FXTrading Australia Market Weekly Outlook – 20/12

Couple of key points to emerge from last week was the poor results from the U.S. TIC report which showed that net capital inflows were below $50 Bn, while the Trade Deficit went to its highest level ever. Thus after a week’s correctional rally by the Greenback the focus has shifted back on the structural deficiencies in the economy.
Another point has been the higher than expected results in the German IFO survey results. This is very significant as in spite of the Euro at such high levels German economy has held firm and exports have not yet been threatened much.

Key data releases for the U.S. kicks off on Monday with the release of Leading Indicators expected to rise due to drop in oil prices. Wednesday has GDP for Q3 the result should stay unrevised. Thursday has Personal Income expected to rise but Spending should decline slightly. Durable Goods orders are expected to bounce back up while Consumer Confidence should stay unrevised.

For the Euro-Zone, key data starts from Monday with German Producers Price Index which should decline as oil & energy prices have decreased. Tuesday has French Consumer Spending expected to decline sharply also on the agenda is Euro-Zone’s Trade Balance where the surplus is expected to increase. Wednesday has French CPI expected to decline while Euro-Zone’s Industrial Orders are expected to decline. Thursday has French Biz. Confidence Indicator expected to stay steady and Italian Retail sales should rise.

In the U.K. key data starts from Monday with the release of Mortgage Lending figures where expectations are for an increase as the holiday season is upon us. Tuesday has House Price Balance expected to decline slightly. Wednesday sees the release of the minutes of Bank of England’s meeting which would shed some light on rate prospects given the string of good data in the last week. Thursday has Q3 GDP expected to decline as high oil prices and low consumer spending has slowed growth.

For Japan, key data kicks off on Wednesday with the release of Tertiary Industry Index expectations are for a decline as low exports demand has taken its toll. Also on the agenda is the release of the minutes of BoJ Policy meeting. Friday has the release of Department Store Sales figures which are expected to stay steady as low consumer confidence should be offset by end of the year sales spending.

The technical scenario remains the same as last week with any Euro rallies expected to be capped under 1.35 with stiff resistance and selling interest between 1.3450-1.35. The pair is prone to correctional rallies down towards 1.32 where good support remains and 1.3075 further down.
The Yen has pulled back from 106 region as profit selling on its crosses has helped it rally well on the main pair. Any Yen rally towards 103.50 holds some good bid interest for the Dollar and 102.75 further down, any Dollar rally beyond 106 would prove difficult.
The Pound’s rally has been the talk of last week and has managed to start this week above 1.94. It is prone to correctional down movements but first line of support and strong buying interest lies around 1.9250 and 1.91 further down. Any rallies above 1.95 are likely to bring in profit sellers with stiff resistance between 1.9550-1.96.
The Aussie could continue to remain range bound unless it can have a clear breakout above 0.77 but for now stiff resistance exists between 0.7650-0.77. It has good support around 0.7550 with strong buying interest around 0.75.

Thus with two weeks before the year’s close volatile movements are likely with hedge funds adjusting their portfolios and speculators taking profits on their Dollar short positions and at the same time the sentiment remains against the Dollar. Any correctional rally for the Greenback is expected to brief in nature as market the looks eager to buy on dips.