Today at 8:15 GMT the market will digest Swiss CPI data for the month of November. The report is expected to show inflation rose by only 0.1%, up from a decline of -0.1% in October. The risk is the report will show another contraction in Swiss prices and may force the SNB to act again to prevent deflationary forces from creeping into the Swiss economy.
Forex Market Trends
USD – Non-Farm Payrolls Nothing to Brag Home About
Friday’s NFP data was nothing to brag home about. While the headline number was in-line above consensus forecasts of +140k on expectations of +120k the data in the report was less inspiring. Currently the 12-month average for new private job growth is just under +160k which is less than the latest jobs report. The drop in unemployment rate initially looks promising but the details are less inspiring. When digging through the numbers you can find 315k job seekers dropped out of the work force, allowing for the unemployment rate to fall to 8.6% from 9.0%.
Yes, the jobs data does show an improvement from the beginning of the year but last week’s release points to slow gains in US employment. While the Fed seeks price stability it also has the task of brining the US to full employment. As this goal goes unfulfilled the risk is for additional quantitative easting (QE) by the Fed.
CHF – SNB Could Act if Swiss CPI Shows Deflation
Today at 8:15 GMT the market will digest Swiss CPI data for the month of November. The report is expected to show inflation rose by only 0.1%, up from a decline of -0.1% in October. The risk is the report will show another contraction in Swiss prices and may force the SNB to act again to prevent deflationary forces from creeping into the Swiss economy. There have been discussions in the market that the SNB could raise the floor of the EUR/CHF to 1.25 or perhaps 1.30 but the market has done a fine job of pushing the pair higher based on expectation of further intervention by the SNB. Perhaps the SNB will wait to see what the outcome is of this week’s EU economic summit on Friday and the market’s reaction before making its next policy move.
Looking at the price action the EUR/CHF found support at its 200-day moving average which comes in at 1.2220. The pair has resistance at 1.2470 from the October high. Meanwhile the USD/CHF could have upside potential should it succeed in moving above the November high of 0.9330. Additional resistance may be found at the 20-month moving average at 0.9375 followed by the 20111 high at 0.9780. Support comes in at last week’s low of 0.9065.
CAD – Interest Rate Decision for the BoC
The BoC meets on Tuesday to set its overnight rate. Consensus forecasts are for the BoC to keep interest rates on hold at 1.00% despite the recent economic data coming in on the downside of market forecasts. The Q3 GDP report was marginal at best with GDP rising 0.2%. Last Friday gave us weaker than expected employment numbers. However, with the BoC keeping monetary policy as is the CAD may prove to be attractive. Expectations of quantitative easing by the Fed, ECB, and BoE, and an increase in crude oil prices above the $100 level all support the CAD. According to the most recent CFCT IMM data traders have increased their bearish bets against the CAD with a decrease in risk exposure. This could put pressure on CAD shorts should there be a turnaround in market sentiment with a solution to the European debt crisis. The USD/CAD could test the rising trend line from the July and October lows at 1.0090 followed 0.9890 at the October low. The 1.0250 from Tuesday’s low is the initial resistance.
Crude Oil – Crude Oil Prices Continue to Climb
Spot crude oil prices continue to move higher as Europe takes steps towards closer integration and enforceable budget rules. Crude oil prices rose to their highest level since mid-November following Merkel and Sarkozy’s speech yesterday. The press conference by the two leaders coincided with the release of the ISM services PMI which came in at 52.0 on consensus forecasts of 53.6. While data was below market expectations the survey points to continued growth in the US services sector and increased US Q4 GDP. For the remainder of the weak there is a lack of big name economic data on the calendar until Friday’s UofM consumer sentiment and trade balance numbers. Resistance for spot crude oil is found at the November high of $103.30 while support is located at the November 28th high of $100.75 and November 25th low of $95.00.
The weekly chart shows the pair is trading in a symmetrical triangle pattern with the resistance line falling from the May high and support line rising from the yearly low. The first support from this chart pattern comes in this week at 1.3200. A break here will likely open the door to not only the October low of 1.3145 but also1.3050 from the 61.8% Fibonacci retracement of the bullish move spanning 2010 to 2011. The January low of 1.2875 could contain the near-term price action. To the upside the November 18th high of 1.3610 is the initial resistance followed by the mid-November consolidation at 1.3860 where the 100-day moving average also lies. The top of the triangle pattern would likely contain any move higher near 1.4230-1.2350.
Last week cable found resistance at 1.5780, a level that has proven to be resistive in the past. Additional resistance is found at the October high of 1.6165. Monthly and weekly stochastics continue to move lower and as such the November low of 1.5435 is the initial support followed by the October low of 1.5270. The last bastion of support for the GBP/USD is found off of the rising trend line from the 2009 and 2010 lows which comes in at 1.0590.
The USD/JPY is encroaching on its long term trend line off of the 2007 high and comes in at 78.70. A break above this level is needed to confirm the recent price appreciation. Both weekly and monthly stochastics are moving higher so traders may look for additional resistance at 79.50 from the post intervention high. The 200-day moving average is also lurking just below this price. Should the pair fail at the long-term trend line the congestion between 77.50-77.60 may prove to be supportive while the all-time low near 75.60 stands out as the last support.
As weekly stochasttics have already turned lower the monthly stochastics are beginning to roll over. This is occurring after the pair looks to have failed to break above the 0.9330 resistance level. As such the pair has support at last week’s low of 0.9065 followed by the November low of 0.8760 and the October low of 0.8565. A break above the 0.9330 resistance could spur gains towards this year’s high of 0.9780.
The Wild Card
Spot gold prices have ran into resistance at the trend line from the September and November high which comes in at $1,754. Additional resistance is found at the November high of $1,708. Forex traders should note that if the trend line holds spot gold has support at $1,700 from the November 30th low followed by the November 21st pivot of $1,666.
Written by Forexyard.com