With recent dollar weakness in the market, traders will be eagerly awaiting tomorrow’s industrial production and TIC data for the US before the weekend.  Not much is expected in the way of change for the two reports. But there are some considerations as to what to expect.

Made in America

A lot of optimistic expectations are mounting for tomorrow’s output report.  According to forecasts,industrial production in the US is expected to remain higher, rising by 0.3%.  This would be the fourth positive gain for the report in the last five months and add to already growing longer term sentiment that things may not be as bad in the world’s largest economy.  And, it would reverse some of the recent negative economic figures that have emerged as the country enters the holiday season next week.  US dollar bears continue to point to lower regional manufacturing activity and weak labor conditions as indications that the figure could show a decline for October.

By comparison, a decline in industrial output would be bearish for the US dollar.  Lower output figures would simply bolster Federal Reserve policymakers’ fears that further monetary policy will be required to lift the country out of the recent economic funk.  The sentiment has been confirmed by indications that the central bank is toying with the idea of expanding its bond buying commitment further, increasing the size per month by another $40 billion.  This would be in addition to the already committed $40 billion in mortgage bond purchases per month.

Ultimately, a bullish figure would help to support further advances in the US dollar against currencies like the European euro and the Japanese yen.  Specifically, all eyes will be focused on technical resistance at 1.2850 in EURUSD and 82.00 in USDJPY.

TIC Long Term Purchases

A relatively ignored survey, the Treasury Department’s TIC data report is anticipated to show net long term asset purchases of $75 billion in the month of September.  The forecast is a bit less than the $90 billion witnessed in August, and far above the rolling monthly average of about $55 billion.  Unfortunately,the high forecast is likely to see disappointment given the 2 month surge that boosted report findings in the summer months and the fact that returns in both US bond and equity markets were relatively at a standstill for September.