Week in Preview: Keep On Eye On The Fed

Although not chock full of economic events, next week’s schedule does offer a handful of key releases for the market to deal with. In particular, traders will be eyeing the Federal Reserve’s interest rate decision later on in the week in gauging future monetary policy direction in 2013, with Japan’s GDP figure setting the weekly tone.

Japanese Final GDP Report (December 9th, 6:50pm EST)

The final assessment for the Japanese economy is set for release on Monday morning in Asia, and it’s not looking good. With manufacturing activity slumping and tepid household spending still rampant, the world’s third largest economy is expected to expand at a -0.9% pace in the third quarter. The bearish figure adds to an annualized contraction – which is currently at -3.5%. Ultimately, the negative figure will continue to add to speculation of additional easing by the BOJ, ahead of political elections on December 16th, adding to already mounting yen bearishness.

Weak market estimates are likely to place the 83-83.50 resistance area into play. Should price action break through the formidable roadblock, expect 84 to be targeted next.

German ZEW Economic Sentiment (December 11th, 5:00am EST)

Expectations are for German investment community sentiment to remain pessimistic in light of recent Greek debt buyback resolutions. Although an improvement to -11.4 from -15.7 is anticipated in the month of December, probabilities are high that figures may disappoint to the downside. Mainly, the tilt is being supported by depressed employment for the eighth straight month and a decline in the country’s output.

A below -11.4 print could spell disaster for the Euro, particularly against the US dollar. This would place the 1.2850 support figure into focus, with a penetration lower activating lower targets at 1.2750.

Federal Open Market Committee Meeting (December 12th, 12:30pm EST)

Although central bankers aren’t expected to augment the benchmark interest rate, they are anticipated to potentially announce additional easing in their last meeting of the year. With the implementation of Operation Twist slowing winding down, it will be interesting to see if Fed policymakers add to already established commitments of buying $40 billion in mortgage bonds a month to keep yields low and credit conditions accommodating. Any further mention of monetary easing for 2013 is likely to lend the greenback some downward pressure.

Swiss National Bank Libor Rate Announcement (December 13th, 3:30am EST)

In the same nature as their US counterparts, Swiss National Bank officials aren’t expected to make any particular move in interest rates next week. However, statements regarding the past year’s franc intervention will be scrutinized heavily. With officials likely to reiterate their commitment to the 1.2000 EURCHF ceiling, it will be noted if policymakers back off on the pledge of “unlimited” franc purchases. Subsequently, traders will be on the lookout for any mention of a sovereign fund to help mitigate recent franc purchases.

A recommitment to the 1.2000 ceiling would definitively place the 1.2150 resistance barrier into play for EURCHF bulls. The advance is only likely to be support if price action remains above current support at 1.2050.

US Retail Sales (December 13th, 8:30am EST)

One of the more anticipated retail sales reports for the year, the November release is anticipated to show a recovery in consumer spending ahead of the US holiday season. Expectations are for a gain of 0.4%, compared to October’s less than spectacular 0.3% decline. Remember, this month’s report should show optimistic gains in retail spending following an aggressive Black Friday campaign and could set the US on path for uplifting Q4 results.
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