Another day of eventful Forex trading. As I suspected U.S. retail sales were abysmal but real PPI came out less than expected while core PPI was spot on. Meanwhile the Empire Manufacturing index also underperformed. The end result of this news was a weaker dollar against the Yen. The pound was on its way up before the US data broke, with inflation coming out higher than the market had expected but in line with my predictions. When everything was said and done though the euro and Swiss franc gave back their gains as soon as they made them. Obviously is lots of interest and profit taking at 1.0850 in USD/CHF and the $1.49-$1.50 area in EUR/USD. It is looking more and more like a double top in EUR/USD with each day that goes by. There was terrible news from the U.S. yet the euro could not hold on to its gains from the news. Yes the ZEW came out worse than expected this morning and that certainly weighs on the minds of euro owners but still it seems like there is more than just a fundamental reason to sell Euros up here. If you look at the Euro historically, it tends to make double tops when it peaks out and history has a habit of repeating itself. Looking ahead it will be interesting to see if the yen can hold onto its recent gains. Core machinery Orders which were up a staggering 12.7% in the prior period are expected to fall 4.7% from that seemingly untenable level. This points to strong demand from China for sophisticated equipment used in new manufacturing plants. The same type of purchasing which has helped Germany out on the industrial front where they have also posted large machinery order increases. Also of interest is the current account balance which is expected to stay positive to the tune of about 1.8609 TRILLION yen for the MONTH which works out to about $17.5 billion dollars at current exchange rates. Which is still a pretty big figure even if it is a decline, and should help remind people that there is good reason to buy yen. Also worth eyeballing is the Domestic Corporate Goods Price Index which is a helpful gauge of inflation on the corporate front. This figure is expected to moderate to .1% month on month and stay at 2.3% year on year this is all happening at 6:50 pm. The CPI and other indicators show that inflation is now occurring in Japan and the perception of it occurring is a powerful thing. With this in mind I envision the inflation index come out higher than expected. German CPI will lead the way in Europe at 2 am and is expected to come out at .5% month on month and 2.8% year on year. Down slightly from last month’s year on year reading if this is the case or it comes in even lower then the Euro should suffer. I suspect this will be the case and that the double top will become apparent to many more traders as a result. Then at 4:30 am U.K. wage and employment data is to be released. Wages are expected to be basically flat for the quarter reported and elevated very slightly year on year. The employment rate is also expected to hold steady for the month and jobless claims are expected to decrease. Employment has yet to be adversely effected the economic crisis Britain is experiencing but I fear not for long. I think these figures could easily come out worse than expected. Then it’s EMU CPI at 10 am which is supposed to tick down and will probably do so. More importantly at 8:30 am we have U.S. CPI which is expected to moderate on all fronts but seems unlikely to me. I can see real CPI coming out at much more than .2% month on month. Then an enlightening TICS Flow figure which should show a big decrease over last months huge inflow for a few reasons. Mainly the fact that the stock market took a beating in November and the last time it did in August there was a withdrawal of 40.7 billion from equities. October’s figures showed an inflow of 30 billion to stocks, but if these foreigners know what’s good for them they will have got out again in November. Bond Buying has increased a lot in the past few months, especially corporate paper as foreign reserve managers look to diversify away from treasuries and seek better returns. Capacity utilization and industrial production are both predicted to continue decrease and I have to agree with that prognosis. The EIA crude stocks could affect USD/CAD quite a bit at 10:30 am. The NAHB housing index will be released at 1 pm and is expected to come in at 19 again but I think a lower number is more realistic. Then it’s the Fed’s beige book at 2 pm and judging by the chairman’s recent rhetoric will not support the dollar. In short tomorrow will be a news traders wet dream.
