.00%, they have closed EUR/USD long positions. This has also led the Euro to drop against the rest of the major currencies as well.
Looking ahead to this week, the most interesting news publication from the Euro-Zone seems to be the German ZEW Economic Sentiment on Tuesday. This is a survey of German institutional investors and analysts who are asked to rate the next 6-month outlook for Germany. If the end result will reach over 50.0 it is likely to support the Euro.
The Yen saw an extremely bullish session during last week’s trading. The Yen rose close to 200 pips again the Dollar, and gained over 300 against the Euro. The Yen strengthened against the Pound as well.
Two main reasons have lead to the Yen’s recovery this week. The first one was the relatively positive data that was released from the Japanese economy. The most significant data was the Current Account, which showed that during November, the Japanese surplus grew by 76.9%. The Japanese economy relies greatly on its exports, and thus extremely positive data such as that one is very likely to support the Yen. The second reason that led to the Yen’s bullish trend was the weakening of its rivals. The Dollar and the Euro have dropped against most of the major currencies last week, and when the Euro and the Dollar are dropping, their main counterpart – the Yen – is likely to strengthen as a result.
As for this week, a batch of data is expected from the Japanese economy. The most interesting publication that traders are advised to focus on is the Tertiary Industry Activity on Tuesday. This report measures the change in the total value of services purchased by businesses during November. A positive figure will be another indication that the Japanese economy is recovering, and is likely to support the Yen.
Crude Oil continued to tumble during last week’s trading session. A barrel of Oil was traded for $84 as last week took off, yet by Friday, crude oil saw a steep drop, and a barrel of crude oil is now traded for $77.80.
It seems that speculations claiming that supplies are more than enough to complete the enhanced demand for energy due to the global recovery. For several weeks Crude Oil saw a bullish trend as demands for energy kept increasing. However, as a barrel of Oil reached $84, it seemed that supplies have reached over the demands, and thus a decline in Oil’s value was imminent. In addition, the strengthening of the Dollar against the Euro also contributed to the weakening Oil. Crude Oil is valued in Dollars, and thus when the Dollar rises, Crude Oil usually drops as a result.
As for the following week, traders are advised to follow the main publications from the U.S. and the Euro-Zone as they are likely to impact Oil’s value. In addition, traders should also focus on the Crude Oil Inventories scheduled for Thursday, as this indicator tends to have an immediate impact on the market.
A reversal of the recent bearish trend for the pair may be expected today as the 4 hour RSI is floating in the oversold territory and an impending bullish cross is evident on the 8 hour and daily Slow Stochastic. Furthermore, the 8 hour RSI is floating near the oversold territory. Going long for the day may be advised.
The pair maybe experiencing some bearishness today as the hourly and 8 hour RSI are floating in the overbought territory and the hourly and daily charts’ Slow Stochastic is exhibiting a fresh bearish cross. Going short for the day may be advised.
The daily and 8 hour charts’ Slow Stochastic is exhibiting a fresh bullish cross and the 4 hour and 8 hour RSI are floating in the oversold territory. Going long for the day may be a good choice.
The pair may be seeing a bearish correction today as the 4 hour and 8 hour RSI are floating in the oversold territory and the 8 hour chart’s Slow Stochastic is exhibiting a fresh bearish cross. Going short for the day may be advised.
The pair’s hourly, 4 hour and 8 hour RSI are floating near the overbought territory while a bearish cross is evident on the daily and 8 hour charts’ Slow Stochastic. Furthermore, an impending bearish cross is evident on the hourly and 2 hour MACD. Forex traders are advised to go short for the day.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.
Riskier assets did not fare well this week with the equity market, the commodity markets selling off and the dollar rallying. All the trepidation came to a head on Friday, after JP Morgan announced that although earnings were very strong, the future might have a number of pot holes. The S&P 500 lost its earlier gains and closed the week with a loss of 1%. The negative U.S session had a direct impact on the Forex market and sent the Euro was down 0.5 of a big figure for the week, after a retracement of almost .015 on at the end of the week.
The beginning of the week started on a strong note. On Monday China announced a 17.7% year-over-year surge in exports, which was better than expected. The news is reflective of the potential strength in its major trading partners. One must note that while headlines are focusing on exports, their imports are as important. Imports surged almost 56% year-over-year showing that the emerging market is holding up despite the global downfall. Imports from Australia and Malaysia, for example, have doubled.
The PBOC (Bank of China) made a number of moves that targeted rate tightening last week. First, following up last week’s 4 basis point (BP) tweak of 3-month bill rates, the PBOC sold benchmark 1-year bills at 1.8434%, an 8 basis points increase from the rate that has prevailed since August. In addition, the PBOC has been draining liquidity from the banking system to reduce access money within the system. On Friday the bank sold CNY200 billion 28-day bills in what appears to be the largest repo operation since 2004. China also raised reserve requirements on the nation’s large lenders by 50 basis points (half a percent), the first increase since 2008. All these operations now seem to be pointing to a tightening bias.
Also in Asia, Japanese exports recorded their smallest annual decline in 14 months in November, more evidence of the recovery in global trade. That helped widen their current account surplus for the fourth straight month. Exports fell 7% from a year earlier, after a 24.6% drop in October, while imports dropped 18.2%. The surplus widened 76.9% to 1.1 trillion yen ($11.9 billion). Exports to Asia actually recorded their first annual gain since November 2008, attesting to the strength of the recovery in the region. Japan’s merchant confidence improved for the first time in three months in December. The Cabinet office’s index climbed to 35.4 from 33.9 in November.
On Wednesday US data caught the headlines due to the release of their Beige Book. According to the FED, U.S. economic conditions continued to improve slightly at the end of 2009, but weak labor and real estate markets are keeping activity low. In its latest beige book report, the Fed said 10 districts reported some increased activity or improvement in economic conditions, while two, Philadelphia and Richmond, reported mixed conditions. The beige book is a summary of economic activity prepared for use at the central bank’s next policy setting meeting Jan. 26-27.
On Thursday U.S. retail sales fell in December unexpectedly, signaling restraint by consumers during the holidays as the economy wrestles with high unemployment. Retail sales declined 0.3%, the Commerce Department reported. Economists surveyed forecast a 0.5% increase.
November sales, however, were adjusted upward, to a 1.8% increase from a previously reported 1.3% gain. October sales also rose strongly, up 1.2%. Excluding the car sector, all other retail sales in December fell 0.2%. Economists expected a 0.3% increase.
On Friday, the markets were required to absorb a wave of data. U.S. consumer prices continued to rise at a moderate pace in December 2009 from the previous month, indicating that a soft economic recovery is keeping inflation contained. The seasonally-adjusted consumer price index rose just 0.1% last month, following an unrevised monthly 0.4% increase in November. The core CPI, which strips out volatile food and energy prices, also advanced by 0.1% in December, after a flat reading in November. Industrial production rose 0.6 percent in December as unusually cold weather helped energy utilities offset a small drop in manufacturing.
The mixed picture from Friday’s report by the Federal Reserve shows that the economic recovery remains uncertain, as consumers and businesses were reluctant to spend, to spur the production of more factory goods.
From a technical point of view the S&P 500 Index was able to hold it double support trend line, despite Friday’s sell-off session.
Forex
The Australian dollar held onto relative strength last week after Australian job creation was stronger than expected in December. Job growth increased for the fourth straight month, and is fanning speculation about further RBA rate hikes. Employment rose by 35.2K from a month earlier, more than three times the median economists’ estimate of 10K with part-time jobs jumping 27.9K. Additionally, the jobless rate fell to 5.5% from 5.6% in November. The AUD/USD is now trading at major resistance, receiving support from its secondary trend line. Monday’s session could lead this pair to either direction, with a break of either trend line signaling an entry.
Other pairs were also hammered by Friday’s data, sending the Dollar higher against counterparts. The EUR/USD dropped severely during the session and completed wave B or its Elliot wave pattern. A break below trend line support could lead this pair to lower levels.
Week Ahead
Next week the markets will be watching the Japanese Industrial Production on Monday, followed by Consumer Confidence on Tuesday. Also on Tuesday will be UK Consumer Prices and UK Construction Output. Consensus estimates for CPI are for a Y/Y gain of 2.9%. In addition the EMU ZEW survey and the BOC interest rate decision will have an impact on the intraday session. On Thursday, the day leads off with Japan Leading Economic Index, which is followed by the US Leading Indicators and the Philadelphia Fed survey. On Friday, EMU PMI leads off followed by EMI Industrial Orders.
Daily Forex Market Analysis provided by eToro
Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don’t trade with money you can’t afford to lose.
Two main trends dominated the market during last week – the bullish Yen and the bearish Crude Oil. The Yen strengthened against all the major currencies, yet this was mainly due to the weak Dollar and Euro. The more surprising development was the bearish price of Oil.
For several weeks it seemed that Crude Oil was on its safe way to reach $100 a barrel; however, starting last week, Crude Oil has been consistently dropping, and is currently trading at $77.80 a barrel. It seems that if the Dollar will continue to strengthen against the Euro, Crude Oil even has the potential to drop towards $70 a barrel, especially as global recovery seems slower than what was lately expected.
Today looks to be a relatively weak news day. The most significant publication seems to be the Canadian Foreign Securities Purchases, scheduled at 13:30 GMT. The Foreign Securities Purchases report measured the total value of domestic stocks, bonds and money-market assets purchased by foreigners during November. If the end result will reach above the forecasted 5.23B figure, it is likely to support the CAD.
