EUR/USD Likely To Break Below 28-Month Low

GROWTHACES.COM Trading Positions

EUR/USD: short at 1.2440, target 1.2180, stop-loss 1.2305

USD/JPY: long at 116.50, target 120.90, stop-loss 118.50

USD/CHF: long at 0.9795, target 0.9890, stop-loss 0.9780

USD/CAD: long at 1.1570, target 1.1740, stop-loss 1.1540

GBP/JPY: long at 186.70, target 189.10, stop-loss 185.80

GROWTHACES.COM Pending Orders

EUR/GBP: sell at 0.7870, target 0.7770, stop-loss 0.7910

EUR/CHF: buy at 1.2025, target 1.2090, stop-loss 1.1995

EUR/USD Is Likely To Break Below 28-Month Low

(target lowered to 1.2180)

• Yesterday’s U.S. data pointed to firmer labor market. Initial claims for state unemployment benefits dropped by 6k to a seasonally adjusted 289k for the week ended December 13. A reading of 295k was expected. The report came a day after the Federal Reserve offered an upbeat assessment of the labor market and the broader economy.

• The Federal Reserve Bank of Philadelphia says its index of regional factory activity dropped to 24.5 this month from 40.8 in November. Last month's reading was the highest in 21 years. Any figure above zero indicates expansion.

• The Conference Board said its Leading Economic Index rose 0.6% mom last month after a downwardly revised 0.6% mom increase in October. A rise by 0.5% mom was expected after October’s previously reported 0.9% mom jump.

• Strong U.S. labor market data supported the USD yesterday. We lowered the target of our short position to 1.2180, because further losses of the EUR/USD below 1.2247 (28-month low on December 8) look likely.

• The markets are turning holiday mode on and we expect lower activity in the last days of December. However, investors will be focused on final U.S. GDP reading on Tuesday next week and housing market data (existing home sales on Monday and new home sales on Tuesday).

• The overall EUR/USD bias remains bearish with the Fed slightly more hawkish and the ECB expected to embark on quantitative easing next year.

Significant technical analysis' levels:

Resistance: 1.2352 (high Dec 18), 1.2516 (high Dec 17), 1.2570 (high Dec 16)

Support: 1.2247 (low Dec 8), 1.2242 (low Aug 10, 2013), 1.2167 (low Aug 3, 2012)

USD/JPY Rises On Improved Risk Sentiment

(stay long, target raised to 120.90)

• The Bank of Japan kept monetary settings unchanged and offered a more upbeat view on the economy, signalling that no immediate expansion of stimulus was on the horizon. The BOJ decided to maintain its pledge to increase base money, or cash and deposits at the central bank, at an annual pace of JPY 80 trillion, as widely expected. BOJ board member Takahide Kiuchi dissented from the decision, arguing that it was appropriate to revert to the BOJ's monetary policy before the Oct. 31 decision to expand stimulus.

• BOJ Governor Haruhiko Kuroda stressed that Japan is on track to hit the central bank's 2% inflation target in the year beginning in April 2015, shrugging off speculation that a dramatic slide in oil costs will weigh on consumer prices and force Kuroda to ease policy again early next year.

• The government's monthly economic report raised its view of business investment and factory output, but stuck to its overall economic assessment of moderate recovery despite some weakness as the economy struggles to recover from recession. The Cabinet Office described private consumption as holding firm while weakness was seen in consumer confidence which has been sliding because the weak JPY drives up the cost of imports.

• Japanese Economics Minister Akira Amari said that a weak JPY is benefiting the country's exporters and that a fall in oil prices is also good for the economy.

• The USD/JPY is rising on a revival of global risk sentiment after oil prices and Russia’s rouble stabilized. The rate hardly reacted to the BOJ’s decision. At GrowthAces.com we raised the target of our long position to 120.90 and the stop-loss level to 118.50.

Significant technical analysis' levels:

Resistance: 119.46 (61.8% of 121.86-115.56), 119.55 (high Dec 11), 119.92 (high Dec 10)

Support: 118.26 (low Dec 18), 116.30 (low Dec 17), 115.56 (low Nov 16)

USD/CAD: Eyes On CPI And Retail Sales Data

(long at 1.1570, target 1.1740)

• The CAD firmed against the USD as oil prices stabilized. The USD/CAD fell to 1.1567 today and we used the lower level to get long (at 1.1570), in line with our strategy. The strong short-term support levels are at 1.1549 (low Dec 15) and 1.1545 (10-dma) and we placed our stop-loss level below (at 1.1540).

• Today investors are focused on Canada’s November CPI reading (13:30 GMT). The median forecast is at the level of 2.2% yoy vs. the reading of 2.4% yoy in the previous month. In our opinion there is a risk of lower reading, which would be supportive for the USD/CAD bulls. The median forecast for core CPI is at 2.4% yoy vs. the reading of 2.3% yoy in October. Moreover, retail sales data will be released at the same time. A slight fall (by 0.2% mom) is expected after solid 0.8% mom rise last month. We expect a drop by 0.3% mom, which would be also good news for the USD/CAD bulls.

Significant technical analysis' levels:

Resistance: 1.1674 (high Dec 15), 1.1680 (high Jul 9, 2009), 1.1725 (high Jul 8, 2009)

Support: 1.1549 (low Dec 15), 1.1545 (10-dma), 1.1516 (low Dec 12)