Today’s price action was rather subdued and provided a much needed breather after yesterday’s euphoria. Narrow ranges was seen in not only the FX market, but also equities and commodities as well. Accordingly, the USD finished mixed across the board, with small gains versus NOK, AUD, CHF & NZD and slightly lower against the CAD & EUR. As for alternative markets, U.S. Equities finished slightly lower on the day – Dow: -25.20pts and S&P500: -2.37pts, 10-year Treasury yield rose nearly 3bps to around 2.096% and commodities were essentially flat on the day – Gold was lower by -0.09%, Silver fell by -0.16% and Oil (WTI) lost -0.33%. With that said, currencies have grinded to a halt heading into the Asia open and with the U.S Employment report tomorrow, many traders seem content to sit on the sidelines. Currently, the Dollar Index (DXY) sees the 21-day sma which has held on multiple occasions over the past 48-hours around 78.10/15.
However, there are a few other news announcements coming out tomorrow which could prove noteworthy:
- Swiss Oct. Real Retail Sales (con. 0.0% YoY)
- Norway’s November Unemployment Rate (expected 2.4%)
- U.K. Nov. Construction PMI (consensus 52.0)
- EZ October PPI (exp. 0.2% MoM)
- Canada’s Nov. Change in Employment (exp. +17.5K)
- Canada’s Nov. Unemployment Rate (con. 7.3%)
- U.S. November NFP (con. 125K)
- U.S. November Private Payrolls (expected 150K)
- U.S. Nov. Unemployment Rate (con. 9.0%)
- Bank of Mexico’s rate decision (expected to remain on hold at 4.50%)
Also be cognizant that German Chancellor Merkel will be addressing parliament regarding the goals of next week’s EU summit, the ECB’s Stark will be speaking in NY and the Fed’s Fisher, Plosser and Rosengren will also being speaking tomorrow – Thus, be aware of potential headline risk.
Key technical themes heading into the weekend/next week:
- EUR/USD – As I stated yesterday, I wouldn’t be shocked to see a 1.32-36 range persist until the ECB meeting & EU summit next week. However, I would ultimately prefer to be shorting the Euro relative to the dollar. The Euro failed above 1.35 for the second day in a row today and this could prove to be a medium term top, yet I would prefer to establish a bearish bias on one final advance towards the 1.36-1.3650 area (38.2% retracement of the November decline and 55-day sma), ideally with a stop above the November highs (1.3860/70) in search of a move towards the 2011 low near 1.2860/70.
- USD/JPY – Still considering longs on a move back towards 77.00/20 (convergence of 50 & 100-day sma’s), however with the Daily Ichimoku Cloud rising to 77.40/45 next week (also the daily Kijun line) buyers could step in ahead of the noted moving averages. Ultimately, I’m seeking a break above long-term trendline resistance from the May 2010 high around 78.80 and then possibly test the October high around 79.50/55. Furthermore, I wouldn’t be surprised to see $/¥ test 80 by the end of the year.
- USD/CAD – Sees the 61.8% retracement of the November advance around 1.0125/30, however we have seen the CAD outperform crude oil (WTI) relative to the USD over the past 24hrs, whereas USD/NOK & oil (Brent) have synchronized rather well over the same time period – See today's Chart to Watch and something has to give. That said, tomorrow sees Employment reports out of both Canada and the United States – Consequently, we could see USD/CAD play some catch up tomorrow.
- AUD/USD – Yesterday the pair failed ahead of the 61.8% retracement of the November decline around 1.0335 and the 100-day sma near 1.0320. Today the Aussie formed a Hanging Man candlestick, which is typified by a short body with no upper shadow after a strong uptrend – This pattern suggests further bullish demand may be waning.
- USD/CHF – News that the SNB is considering negative interest rates as additional measures to fight against the appreciation of the Swiss Franc sent the CHF lower – EUR/CHF rose towards 1.24 and USD/CHF rallied to nearly 0.92 before backing off. In USD/CHF, I may be inclined to get bullish on a move back towards 0.9000-50 (38.2% retracement of the November advance and 55-day sma) with the SNB keen on keeping the Swiss Franc weak. For those looking for a way to play EUR/CHF – See Brian Dolan’s Weekly Strategy.
- S&P500 – Briefly broke above yesterday’s highlighted trendline resistance around 1248/50 earlier today, however equities were unable to stay in the ‘black’ today and consequently closed just below the aforementioned level. Keep in mind that RSI is traditionally known as a leading indicator and the daily RSI has already broken above its corresponding trendline resistance – See yesterday's Chart to Watch, yet the 1265/70 area may prove difficult to surmount as it sees the 200-day sma and trendline resistance drawn from the July 2011 high.