Forex Analysis: US Dollar Corrects Higher, Wells Fargo Earnings on Tap

The US Dollar corrected higher overnight as prices digested the largest drop in four months. Wells Fargo earnings are now in focus for sentiment trends.

Talking Points

• US Dollar Corrects Higher After Posting Worst Selloff in Four Months
• Swiss CPI, UK Industrial Production Data Likely to Pass Without Fanfare
• Risk Sentiment Trends Look to Wells Fargo Q4 Earnings for Direction

The US Dollar corrected higher - rising against all of its leading counterparts - as prices corrected after yesterday's aggressive selloff. The greenback fell 0.6 percent, marking the largest single-day drop in close to four months, as risk appetite swelled in the wake of better-than-expected Chinese trade figures. The New Zealand Dollar underperformed.

The economic calendar is quiet in European hours. Swiss CPI is expected to fall 0.3 percent year-on-year in December, marking a narrow improvement from November but keeping deflation concerns alive. On balance, this represents the status quo and is unlikely to drive significant changes in forex traders' outlook for SNB policy. A narrow improvement in UK Industrial Production will probably pass with little fanfare.

S&P 500 index futures are trading flat, offering no clear bearing on risk appetite trends for the time being. The US data docket is likewise lackluster, turning traders' attention to the earnings calendar. Wells Fargo is due to report fourth-quarter results and the markets will be keen to gauge the bank's guidance to inform their outlook for global financial conditions.

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
23:50	JPY	Current Account Total (¥) (NOV)	-222.4B	-17.1B	376.9B
23:50	JPY	Adjusted Current Account Total (¥) (NOV)	225.9B	277.4B	414.1B
23:50	JPY	Current Account Balance (YoY) (NOV)	-276.4%	-84.1%	-29.4%
23:50	JPY	Trade Balance - BOP Basis (¥) (NOV)	-847.5B	-832.0B	-450.3B
23:50	JPY	Bank Lending Banks ex-Trust (DEC)	1.4%	1.1%	1.2% (R-)
23:50	JPY	Bank Lending incl Trusts (YoY) (DEC)	1.2%	-	1.0%
1:30	CNY	Consumer Price Index (YoY) (DEC)	2.5%	2.3%	2.0%
1:30	CNY	Producer Price Index (YoY) (DEC)	-1.9%	-1.8%	-2.2%
5:00	JPY	Eco Watchers Survey: Current (DEC)	45.8	40.8	40
5:00	JPY	Eco Watchers Survey: Outlook (DEC)	51	42.5	41.9

Euro Session: What to Expect

GMT	CCY	EVENT	EXP	PREV	IMPACT
8:15	CHF	Consumer Price Index (MoM) (DEC)	-0.1%	-0.3%	Medium
8:15	CHF	Consumer Price Index (YoY) (DEC)	-0.3%	-0.4%	Medium
8:15	CHF	CPI - EU Harmonised (MoM) (DEC)	-	-0.5%	Low
8:15	CHF	CPI - EU Harmonised (YoY) (DEC)	-	-0.1%	Low
9:30	GBP	Manufacturing Production (MoM) (NOV)	0.5%	-1.3%	Low
9:30	GBP	Manufacturing Production (YoY) (NOV)	-1.3%	-2.1%	Low
9:30	GBP	Industrial Production (MoM) (NOV)	0.8%	-0.8%	Medium
9:30	GBP	Industrial Production (YoY) (NOV)	-1.9%	-3.0%	Medium

Critical Levels

CCY	SUPPORT	RESISTANCE
EURUSD	1.3116	1.3350
GBPUSD	1.6059	1.6222

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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