Retail Sales from the UK came out much higher then expected at 0.9% vs 0.3% expected and sends especially GBPCHF significantly higher.
MAJOR HEADLINES – PREVIOUS SESSION
US
Yesterday's FOMC minutes gave USD/Majors not much to go by short term. FOMC showed incoming data was broadly as anticipated. Housing to remain a substantial drag but was not spilling into consumer spending with labor market remained tight. So the take is that, it looks like the FOMC is still a bit more concerned about inflation being to high rather than growth too low. US CPI should be the focus for EURUSD for the remainder of the week. A surprise to the upside meaning 0.3% should lead to break of 1.2765 and a reading of 0.1% should see the pair rally for a test of at least 1.2855.
UK
The retail sales for October is the biggest monthly gain since November 2005. This number is consistent with the MPC's expectation that consumer spending growth will remain firm. But GBPUSD remain vulnerable intra-day as market awaits US CPI which could send the pair a leg lower. We look to sell the pair if it breaks 1.8850 post US figures.
From yesterday:
JPY
Finally some impressive data out of Japan. The economy grew by 0.5% in Q3 compared to 0.2% in Q2. This should set the BOJ on a path of hikes looking ahead into 2007. For comparison the Euro-Zone Q3 GDP release today came out at 0.5%, the same as Japan. So we with an employment reading of 4.2% in Japan and rates at 0.25%, it should be a clear cut case for the BOJ in 2007 to begin to "normalize rates" as long as core CPI and labor costs continue to rebound. Technically we still look for a break of 115.55 in USDJPY and 147.55 in EURJPY to change the technical picture medium term.
NZD
The Kiwi remains under pressure from more then one front. NZDJPY has been "the" carry trade looking back over the past years, but we do not expect this to continue. As the Japanese recovery continues we expect unwinding of theses trade to start being in focus looking towards the end of 2006. Producer Prices input/output disappointed and we do not expect retail sales tonight of out of New Zealand to particular impressive either. Also next week's data event's should bring more selling interest to the NZD as kiwi trade balance and RBNZ cash rate decision should not be supportive. We are short NZDJPY from 78.15 and we look to add to this short if we see a break of 77.40.
FX ORDERBOOK
Euro/US Dollar
EURUSD (1.2811 @ 11:56 GMT)
Support:
1. 1.2460 daily base which coincides with 1.2465 38% retracement
2. 1.2320 double top form march 2006
3. 1.2260 bull trend line from March 2006
4. 1.1635 38% retracement (0.8350-1.3667), also low from 2005.
Resistance:
1. 1.2940 old top from August 2006.
2. 1.2980 long term inverse head-and-shoulder target.
3. 1.3175 upper bull trend channel from March 2006.
Resist.
1.2935
1.2873
1.2850
1.2811
1.2789
1.2750
1.2689
Support
British Pound/US Dollar
GBPUSD (1.8888 @ 11:56 GMT)
Support:
1. 1.8520 lower end of the bear channel from early August 2006.
2. 1.8500 daily base support.
3. 1.8325 wave high from March 2005.
4. 1.8090 wave support from July 2006.
5. 1.7330 long term bull trend support from 2001.
Resistance:
1. 1.9145 Old top from August.
2. 1.9215 old top from April 2005.
3. 1.9325 wave high from March 2005.
4. 1.9550 highs from december 2004.
Resist.
1.9170
1.9035
1.8961
1.8888
1.8825
1.8763
1.8628
Support
US Dollar/Japanese Yen
USDJPY (117.97 @ 11:56 GMT)
Support:
1. 116.50 wave low from late October.
2. 115.55 wave low from April (key level as it would take our weeky lower high/higher high, which would confirm accelerated downside)
3. 113.35 weekly base support.
4. 109.00 key support form confirmation of a monthly downward trend.
Resistance:
1. 119.20 choppy range base from early October.
2. 119.90 old top from mid-October.
3. 121.40 old top from December 2005.
4. 1250.00 50% retracement (form 147.63-101.67).
Resist.
119.27
118.59
118.30
117.97
117.62
117.23
116.55
Support
