By Mercaforex
USD:
The USD was steady on Friday as it battled within a tight range against the major currencies. The Consumer Sentiment report from the University of Michigan before going into the weekend surprised analysts as it came in far below expectations with a reading of 66.0 compared to the forecasted number of 71.1. The Prelim Consumer Sentiment figure was also worse than the previous outcome and these figures may have put a cramp into the U.S. stock markets which turned in a flat performance for the day after a week of solid gains. There will be plenty of data from the States today with Retail Sales statistics and the Empire State Manufacturing Index. The Core Retail Sales estimate carries an estimated gain of 0.4%, while the Manufacturing reading from the New York Fed is expected to decline.
The critical issue for investors regarding the USD and the stock markets today will be the data from Retail Sales, this as the Christmas holiday season is fast approaching. The impact of high unemployment in the U.S. and its direct affect on the spending habits of consumers will not be taken lightly by the marketplace. Investors have boosted the value of stock prices since March of this year as they have fought back from the financial crisis yet doubters remain and one of the key points they have spoken about is revenues. The GDP in the U.S. is largely geared towards the impetus of the American public’s pocketbooks. If the people of the States continue to fear that their job situations are not stable they certainly will be less likely to buy big ticket items. Tomorrow the U.S. will release its CPI and Industrial Production figures. The ‘story’ of unemployment seems to be gaining scrutiny in the States and if this continues early this week, we could see pressure mount on what up until now has been a strong Wall Street rally and the USD could possibly recover some lost ground under this scenario.
EUR:
The EUR maintained the higher part of its range against the USD on Friday as the European currency handled the rather lackluster GDP publications from the continent calmly. Preliminary GDP numbers from Germany produced a result of 0.7%, which was slightly below the expectation of 0.8%. However, the French and Italian reports both fell below their estimates. Also the French released their CPI figures and the numbers continued to highlight that inflation remains hard to find and that deflation could still be lurking in the shadows. Following that note, Europe will bring forth its broad CPI statistics today and they are anticipated be rather tame concerning inflation too. Tomorrow will be a relatively light day of data from the continent and this will leave investors to contemplate the data they have seen the past two trading days. The EUR has done nothing but turn in a remarkably strong value the past few months against the USD, but this has had more to do with risk appetite. The question some traders may be beginning to ask, is if the worm is going to turn anytime soon?
GBP:
The Sterling showed its footing on Friday as it quietly kept its pressure on the USD and finished the session nears its highs. There was little in the way of economic data from the U.K. on Friday and today will be quiet too. Bank of England Deputy Governor Paul Tucker is scheduled to speak in Brussels today, but it is unlikely that he will offer any new definitive tidbits taking into consideration the BoE’s rather straightforward report last week on the state of the economy. Tomorrow the Bank of England’s Inflation Letter will be published and on Wednesday the MPC’s Meeting Minutes will be brought forth. Due to the quiet nature of data today and the two reports coming out the over the next couple of days, we could see a rather cautious day of trading for the GBP. The Sterling has shown again that its range is a strong one and it certainly seems to have pushed to the side Mervyn King’s comments about his desire for a weaker GBP for the short term.
JPY:
The JPY gained slightly on the USD late on Friday as the currency pair continued their rather cautious trading pattern. Gold however broke into new ground as it found its way to more powerful heights. Gold continues to find takers while its charges forward to record values. Speculative or not the Gold train continues to churn and it may be a very dangerous beast to stand in front of taking into consideration the famous axiom ‘the trend is your friend’.
What Will The Dollar Do Next?
SPX/USD:
Friday’s open saw us trading 5 points lower, but after the first half hour the market pulled itself together and started to push higher. While we did close higher on the day the trading day as a whole was not all too significant. What I expected to be another showing of dollar strength quickly became another down day for the greenback. This of course led to strength in various other markets. On that level, the SPX underperformed on Friday, and as such, I watched it close with a raised eyebrow (I.E. questioning what the lack of strength signalled) Friday’s candle is an inside candle, and if Monday breaks lower then I expect us to try and fill the gap created last week, and move down to at least 1070. Support 092.6, 1087.4, 1081.5, 1077, 1071.5.1059.3 1052.4, 1045.5, 1029.4, 1019.6, 1009.1, 992.25 Resistance 1093.8, 1097.8, 1101.4, 1105.4, 1132.2, 1153.8
XAU/USD:
Dollar weakness continued to fuel strength in the precious metal market, pushing gold to just $4 off its record high. We tested support of 1101.6, and the effect was the same as falling off a cliff with a bungee cord attached. As we trade around 1118, let’s take a look at how well this trade is playing out on the weekly chart. We had mentioned how it was necessary to hold over 1032 on the close three weeks ago. After that was accomplished the follow through in this trade has been spectacular. If you were able to get in, and hold it, this was a $70-$90 trade in gold. I promise you that fortunes have been made and lost over the last two weeks. In the meantime, while there is room for retracement, and we may enter a consolidation phase here, there is still great potential in this market. We have to keep playing it on the long side for now. Support 1111.14, 1100.30, 1104.5, 1100, 1096.15, 1092.87, 1087.65, 1081.05, 1078.37, 1070.6, 1066.1, 1051.3, 1046.7 Resistance 1118.75, 1122.82….
GBP/USD:
On the 10th of November I had suggested that a selling tail on the weekly chart would not be the type of signal that would exude great strength in the Sterling Market. While it’s not the worst type of candle to see, it’s clear that the market is somewhat unsure of where it wants to go next. Dollar strength will be a large factor over the coming week, and I expect this currency to trade lower if we even hint at a rally in the greenback. In the meantime we have found some nice support around 1.6515. It will be important to hold that level, as otherwise this market could quickly find itself at 1.62, or even 1.57. Keep trading the channel and maintaining a vigilant eye on the ever important American Dollar. Support 1.6515, 1.6485, 1.6249, 1.6119, 1.5776 Resistance 1.6741, 1.6842, 1.7042
EUR/USD:
Confirming what we see in the Pound, when studying the Euro weekly chart we can see a nice selling tail. We approached previous highs of 1.5060, (succeeded only in reaching 1.5050) and instead of blowing higher like we had expected, this currency took a moment to collect its thoughts and decide whether it’s truly ready for what lies above resistance. I am not putting out a long recommendation on the Euro as I expect it trade lower this week. However, it has been trading in an uptrend for most of 2009, and continues to do so. So, if we do retrace to about 1.4700, that would be a good time to buy once again. In the meantime patience is a virtue and will standing aside could save you from being chopped up in the market noise until we can re-establish the momentum upwards. Support 1.4918, 1.4844, 1.4810, 1.4701, 1.4683, 1.4626 1.4449 Resistance 1.5020, 1.5062, 1.5144, 1.5284, 1.5343, 1.546
USD:
The USD was steady on Friday as it battled within a tight range against the major currencies. The Consumer Sentiment report from the University of Michigan before going into the weekend surprised analysts as it came in far below expectations with a reading of 66.0 compared to the forecasted number of 71.1. The Prelim Consumer Sentiment figure was also worse than the previous outcome and these figures may have put a cramp into the U.S. stock markets which turned in a flat performance for the day after a week of solid gains. There will be plenty of data from the States today with Retail Sales statistics and the Empire State Manufacturing Index. The Core Retail Sales estimate carries an estimated gain of 0.4%, while the Manufacturing reading from the New York Fed is expected to decline.
The critical issue for investors regarding the USD and the stock markets today will be the data from Retail Sales, this as the Christmas holiday season is fast approaching. The impact of high unemployment in the U.S. and its direct affect on the spending habits of consumers will not be taken lightly by the marketplace. Investors have boosted the value of stock prices since March of this year as they have fought back from the financial crisis yet doubters remain and one of the key points they have spoken about is revenues. The GDP in the U.S. is largely geared towards the impetus of the American public’s pocketbooks. If the people of the States continue to fear that their job situations are not stable they certainly will be less likely to buy big ticket items. Tomorrow the U.S. will release its CPI and Industrial Production figures. The ‘story’ of unemployment seems to be gaining scrutiny in the States and if this continues early this week, we could see pressure mount on what up until now has been a strong Wall Street rally and the USD could possibly recover some lost ground under this scenario.
EUR:
The EUR maintained the higher part of its range against the USD on Friday as the European currency handled the rather lackluster GDP publications from the continent calmly. Preliminary GDP numbers from Germany produced a result of 0.7%, which was slightly below the expectation of 0.8%. However, the French and Italian reports both fell below their estimates. Also the French released their CPI figures and the numbers continued to highlight that inflation remains hard to find and that deflation could still be lurking in the shadows. Following that note, Europe will bring forth its broad CPI statistics today and they are anticipated be rather tame concerning inflation too. Tomorrow will be a relatively light day of data from the continent and this will leave investors to contemplate the data they have seen the past two trading days. The EUR has done nothing but turn in a remarkably strong value the past few months against the USD, but this has had more to do with risk appetite. The question some traders may be beginning to ask, is if the worm is going to turn anytime soon?
GBP:
The Sterling showed its footing on Friday as it quietly kept its pressure on the USD and finished the session nears its highs. There was little in the way of economic data from the U.K. on Friday and today will be quiet too. Bank of England Deputy Governor Paul Tucker is scheduled to speak in Brussels today, but it is unlikely that he will offer any new definitive tidbits taking into consideration the BoE’s rather straightforward report last week on the state of the economy. Tomorrow the Bank of England’s Inflation Letter will be published and on Wednesday the MPC’s Meeting Minutes will be brought forth. Due to the quiet nature of data today and the two reports coming out the over the next couple of days, we could see a rather cautious day of trading for the GBP. The Sterling has shown again that its range is a strong one and it certainly seems to have pushed to the side Mervyn King’s comments about his desire for a weaker GBP for the short term.
JPY:
The JPY gained slightly on the USD late on Friday as the currency pair continued their rather cautious trading pattern. Gold however broke into new ground as it found its way to more powerful heights. Gold continues to find takers while its charges forward to record values. Speculative or not the Gold train continues to churn and it may be a very dangerous beast to stand in front of taking into consideration the famous axiom ‘the trend is your friend’.
What Will The Dollar Do Next?
SPX/USD:
Friday’s open saw us trading 5 points lower, but after the first half hour the market pulled itself together and started to push higher. While we did close higher on the day the trading day as a whole was not all too significant. What I expected to be another showing of dollar strength quickly became another down day for the greenback. This of course led to strength in various other markets. On that level, the SPX underperformed on Friday, and as such, I watched it close with a raised eyebrow (I.E. questioning what the lack of strength signalled) Friday’s candle is an inside candle, and if Monday breaks lower then I expect us to try and fill the gap created last week, and move down to at least 1070. Support 092.6, 1087.4, 1081.5, 1077, 1071.5.1059.3 1052.4, 1045.5, 1029.4, 1019.6, 1009.1, 992.25 Resistance 1093.8, 1097.8, 1101.4, 1105.4, 1132.2, 1153.8
XAU/USD:
Dollar weakness continued to fuel strength in the precious metal market, pushing gold to just $4 off its record high. We tested support of 1101.6, and the effect was the same as falling off a cliff with a bungee cord attached. As we trade around 1118, let’s take a look at how well this trade is playing out on the weekly chart. We had mentioned how it was necessary to hold over 1032 on the close three weeks ago. After that was accomplished the follow through in this trade has been spectacular. If you were able to get in, and hold it, this was a $70-$90 trade in gold. I promise you that fortunes have been made and lost over the last two weeks. In the meantime, while there is room for retracement, and we may enter a consolidation phase here, there is still great potential in this market. We have to keep playing it on the long side for now. Support 1111.14, 1100.30, 1104.5, 1100, 1096.15, 1092.87, 1087.65, 1081.05, 1078.37, 1070.6, 1066.1, 1051.3, 1046.7 Resistance 1118.75, 1122.82….
GBP/USD:
On the 10th of November I had suggested that a selling tail on the weekly chart would not be the type of signal that would exude great strength in the Sterling Market. While it’s not the worst type of candle to see, it’s clear that the market is somewhat unsure of where it wants to go next. Dollar strength will be a large factor over the coming week, and I expect this currency to trade lower if we even hint at a rally in the greenback. In the meantime we have found some nice support around 1.6515. It will be important to hold that level, as otherwise this market could quickly find itself at 1.62, or even 1.57. Keep trading the channel and maintaining a vigilant eye on the ever important American Dollar. Support 1.6515, 1.6485, 1.6249, 1.6119, 1.5776 Resistance 1.6741, 1.6842, 1.7042
EUR/USD:
Confirming what we see in the Pound, when studying the Euro weekly chart we can see a nice selling tail. We approached previous highs of 1.5060, (succeeded only in reaching 1.5050) and instead of blowing higher like we had expected, this currency took a moment to collect its thoughts and decide whether it’s truly ready for what lies above resistance. I am not putting out a long recommendation on the Euro as I expect it trade lower this week. However, it has been trading in an uptrend for most of 2009, and continues to do so. So, if we do retrace to about 1.4700, that would be a good time to buy once again. In the meantime patience is a virtue and will standing aside could save you from being chopped up in the market noise until we can re-establish the momentum upwards. Support 1.4918, 1.4844, 1.4810, 1.4701, 1.4683, 1.4626 1.4449 Resistance 1.5020, 1.5062, 1.5144, 1.5284, 1.5343, 1.546