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.
