Greenback Looks To Sustain Gains Towards The Weekend.
Economical News
USD
The Commerce Department yesterday reported that GDP in the US rose to a 4.9% annual rate, up from last month's figure of 3.9%.
As a result, the US dollar rose Thursday against two of its major counterparts, the Euro and the Sterling. The U.S Dollar which has dropped overall by 11% this year, found a way yesterday to rally from $1.4769 per EUR from the $1.4841 it had hit the day before; it's most significant rise since Nov. 12. The US dollar increased to $2.0628 versus the Sterling, from $2.0823, and against the Japanese yen the greenback fell by 0.4% to 109.60, from 110.03.
GDP deflator's increased from 0.7% to 0.9%, above the estimate of 0.8%. US PCE index, an inflation gauge, remained at 1.7% in the third quarter as expected. US weekly jobless claims rose 22k to 352k, above the estimate of 332k.
In other news from yesterday, US new home sales fell from 770k to 728k in October, below the estimate of 750k. This confirmed the expectation that the nation's housing sector is slowing.
Today we will see several important US economic reports, including personal income and spending, PCE index, Chicago PMI, and construction spending. US personal income is expected to remain at 0.4% in October. Personal spending is expected to be released at 0.3%, a figure unchanged from last month. The day will be capped off with a speech by Federal Reserve Governor Kroszner who will finish up the weeks economic calendar.
EUR
The failure of equities to extend their gains in a meaningful way has weighed on all high yielding currencies including the EUR. The EUR and the GBP eased vs. the greenback as subprime concerns continued to spread from the US to European banks during last week. Yesterday, the EUR remained below 1.48 against the dollar, and the Sterling fell to as low as 2.06. The EUR weakness is mainly attributed to a broad base dollar recovery and to carry trades including EUR/JPY, giving back some of the sharp gains that it has incurred over the past two trading days.
Overall, the European currency has gained 11% this year versus the USD. However the strong EUR still concerns the ECB as its economy is heavily reliant on exports. So far there have been no noticeable indications that the strong EUR is dampening growth.
Today's European economic calendar is quite empty as we are only expecting CPI data and the GBP Consumer Confidence to be released. The expectations for the CPI release are currently standing at 2.7%, only 0.1% higher then the previous figure. On the contrary, the GBP Consumer Confidence is expected to drop to a -9 level, in comparison to the -8 in the past month. We believe that the outlook for the Euro in the near future will be more dependent upon US fundamentals then the Euro zone fundamentals because the pace of deterioration in the US might be sharper than its European counterpart.
JPY
Yesterday, at 11:50 GMT the Industrial Production Index was published in Japan. The report showed that Japan's industrial production rose in October as output climbed 1.6% from a month earlier. As a result, the Japanese Yen rose steadily and got stronger against most of the 16 major currencies. The Japanese Yen increased by 1.4% against the Sterling to a level of 226.01 from 229.13. The 13 nation currency dropped by 1% to 161.75 from 163.34.
Yesterday saw a busy news day from Japan as several indicators were published in Japan: Manufacturing PMI, Core CPI (consumer price index) y/y, Core Tokyo CPI y/y, Overall Household Spending y/y, and the Unemployment Rate.
The unemployment rate remained unchanged at 4% for the month of October. The rate climbed up from a nine-year low of 3.6% in July. Jobless rates stood at 4% in October, unchanged from September. Household spending also came back positive as it rose 0.6% from last month, as the Japanese economy has responded well to demand for its currency. Consumer prices in Tokyo, a leading measure of nationwide price trends, also rose 0.1% in November from a year earlier, in line with expected market trends.
As the week comes to a close, the Japanese economic calendar stays empty for Friday, as it looks toward news from the US and Europe.
Technical Analysis
EUR/USD
This pair has dropped nearly a hundred pips since yesterday but the momentum and RSI on the 4H chart are relatively flat indicating that the downward movement is stalling. This pair has nearly touched the 1.4700 over the last two days which indicates a break out of the steady upward channel that it has been trading on, therefore we could see this pair move even lower in the next few days. However with the 4H indicators remaining flat and bearish dailies, a short position on a high could maximize profit taking.
GBP/USD
Bollinger bands are tightened indicating decreased volatility. The Stochastic Slow has a positive slope indicating another possible move upwards. However this pair is at the bottom a channel, so traders should wait to see a breakout. Preferred strategy today will be to buy on lows and sell on highs.
USD/JPY
The dailies and the hourlies are bullish, so this pair is expected to continue its upward movement. This pair will now target the 111.00 level, so entering a long position on a dip will create a good opportunity for some profit taking.
USD/CHF
This pair has now breached the 1.1200 key resistance point and all indications are that this upward trend will continue. The RSI and momentum are very bullish, however traders should be careful of a dip but a long is still the preferred strategy.
Wild Card
Crude Oil
On the 4 H chart and the daily chart the Slow Stochastic is still deep in oversold territory but it has not yet crossed indicating that we should still see some downward movement. There is a good opportunity for Forex traders to still take some profits on a short position and maybe even enter an early long on the dip.
Market Trend
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
|---|---|---|---|---|---|---|
| Daily Trend |  |
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| Weekly Trend | |
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| Resistance | 1.4960 | 2.0800 | 111.80 | 1.1350 | 0.8985 | 0.7254 |
| 1.4900 | 2.0720 | 111.00 | 1.1290 | 0.8940 | 0.7231 | |
| 1.4830 | 2.0680 | 110.60 | 1.1230 | 0.8900 | 0.7200 | |
| Support | 1.4700 | 2.0600 | 109.60 | 1.1130 | 0.8800 | 0.7100 |
| 1.4660 | 2.0570 | 109.00 | 1.1100 | 0.8770 | 0.7060 | |
| 1.4600 | 2.0500 | 108.40 | 1.1075 | 0.8700 | 0.7000 |