If you took my advice last night you are up about a penny on USD/JPY already. Don’t be greedy get out before the weekend just in case something should happen over the weekend. You never know an earthquake might occur or something. One thing is for sure, greed is not good, and it can only lead to bad things especially when it comes to trading. I don’t expect any significant moves this afternoon so just go start your weekend early.

As I had anticipated the Japanese employment and production came out strong but spending was weak. Retail sales did show an increase however and CPI was even more than expected. The BOJ’s suspicions that it would turn positive were confirmed and the increase in prices was quite significant. This will no doubt fuel speculation of a rate hike in the early part of next year out of Japan. In any case this data did help USD/JPY reach 113 as I had expected it too. I see a big increase in the value of yen coming as soon as next week. Meanwhile New home sales were very weak in the U.S. and stocks and the dollar suffered from the news. Position squaring is still to be expected this afternoon as savvy trader’s book profits before the holiday and year end. Meanwhile UK house prices did decline quite a bit more than economists expected and the Pound was unable to break $2.  German CPI came in below market expectations but right around where I guessed it would. Long story short what I told you yesterday has come to fruition today. Staying out of the markets this afternoon might be a good idea. Next week will provide plenty of chances to make money. Expect position squaring to account for most of the trading this afternoon which will help stabilize the battered dollar heading into the weekend and lack of any interesting plays.  

My advice remains to buy yen and to do so mainly against the U.S. Dollar. I foresee 113 being reached overnight with help from strong production from Japan.

As I had anticipated The Durable Goods figures were very weak and the dollar has taken a pretty through beating as a result from it. With A slue of Japanese data out tonight starting at 6:15 pm EST and continuing untill 10:30 it should prove to be an active Asian session. I expect the overall thrust of the data to be Yen supportive and help USD/JPY reach 113 with a break of the figure tomorrow afternoon. As mentioned in prior analysis the falling stock market correlates strongly to a more valuable Yen. I expect the Japanese jobless rate to remain low and industrial production to beat expectations

buoyed by demand from Japan’s largest trading partner, China. Meanwhile CPI will interesting since even the BOJ is now speculating that increased production costs will be evident in the CPI figures as firms pass on the price increases in commodities to the consumer. Retail sales remains the great unknown in my mind because even though corporate profits are high and production is strong and incomes are rising Japanese consumers have not been spending money. The best reason for this seems to be that the Japanese are more inclined to save the extra money than the average U.S. consumer would be. This figure could be the most disappointing out of Japan tonight but if it does come out above expectations of 0% month on Month and 1% year on year expect a flurry of yen buying and overall positive yen sentiment regardless. Meanwhile another monthly decrease in house prices in England which will be released at 2 am seems very likely and would help establish a clear downward trend in housing in England. This is not bullish for the Pound since the key reason for the rate hikes by the BOE has been directly related to house price growth. Although the pound like everything else is Rallying against the dollar today I would be surprised to see it crack $2 overnight. Meanwhile German CPI is to be released at 10:30 am but I would suggest the figure will be below expectations since the inflation in commodities which are priced in dollars is being partially absorbed by a strong euro.  Commodity currencies have strengthened this week with help from higher gold and oil prices.  As long as the dollar remains weak and commodity prices remain high the New Zealand and Australian and Canadian dollars will stay strong.  It is also a lot harder for the central banks of these countries to cut rates when their economies are booming and the high rates help keep the currency strong also. Finally, considering that tomorrow is Friday and that Monday is New Years Eve there should be a lot of position squaring. Even so I can’t help but expect a reaction to new housing starts, if they are weaker than expected I would expect dollar selling in the morning followed by a recovery in the afternoon as people take off short positions ahead of the holiday. On the other hand a strong report would take the market by surprise and convince participants to exit earlier and possibly even place dollar long positions for day trading purposes.  So I think the tone will really be set by the news for the session but I would expect dollar weakness before the figure and that one way or another I see the dollar rallying by the end of the session by either pure profit taking or actual buying. New Years is notorious for big moves and illiquidity, some of the biggest moves I have ever witnessed occurred on the last day of the year. Be ready for something big to happen next week.

While the market has shown a clear bias for Euros I am still partial to Yen here. I like CAD/JPY short or USD/JPY. My target on CAD/JPY is 115.

Not a whole lot of action today but the Dollar bearish tone has indeed took over this week following up on last Friday’s position squaring. The Euro is the big gainer this week gaining not only against Dollar but also against Sterling and Yen. This divergence is made clear by the fact that USD/JPY faltered and reversed course while EUR/JPY easily broke 165 even with some hawkish minutes from the BOJ meeting.  The Bank of Japan minutes were quite interesting in that one member voted for a rate hike and contended that the sub prime risk was only one of the threats to the Japanese economy and there was a good chance of leaving rates too low for too long. The BOJ also said that new building codes were the main motivator for the slowdown in building permits and construction.  Also of merit was the statement that corporate costs would start to be passed onto consumers and that public perception was that there is inflation afoot. Meanwhile EUR/GBP reached all time highs, which may not come as a shock since the Pound is on the defensive across the board.  Still this sends a statement that the Euro is the new dollar the new king currency and it helps to make the case for the Amero’s introduction. Gold and silver really took off today as further proof that the dollar has lost respect. Tomorrow’s 8:30 am release of U.S. durable goods should be a big market mover, expect some fireworks and potentially a penny move or better. I have doubts that this number will help the dollar out at all. It would not surprise me to se the dollar fall considerably on this news.  Then tomorrow evening at 6:30 pm the Japanese jobless rate and CPI will be released. It will be interesting to see if CPI has increased due to inflation perceptions and pass through price increases as was feared in the minutes. My guess is that it will and that the Yen will gain because of it. At 12:30 am tonight housing starts are released from Japan though which could be decidedly bearish for the Yen making it an even better buy tomorrow evening.

My advice today is to buy yen against either euro or the dollar.  The Japanese markets will be open and will likely move the market the most in the coming session. Not to mention those 2 pairs are at resistance and will most likely lack the follow through to break it.  Also there is some Japanese data tonight which can help the Yen.  

Well the Dollar was mixed today as it gained against the Pound and Yen but fell against the Euro and Loony and Kiwi. The carry trades did gain today as I had suspected they would but I don’t see much upside in USD/JPY or EUR/JPY either at this point. The USD/JPY has completed its pattern on the daily chart and EUR/JPY has hit resistance at 165.  Meanwhile the Canadian Dollar continues it’s ascent against its US counterpart. The Pound is almost to my aforementioned target of $1.9637 which would complete the pattern on the daily chart as well. If I were trading today (which I am not) I would buy Yen against either Euro or Dollar. 

Well my folly yesterday was failing to realize that there would be short carry trade positions being squared up and profits on them being secured heading into the holidays. One the plus side at least I envisioned this happening to dollar long positions. Sadly my USD/JPY advice was not useful as a result of all this.  You can expect choppiness for the rest of the session as players get out of the markets for the long weekend.  I really would not recommend any new trades at this point, unless you are just trying to scalp.  Wait untill next week to see if dollar bears and carry traders who have no allegiance to Jesus take over the markets. My gut feeling says they will and that we could see a move similar to what we did during Thanksgiving of 2006.  There should be some good movement next week, perhaps not on Christmas day but new years is notorious for big moves. 

The dollar did falter today as I had forecast.  Mainly due to position squaring going into the holidays since the data was actually above expectations in the US. Spending was well beyond expectations although wages grew less than forecast. The savings rate also turned negative indicating this was credit card based buying since no one wants to be seen as a cheapskate during the holidays. Wage growth in Canada grew handsomely and sadly I was not aware of this release.  Retail sales were weak as I had expected, bouyed only by auto sales which are not as easy to import. USD/CAD is now below the 50% retracement of it’s August high to it’s Novemer low.  After failing to crack the 38.2% retracement of it’s move form 1.18 to .9 it has cracked parity once again and looks like it will stay there for some time. The Canadian Dollar has been leading the decline in the dollar and then the rally. This pair can be a good indicator of what is to come for the U.S. dollar across the board. Meanwhile UK retail sales beat expectations also and helped the Pound to stabilize.  Inflation in France and also lots of new industrial orders in E.M.U. helped the Euro this morning.  Meanwhile the dollar also slumped against Kiwi; even earthquakes could not shake the recovery.  NZD/USD had been resting on the golden ratio retracement of 61.8% of its high in July to its low in August.  The carry trade rally helped lift that pair while yen took a beating inspired by strong European data this morning. That beating lead to USD/JPY testing 114 as I write this.  A figure I still expect to hold, at least untill next week.  Quite possibly this move has also been incited by position squaring and profit taking on short carry positions headed into the holidays.  It will be interesting to see if the carry traders try something sneaky next week when those who love their families more than money are out of the markets.