My advice going into tomorrow is that the Pound still has room to fall but will find support at $1.9653.  Meanwhile the Yen will most likely gain against the dollar with weak spending from the U.S. released tomorrow. 

As expected the dollar did rally against the British Pound and other currencies while it has struggled against the Yen.  While the Bank of Japan mentioned that housing is in a sharp downtrend they also mentioned they expect PPI and CPI to increase going forward due to high commodity prices even though the economy is seen as slowing since banks are still offering cheap credit there. Meanwhile in England the BOE minutes show real panic about falling asset prices hurting the economy.  They decided to cut rates now to help bail out their banking buddies and try to stem the tide of asset depreciation and tightening credit in the hopes that this could help combat inflation in the longer term once stocks and real estate have crash landed.  So much for the “soft landing” the central banks were talking about in recent times. Looking forward New Zealand GDP is on the can lender www.forextradersinc.com/economiccalender this afternoon at 4:45 PM and tomorrow the big news will be UK retail sales which are important to see if the BOE was right about the projected slowdown of demand. At 8:30 am statistics scrutinized by the Federal Reserve are released. Their favorite indicator for measuring inflation, the core PCE deflator along with income and consumer spending. If UK figures are weak it just confirms the already bearish attitude towards Sterling and if U.S. spending is also stagnant there could be a correction in GBP/USD as a result.  If you wanted to sell dollars tomorrow however I would be more interested in buying Yen then Pounds. The Yen is sitting at key support levels now, the 50% Fibonacci retracement of the low printed in 2004 to the high made this summer.  A weak consumption figure in the U.S. could trigger the stock market to plunge and help USD/JPY break that key support. Core PCE inflation is closely monitored as well as the other components but with position squaring occurring before Christmas and consumption likely to be very weak I expect the figures to be dollar bearish overall. Canadian GDP is coming out at 8:30 and also Canadian retail sales.  Both of which figures I anticipate being hurt by the Strong Loony.

My advice in the coming session is to short GBP/USD.  With the minutes coming out tommorrow I think there is a good chance to see $2.009 breached.

As I had anticipated CPI figures came out below expectations in Europe and Canada and did little to encourage buyers of Sterling or Canadian dollars. With Bank of England minutes to be released “on the marrow” we may see GBP/USD break key support of $2.009 and end up below $2 even by the end of the week.  Meanwhile the food price index comes out in New Zealand at 4:45 pm and is important since that economy is largely agricultural. A high reading may help the RBNZ justify keeping rates right where they are. A little later on we have the Japanese all industrial activity index coming out at 6:50 pm which may help people decide their stance going into the Bank of Japan’s rate announcement tomorrow night. Also on the calendar is the Westpac Leading Index which is considered an important forward looking survey into Australian fortunes. German PPI starts the European session at 2 am followed by IFO survey at 4. Both of these figures should be market movers especially if sentiment has deteriorated in Germany, the Euro Area’s largest economy.  I do expect PPI to be tame so expect further Euro selling to start the morning.  Later on at 4:30 the BOE releases the minutes of its last meeting which should prove very interesting.  My guess is that the minutes will show talk off needing to bail out the banks and also that the housing market is cooling and generally dovish comments all around. Like I said the minutes could prove to be the catalyst which allows the Pound to go back under $2 for the first time in months.  

The dollar appears to be rallying nicely here but it may have some trouble with $.7775 on the DX.  Still the potential exists to buy it on weaker than expected CPI figures tomorrow morning, especially against the Loony, which already sits near parity.

The dollar has maintained last week’s gains by and large today although it faltered against the carry trade currencies of Swiss Franc and Japanese Yen.  The cash transfusion into the U.S. of one hundred billion dollars helps support the dollar from a fundamental perspective. Meanwhile the declining stock market helps make the case for a stronger yen which bounced off of the 50% Fibonacci retracement of the move from 101.74 during the Asian Currency Crisis to the high printed this summer at 124.13.  There is a lot of resistance at around 114 so expect it to hold.  Meanwhile the Euro is still declining against the US Dollar and the Pound looks finished here as well.  If this keeps up the EUR/JPY should decline by default, but not if carry traders have anything to say about it. It will be worth watching Japanese retail sales figures tonight at 12:30 am to see if domestic demand is finally picking up there.  Then there are UK CPI and retail sales to consider being released at 4:30 am.  I don’t expect that the British CPI will be too high because of the effect I mentioned when I rightly anticipated a below expectation inflation for the Euro area.  The inflation in commodity prices created by a weak dollar is partially offset by a strong Pound. One thing is for sure, house price inflation has now become house price deflation in the U.K.  Later on at 7 am we have Canadian CPI which once again I expect to be tempered by the exchange rate situation. So it could turn out to another dollar positive day, all things considered.  

Well I keep getting beat up wit my Franc predictions so I will stop making them.  The dollar is rallying on high inflation/bargain hunting and should continue to do so into the next session.  The Franc takes a beating as a result since it is a good dollar barometer, so a mistake on my part for suggesting a buy even against Sterling.  Anyways, looking forward The Canadian dollar looks poised to give back more of it’s recent gains and head on up to 1.05 the 50% retracement of it’s big move from 1.18.  Also I expect the Euro to lose more ground tomorrow as Sterling should decline also.  I am less bearish on Yen since the Tankan is coming out although it looks like it’s headed to 114.50 before long.  

Well my prediction of a dollar positive day was fulfilled, however I have seemed to forget that the Swiss Franc is the best dollar barometer and has taken a beating as a result.  Not only was PPI higher than forecast by economists but also retail sales surprised to the upside.  Tomorrow we have CPI for both Europe and the U.S. coming out and I for one expect to see more pass through effects of the high inflation we are seeing with PPI in these figures.  This is why I am upset with the Federal Reserve for cutting rates, because they ignore inflation and increase instability in the markets with their policy of bailing out the financial players who have dug their own graves.  The dead should be buried in my opinion not resurrected by pseudo government intervention, while the common man takes it on the chin with high inflation.  A perfect example why America needs to abolish the Fed and put its people before powerful banking and corporate interests, please vote Ron Paul. 

Well enough of my rantings, moving on to trading the Tankan is coming out tonight and this survey could provide the Yen with much needed support.  A poor reading could really help push USD/JPY up to 114.50 especially with tomorrows CPI looming large.  So the carry traders could be having a field day as a result.  Although it’s true that Euro CPI could be high also it is unlikely to have increased as much as U.S. CPI since the Euro appreciated a lot against the dollar and since commodities are priced in dollars some of the artificial price inflation caused by the weakening dollar is offset by the strengthening Euro.

I am liking GBP/CHF short at these levels, it was a pick yesterday and I really love it today. Also if youur still in USD/CAD from yesterday I hope you took a take profit already on that one. 

The dollar is mixed again today as it gained against its Canadian counterpart and the Swiss franc which suffered from a weak ZEW survey and the yen as stocks came out of the gate strong.  Meanwhile it lost ground to the Euro and Sterling as industrial production in Europe beat expectations and the UK employment picture beat expectations which helped fuel buying during the trade balance release at 8:30. The Pound briefly tested resistance with the Fibonacci coming in at $2.0582 limiting the upside.  Plenty of orders and/or profit taking at that level brought GBP/USD right back down again and it now looks like the dollar is taking charge of the situation again.  Meanwhile the Dow just cracked 13,400 on its way back down giving back its morning gains.  Meanwhile GBP/CHF shot up today and currently rests on the Fibonacci support of 2.3209. Actually it just cracked it and looks like a short to me especially with it failing 2.3350 earlier.  Looking forward also we have Kiwi retail sales coming out this afternoon and this should provide some decent volatility, I expect the tone to be dollar positive for the rest of the session especially with the RICS house price balance survey coming out at 7 pm.  There sure is a lot of important data coming out tonight and tomorrow with Aussie employment coming out at 7:30 and Japanese capacity utilization and then industrial production at 11:30 pm.  Then tomorrow we have a huge Swiss National Bank rate decision at 7 AM which could explain partially the Franc weakening today. CBI Industrial Trends is also significant at 6 am.  Then we have PPI and Retail sales at 8:30 am from the US which should set the tone for the rest of the day with Business inventories at 10 am as well.  A high PPI will probably offset a weak retail sales figure which will give a dollar neutral or even dollar positive bias to the session.  So long story short I am still expecting a good day for the dollar but also a good day for the Franc, but better against Sterling than the greenback.