Filed Under:
  • Dollar Climb Overshadowed by EUR/USD Push Above 1.3300
  • Euro Rallies With its Best Performance Against Aussie Dollar
  • Japanese Yen Secures Ninth Consecutive Week of Decline
  • Australian Dollar Traders Awaiting Chinese GDP, Aussie Employment
  • New Zealand Dollar May Face Trouble if 4Q CPI Doesn't Rebound
  • Swiss Franc: EUR/CHF Moves to 12-Month High 1.2200
  • Gold Volatility Measure Heading for a Break
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Dollar Climb Overshadowed by EUR/USD Push Above 1.3300

How did the dollar perform this past week? That is a straightforward question, but answers will vary depending on who is analyzing the currency. To many, the greenback tumbled this past week. Indeed, on a week-over-week basis, the dollar was lower against all majors with the exception of the Japanese yen. On the other hand, if we were looking at anything other than a standard 'range swing', only the Euro posted a meaningful advance. In fact, through Friday, only EURUSD printed a dollar decline with the pair making a follow through push to overtake the 1.3300 and close at a nine-month high. In contrast, the benchmark currency actually made gains against the pound, Australian dollar and New Zealand dollar. For the equal-weighted Dow Jones FXCM Dollar Index (ticker = USDollar) this converted to a Friday advance and higher low on the week.

The dollar's performance was another contradictory outcome to the general assumption that sentiment enjoyed a serious advance this past week. Sensationalist bulls calling a renewed risk appetite phase - and conversely a dollar retreat - would point to the S&P 500's five-year high close on the week, carry-heavy yen crosses soaring and of course the EURUSD. Yet, the equity index only advanced 0.4 percent, the yen crosses are moving on the yen's own rapid depreciation and the correlation of the market's favored risk-sensitive benchmarks has relaxed. This isn't to mean that risk trends won't spark or that the dollar will suffer under different circumstances. Instead, it implies we still await a driver.

Through the end of this past week, we were given our first taste of a bigger event risk moving forward. The headline earnings of both the American Express and Wells Fargo 4Q earnings figures beat analyst expectations; but the former came with layoffs and a hearty charge off, while the latter reported record capital hoarding (rather than charging economic activity by lending). Details will be important as we watch the earnings season heat up this week with a heavy round of financial firms reporting (JPMorgan, Bank of America and Citibank amongst others). A more concentrated catalyst will be the Chinese GDP report, though its late-in-the-week release could curb trend development rather than aid it. As we watch these scheduled releases, we should also keep an eye on a more distant concern: the eventual exit of stimulus. The last Fed minutes revealed expectations for the QE3 program to end before the end of the year. And, there are plenty of Fed speakers this week.

Euro Rallies With its Best Performance Against Aussie Dollar

Tail Risk. That is a phrase that all euro traders should be familiar with by this point. The jargon refers to a low probability scenario with a severe impact. Having suffered through nearly three years of a drawn out financial and debt crisis, the euro has proven the poster child of tail risk. Yet, as the currency suffers through the fear and uncertainty building, it will also rebound and revive when the threat is seen to dissipate. That is the stage we seem to be in currently. Since Greece managed to secure funding through the end of last year, the immediate threat was withdrawn and the region's debt markets have thawed. Recently, there have even been proactive fundamental developments. The most recent headline was Greece's Parliament approving a 'mini' tax bill late Friday to raise revenue estimated to be over ¬1 billion. Coupled with possibility that Spain will drop seniority status on the regional rescue program (which helped a strong bond sale along last week), these raise the water mark on euro relief. However, there are still issues that are incubating. Particularly concerning is Cyprus which is looking for a Greece-level rescue.

Japanese Yen Secures Ninth Consecutive Week of DeclineUSDJPY - along with the other yen crosses - closed the week on a strong footing. Over the past two months alone, the yen has fallen between 12 and 18 percent against its most liquid counterparts. What is more impressive than the net move is its consistency. The statistics are particularly incredible for USDJPY which has now risen nine consecutive weeks which is a trend not matched in 24 years. This move certainly has a lot of life to play out through 2013 as Japan embarks on the kind of devaluation effort that crushed the US dollar back in 2008 and 2009, but that doesn't mean it will be a linear move. The government made its move and the BoJ isn't on until the 21st. Beware risk aversion.

Australian Dollar Traders Awaiting Chinese GDP, Aussie Employment

There is plenty of event risk for Aussie dollar traders to watch for through the coming week. Lending figures, consumer confidence and inflation expectations are notable; but the employment figure for December carries the greatest potential for volatility. A significant surprise (the outcome deviates from the market consensus) can certainly generate short-term volatility. However, experienced traders know that the greatest potential for this high-yielder is in the Friday Chinese data. The 4Q GDP is top risk, but we should also take in the retail, factory and investment data.

New Zealand Dollar May Face Trouble if 4Q CPI Doesn't Rebound

The Reserve Bank of New Zealand has maintained a persistent, hawkish tone even though inflation figures have backed off well below target last year. Policy officials target medium-term price pressures, so there is room to temporarily overlook a lull in inflation. However, set too low for too long and action must be taken. There is a pickup expected in the annual 4Q CPI reading next week (0.8 to 1.2 percent). If it misses&

Swiss Franc: EUR/CHF Moves to 12-Month High 1.2200

There is no one that is more relieved by reduced Euro-area tail risk than the Swiss National Bank (SNB). The central bank has struggled to keep the EURCHF's 1.2000-floor in place for much of the past year, but we are starting to see a more permanent buoyancy off that artificial level. The final two days of last week in fact showed a 100-plus pip rally and close at 12-month highs. If Euro-area troubled return though, back to 1.2000.

Gold Volatility Measure Heading for a Break

There is a fundamental assessment when we look for congestion. Markets abhor extremes, and inactivity is certainly a factor that fits the bill. For the gold market - as with most asset classes - there is an extreme lull in the metal's volatility measure. Technical traders will note a wedge formation on the CBOE's Gold Volatility index just off record lows. This is an asset that doesn't have the same restraints of liquidity.

**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar

ECONOMIC DATA

GMT
Currency
Release
Survey
Previous
Comments
NZD
REINZ Housing Price Index (MoM) (DEC)
1.40%
Increased 13% since 1/2011.
NZD
REINZ Housing Price Index (DEC)
3544.4
NZD
REINZ House Sales YOY% (DEC)
Trend is bullish since late 2010.
CNY
Entrepreneur Confidence Index (4Q)
116.5
Declined 15% since 3/2011.
CNY
Business Climate Index (4Q)
122.8
Declined 11% since 1/2011.
CNY
Actual FDI (YoY) (DEC)
-2.0%
-5.4%
Capital outflows strong throughout 2012.
21:45
NZD
Card Spending - Retail (MoM) (DEC)
0.50%
Oscillates around zero, 6 year average at 0.4%.
21:45
NZD
Card Spending - Total (MoM) (DEC)
0.70%
23:30
AUD
TD Securities Inflation (MoM) (DEC)
-0.10%
6 year average at 0.2%.
23:30
AUD
TD Securities Inflation (YoY)(DEC)
2.50%
Increased from 1.5% on 7/2012, rate supportive.
0:30
AUD
RBA Credit Card Purchases (NOV)
.5B
Increased 57% since 2007. Trend still intact through 2012.
0:30
AUD
RBA Credit Card Balances (NOV)
.0B
Decreased 3.3% since 6/2012. Increased 27% since 2007.
0:30
AUD
Value of Loans (MoM) (NOV)
-0.20%
Wavers around zero percent growth.
0:30
AUD
Home Loans (NOV) (NOV)
0.5%
0.10%
Began to show increases in 2010. Wavers around zero though.
0:30
AUD
Investment Lending (NOV)
5.50%
9/2012\'s 8.6 reading was highest since 4/2009. Also oscillates around zero growth.
0:30
AUD
ANZ Job Advertisements (MoM) (DEC)
-2.90%
Began downtrend in 2012 from Feb high at 1.8% growth.
EUR
Wholesale Price Index (MoM) (DEC)
-0.7%
Prices rebounded 6/2012 through October then pace slowed.
EUR
Wholesale Price Index (YoY) (DEC)
3.2%
10:00
EUR
Euro-zone Industrial Production s.a. (MoM) (NOV)
-0.30%
-1.40%
In downtrend since 2010. Turned negative early 2012.
10:00
EUR
Euro-zone Industrial Production w.d.a. (YoY) (NOV)
-3.10%
-3.60%
15:30
CAD
Bank of Canda Senior Loan Officer Survey (4Q)
-15.8
Sentiment deteriorated 150% since 1/2012.
15:30
CAD
Business Outlook Future Sales (4Q)
0.00
Spiked to 35 on 3/2012.
21:45
NZD
Food Prices (MoM) (DEC)
-0.80%
Wavers around zero growth.
GMT
Currency
Upcoming Events & Speeches
01:20
USD
Fed\'s Evans Speaks on Panel Discussion in Hong Kong
10:00
EUR
Bank of Italy Releases Nov. Public Finance Supplement
15:00
JPY
BOJ Branch Managers Meeting
16:55
USD
Fed\'s Williams Speaks in Half Moon Bay, California
17:40
USD
Fed\'s Lockhart to Speak on U.S. Economy in Atlanta
19:30
EUR
ECB\'s Praet speaks in Brussels
21:00
USD
Fed\'s Bernanke Speaks in Ann Arbor, Michigan
SUPPORT AND RESISTANCE LEVELS

To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal

To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table

CLASSIC SUPPORT AND RESISTANCE -EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT

Currency
USD/MXN
USD/TRY
USD/ZAR
USD/HKD
USD/SGD
Currency
USD/SEK
USD/DKK
USD/NOK
Resist 2
15.5900
2.0000
9.2080
7.8165
1.3650
Resist 2
7.5800
6.1875
6.1150
Resist 1
15.0000
1.9000
9.1900
7.8075
1.3250
Resist 1
6.8155
5.9190
5.8200
Spot
12.6551
1.7705
8.7200
7.7518
1.2250
Spot
6.4655
5.5928
5.5302
Support 1
12.5000
1.6500
8.5650
7.7490
1.2000
Support 1
6.0800
5.5840
5.6000
Support 2
11.5200
1.5725
6.5575
7.7450
1.1800
Support 2
5.8085
5.3350
5.3040
INTRA-DAY PROBABILITY BANDS 18:00 GMT

\Currency
EUR/USD
GBP/USD
USD/JPY
USD/CHF
USD/CAD
AUD/USD
NZD/USD
EUR/JPY
GBP/JPY
Resist. 3
1.3450
1.6234
90.17
0.9206
0.9905
1.0616
0.8443
120.62
145.68
Resist. 2
1.3423
1.6209
89.92
0.9189
0.9890
1.0596
0.8423
120.21
145.22
Resist. 1
1.3396
1.6183
89.67
0.9171
0.9876
1.0576
0.8403
119.81
144.77
Spot
1.3343
1.6132
89.18
0.9135
0.9848
1.0535
0.8363
119.01
143.87
Support 1
1.3290
1.6081
88.69
0.9099
0.9820
1.0494
0.8323
118.21
142.96
Support 2
1.3263
1.6055
88.44
0.9081
0.9806
1.0474
0.8303
117.81
142.51
Support 3
1.3236
1.6030
88.19
0.9064
0.9791
1.0454
0.8283
117.40
142.06
v

--- Written by: John Kicklighter, Chief Strategist for DailyFX.com

To contact John, email jkicklighter@dailyfx.com. Follow me on twitter at http://www.twitter.com/JohnKicklighter

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