Week Ahead (jan 01-05)

Last week was the holiday week, as last Monday was holiday on Christmas party and then the party continued thru out the week as the volume dried up and the data were went insignificant, even though we have a good economic data from USA and all came better than expected. So last week and the 2006's last week finally over and now lets step into the first week of 2007 and here we're having a great amount of economic data coming out from G8.

Well Monday will be holiday on New Years day and very next day we having Manufacturing PMI data from German and as well from UK both the reports are expected to come softer and the softer data will not do any great thing on its currency. On Wednesday we having a very busy day of the week as Germans are going to release its Retail Sales numbers which is expected to come at 0.4% from the last months negative reading of -0.5%. Then SVME Purchasing Managers Index data will get out from Swiss. And finally the datas from USA the first of the days is ADP Employment Change which is the key outcome data for Fridays NFP numbers better reading more good to NFP, and then data of the day is ISM Manufacturing Index which is expected to come at 51 (which is above the boom/bust level 50) from the last months 49.5 reading which is the contracting level. And we're having a FOMC Minutes of Meeting. And the another set of very tradeable and watchable data is coming out from New Zealand is Trade Balance which is expected to come better than last months reading. On thursday we're having a inflation data from Swiss and Euroland, from both the economies inflation data is expected to come at unchanged data from their previous month readings. And then we're having a Service PMI from UK and Industrial Product Price Index from Canada which is the smaller part of inflation piece. And the key data for the day is ISM Non-Manufacturing Index is coming out from USA and is expected to come out at 58 from last months 58.9. Last days of the week is purely laid for the USA and Canada and on this day we're having a labor market data from both of this country, Canada is releasing its Employment and Unemployment Rate, Unemployment Rate will remain at unchanged at 6.3%. And USA's Uneployment Rate is also expected to remain at unchanged 4.5%. And the most and much awaited data of the week is Non Farm Payroll is coming out from USA by far most the very important data from US currency and then IVEY PMI is setting out from Canada which is expected to come at 50.5 from the level of 52.8 and the last piece of thing to watch is Feds Bernanke speaks.

So here i'll be keenly watching and i just love to trade on the data is
USD - ISM Manufacturing Index
NZD - Trade Balance
USD - ISM Non-Manufacturing Index
CAD - Employment Change
USD - Non Farm Payrolls

Week in Rewind (Dec 25-29)

The last week was the Christmas week and the datas and as well trading were pretty boring. Liquidtiy was dried up ahead of the Christmas party and as well New Year and no significant movement on the release the datas.

There were a significant number of US data releases during the week and the majority were stronger than expected. New home sales increased to an annual rate of 1.05mn in November from 1.01mn the previous month while existing home sales also strengthened to 6.28mn from 6.18mn as inventory levels dipped slightly. Consumer confidence rose to 109.0 in December from an upwardly-revised 105.3 the previous month and the Chicago PMI index also strengthened to 52.4 from 49.9 in November. The firm data pushed US 10-year bond yields back above the 4.70% level while expectations of a first-quarter interest rate cut were scaled back.
The Euro continued to gain support from a tough ECB stance on interest rates while the increase in Euro-zone money supply growth to a year-on-year rate of 9.3% for November maintained expectations of a first-quarter interest rate increase.
The Japanese economic data failed to provide significant support for the yen with the core annual consumer price increase held to 0.2% in November while the retail sales figures remained subdued. Unemployment fell to 4.0% in November from 4.1% while industrial output rose 0.7% for November. The Bank of Japan pointedly stated that an interest rate increase would be discussed at the January 17/18 policy meeting and this spared the yen from further aggressive selling pressure .
There was little in the way of UK economic data, although the latest house-price surveys remained strong with the Nationwide Bank reporting a further 1.2% monthly increase for December, which maintained the annual growth rate above 10%.
The Swiss franc remained under pressure against the Euro with lows around 1.61. The Swiss KOF index weakened to 1.60 in December from 1.75 the previous month which failed to offer any support to the Swiss currency which settled close to 1.22 against the dollar.

Currency Focus

JPY - The output index continued to rise in November, hitting a new record. It points to relative firmness in production. Inventory in electronic parts and devices declined while production rose. So for now, the possibility of inventory piling up and curbing production as feared has not become a reality. Looking forward, the movements in the output data are expected to be basically flat. We cannot confirm at this moment that the economy is feeling the effects of a slowdown in overseas economies, but it could became apparent in the future.

AUD - Global economic growth, far from fading away is actually quite robust. The Australian dollar is a great proxy for stronger economic growth.

CAD - If the Canadian dollar gains are based on the fact that the U.S. economy isn't slowing as much as previously thought, then we could see these gains erased in fairly short order. On the other hand, if they're commodity based in terms of expectations for cold weather ahead or the thought that geopolitical tensions could see the price of oil go higher, then we could push even a little bit stronger.

FX Trading Signals for Dec 28

Yesterday there was only one report which is quite good to trade and the numbers came in better than expectation but the numbers didnt hit my trigger. And today we have 3 reports are very good tradeable and all the 3 reports are coming out of USA. But trading in all these 3 reports are very difficult bcoz there will be possibilities of conflicting the reports (all coming at same time) which is very dangerous on the thin voulme trading week.

The 3 reports coming out from USA is Consumer Confidence which is expected to come at 101 and my triggers will be at 102 for Dollar long and for Dollar short anything below 100 reading. Chicago PMI is coming out at the same time and it expected to come at 50 and my triggers will be anything below 50 (contracting) will be very bad for Dollar and if it comes above 51 will be very good for Dollar. And the last report is Existing Home Sales which is expected to come at 6.20M.

Currency Focus

NZD/USD - This pair is threatning to go down below the 0.7000 level after making the high of 0.7030. If New Home Sales data comes better than expectations then for time being 0.7000 will be long way.

EUR/CHF - Trading very firm above 1.6000 level and currently trading between 1.6030 and 1.6010 a volatile of just 20 pips. Believe me 1.6000 is very strong support for this pair.

EUR/JPY - In the last few days this pair struck in tight range bound between 156.50 and 155.75 a volatile of 75 pips. As this pair is not giving any direction to the traders to go long in EUR or going long in YEN. Above 156.50 it shows more strength in EUR and cracks below 155.75 then YEN will seize the role.

EUR/GBP - Still trading firm above 0.6700 level as it suggest that EUR is not giving any chance to GBP to gain strength.

FX Trading Signals for Dec 27

This is the week belongs to Christmas holiday, on Monday the market was holiday and yesterday there were no meaningful economic reports to trade on and today only one meaningful report is coming out from USA which is worth to trade on...

1. Wednesday December 27, 2006 (1500HRS GMT) USA
We have a house sales report coming out from USA, in my point which is the very key to the market and mostly everyone speaking about the Housing Sector stabilisation. So New Home Sales is expected to come at 1.02M which is fractionally higer than the previous month figure of 1.00M. If it comes out at more than 1.05M i go short in EUR/USD and if it comes less than 1.00M i go long in EUR/USD. But be careful in trading bcoz volume will be very thin , it can move sharply either side or it may not react too much.

Currency Focus

USD - Headline income and spending was a touch below expectations, but the thing that will jump out at people is the zero growth reading on the core PCE deflator. It's a nice Christmas present for the Fed. It has moved half the distance toward the top end of their comfort zone. I'm sure they won't declare victory but they will be pleased.

GBP - The high level of employment in the UK means that less productive workers are also able to get jobs which obviously reduces overall productivity.

Currency Update

Dollar trading stronger against all majors, EUR/USD struggled to hold above the 1.3200, NZD/USD is now struggling to stay above 0.7000 level. Currently Cables is trading below 1.9600. USD/CHF is heading towards the critical resistence of 1.2200 level.

EUR/GBP - strong support lies at 0.6710, EUR/AUD is trading in very tight range between 1.6820 and 1.6770, EUR/CHF strong resistence is at 1.6035 and the strong support at 1.6000 level. EUR/JPY is resisting at 156.40 for some time now and 155.60 is the very strong support.

Kiwi dollar is heavily trading higher against Aussie dollar and currently trading at 1.1210 and Kiwi i also trading stronger against Yen above 83 level.

FX Trading Signals for Dec 22

Let's review what happened earlier today. We had the two UK reports coming out, the Current Account and the GDP. The annualized GDP came out better than expected by 0.2%. On the other hand, the Current Account came out worse than expected by -1.7 billion. So I stayed out because of the conflict. We saw GBP/USD strengthen first on the back of the better than expected GDP, then it dropped like a rock probably on the back of the negative current account figure. Waste of two reports that would give perfectly beautiful trades if they were released on separate days. Unfortunately these reports generally do come together.

Then we had U.S. GDP that was revised down to 2.0%. We got a long signal on GBP/USD, but I immediately exited with minimal profit, because the GDP Price Index came out conflicting better than expected, and since inflation is on top of everyone's mind, that created a serious conflict, and completely muted the GDP move, and then reversed. Good that we exited early.
The Canadian reports came out both bad for the CAD, and I told everyone that the USD/CAD will probably hit the 1.1560 level, which it did, it went up to 1.1564, thus creating a move of 60 pips total. The unfortunate part however, is because we were fiddling around with the U.S. reports and the GBP/USD pair, by the time I looked at the USD/CAD pair, it already broke the 1.1530 level, and I simply didn't want to chase that move. Basically, another waste of perfectly good three reports that would give absolutely beautiful trades if they were released on their own, but because they were released together, we couldn't quite take advantage of them. These reports don't normally come together...I don't know why the governments bunched them in like that...probably due to Xmas.

Then we had the U.S. Philly Index come out. It came out at -4.3. Our long trigger was at -5 or more negative, so it didn't quite hit our trigger. GBP/USD did move up by about 18 pips upon release of this report.

So lets get thru for todays happenings on FX market...

1. Friday, December 22nd, 2006 (4:30 am New York Time) UK
We have Index of Services coming out of UK. I know very little about this indicator. I only started seeing it being released by Bloomberg in October and November of this year. I've never seen it before that, though I think this indicator has been around, just been too small for news services to care about it and release it. In October and November of this year, this indicator came out together with the UK GDP, so I have no idea if the market cares for it or not. Generally speaking, out of all the 7 major countries, UK probably cares about their services sector more than anybody else, but the indicator is only good as long as traders care about it, and due to this indicator being so young, I really doubt that it's going to cause something...we'll see. I won't be trading this, just observing for future reference.

2. Friday, December 22nd, 2006 (8:30 am New York Time) USA
We have another mess with two important but completely different indicators coming out of the U.S. Chances of conflicts are 50/50. We have Durable Goods X Transportation coming out, and we have PCE Core coming out for November. Remember, PCE Core is another inflationary indicator like CPI. The government cares about PCE core even more than they care about the CPI when it comes to making the interest rate decisions, but CPI seems to be a more fashionable indicator and moves the market more than the PCE. PCE will take more important position this month, because the only excuse the Fed had for talking up the dollar and not cutting the interest rates was the threat of inflation. After CPI came out flat or 0% earlier this month, the question is...was the CPI release a fluke, or the inflation indeed slowed down to such low degree? The way PCE data is derived is different than the CPI, so if PCE comes out way better than expected, it would cause some doubts whether the CPI reading was legit or not, and will be strengthening for the dollar short term. If PCE comes out lower than expected, it could confirm the low reading of CPI, reconfirm that the inflation is still super low, which would mean the Fed will do rate cut rather sooner than later. Looking at opinions of about 49 different economists, we have 22 of them that think that PCE will come out at 0.1%. 17 of them think that it will come out at 0.2%, and the remaining 12 think that it will come out at 0.0%. If we didn't have the Durable Goods released at the same time, I'd probably have triggers of 0.0% for long and 0.2% for short. But because of the possibility of Durable Goods conflict, we need to take more conservative approach. If Core PCE comes out at 0.3% or higher, I may possibly go short on GBP/USD. If it comes out at -0.1% or more negative, I may possibly go long on GBP/USD. I'll be honest with you...the Durable Goods report genuinely scares me. Even if it doesn't conflict, it may come out a second or two faster than PCE, and cause a spike in the price by 30 pips or more at the time of us clicking our order buttons, you add higher than normal spread to that, and you might end up getting filled at the bottom of the spike, and no matter how much the PCE deviates, there may not be enough fuel left for the price to continue declining or strengthening. So be extra careful on this one.

FX Trading Signals for Dec 21

1. Thursday, December 21st, 2006 (4:30 am New York Time) UK
We have two important reports coming out of the UK. We have GDP & Current Account coming out. Both are capable of moving GBP/USD by 30 to 50 pips. What happens if they conflict? The whipsaw massacre happens. Then you say, why not wait for both of them, and only trade if they don't conflict? Well...imagine one of these reports gets released 2 seconds faster than the other, and the first one already moved the market by 30-40 pips, and you see that the 2nd one doesn't conflict, and you enter at the top or bottom of the maxed out move...no good. GDP is a little bit bigger caliber report, but a very steady one with minimal deviations. Current account is a bit smaller caliber, but the deviations can be crazy. What I will do is look for a shock on the GDP number, a shock so strong, that it will make the current account look irrelevant. So GDP is expected to come out at 0.7%. If it comes out at 0.9% or higher, I may possibly go long on GBP/USD. If it comes out at 0.5% or less, I may possibly go short on GBP/USD. But the chances of such deviations are slim to none.

2. Thursday, December 21st, 2006 (8:30 am New York Time) USA
We have 4 different reports coming out. Another freaking waste of golden opportunities by slamming all these reports into release all at the same time. We have core retail sales coming out of Canada, which can move USD/CAD by as much as 50 pips or more. We have Canadian GDP coming out, which can also move USD/CAD by as much as 50 pips or more. We also have U.S. GDP coming out, which can move GBP/USD by 50 pips or more. We also have quarterly PCE coming out, which is important, but usually very steady, with very few deviations and surprises. I am going to have to ignore the golden Canadian reports, because of potential unpleasant conflict. I will focus on U.S. GDP, which is expected at 2.2%. If it comes out at 2.4% or higher, I may possibly go short on GBP/USD. If it comes out at 2.0% or lower, I may possibly go long on GBP/USD. PCE Core is expected at 2.2%, if it conflicts by at least 0.2%, I will exit my positions immediately.

3. Thursday, December 21st, 2006 (12:00 pm New York Time) USA
We have Philly Fed Index coming out of the U.S. It's expected that the number will come out at 4.0. If the number comes out at 15 or higher, I may possibly go short on GBP/USD. If the number comes out at -5 or more negative, I may possibly go long on GBP/USD. If my triggers are hit, I expect GBP/USD to move by at least 25 to 35 pips...

FX Trading Signals for Dec 19

1. Wednesday, December 20th, 2006 (4:30 am New York Time) UK
We have BOE minutes coming out of the UK. I am personally not going to be trading this report, at least not publicly. It's simply too messy and a little bit more risky than most other reports. A lot of crazy price action is going on, because a lot of different things are released out of minutes. Last time I traded it, I took a small loss. Main focus on this will probably be the vote count of how many members voted for no interest rate change earlier this month. It's expected that 9 out of 9 members voted for no rate hike. If the vote is 8-1 or 7-2 instead, that means a rate hike in future meetings is more likely, so GBP/USD may possibly increase by 30 pips or more. Such vote is extremely unlikely. Again, I am not going to be trading this report in my conference room.

2. Wednesday, December 20th, 2006 (4:45 pm New York Time) NEW ZEALAND
We have New Zealand quarterly GDP coming out, which is expected at around 0.5%, same as last quarter. If the GDP comes out at 0.8% or higher, it would match the strong growth as it was in the 1st quarter of this year, so I may possibly go long on NZD/USD. If it comes out at 0.3% or lower, I may possibly go short on NZD/USD. If my triggers get hit, I think we'll get at least 30 pips move on NZD/USD. AUD/NZD will probably give us at least 50 pips move, except remember, you have to do the opposite of what you do with NZD/USD. And if you happen to have GBP/NZD on your broker, that pair will probably move by over 100 pips.

Currency Focus

USD - Finally starting to see some positive traction on the deficit and we're seeing some benefit from the oil component. If we're stabilizing on the trade deficit, that will be a net dollar positive going forward. The post-meeting statement after the Feds interest rate meeting echoed what the Fed officials said recently. The Fed expected the economy to expand at moderate pace. They said the inflation pressures are likely to moderate over time. As usual they added the timing of additional firming depends on the outlook for inflation and economic growth. Fed continues to hold an inflation bias, the market dismisses that and has dismissed that for quite some time, and I see no reason the market would become more concerned about the Fed tightening unless the inflation news becomes more worrisome. The message here is that the Fed is going to keep policy unchanged for an extended period of time. (RETAIL SALES) It underpins the US Federal Reserve's belief that the US economy is expanding at a moderate pace, and it looks like Christmas has started off on a firm footing. So yesterday we've a solid numbers from the Trade Balance and now today we have a great numbers from the Retail Sales. Now lets wait for the Inflation data and what it stores.

GBP - The November inflation data will not be very well received at the Bank of England, and will undoubtedly fuel expectations that interest rates are headed higher in 2007. I wouldn't get carried away by the CPI data. I fear retail sales Thursday could be on the soft side. The fog surrounding the outlook for UK interest rates may now be clearing. However, data later in the week may not be so supportive. In particular, retail sales which surprised on the upside last month are likely to disappoint this time around, which may make for a choppy week for the pound. The rise in RPI inflation ... will heighten concerns over a pick-up in wages growth in the forthcoming pay round. As such these numbers support our view that a February rate hike is still a bit more likely than not. CPI data will give hawks on the MPC more ammunition to argue the case for a further rate hike next year, perhaps at the February inflation meeting, and should help provide a further boost to sterling in the near term. Now higher infation and higher average earnings will put immense pressure on BoE MPC on further rate hikes. A much better than expected result in UK unemployment rolls sparked a small rally in the pound on an otherwise uneventful night in the currency markets. UK employment contracted by -5.7K versus expectations of a rise of 4K. Furthermore, data from the month prior was revised lower to -3.6K from 1.2K originally reported while average hourly earnings improved as well rising to 3.8% versus 3.7% forecast.

JPY - The possibility of a (BOJ) rate rise next week is falling, so it's hard to buy the yen. It's a lot easier to buy yen crosses.

AUD - Clearly, businesses still see recent strong trading as being temporary in nature, with slower growth in prospect in the face of tighter monetary policy, slowing global (especially US) growth, and the drought. Our assessment is also that domestic demand will slow, but that core inflation is still likely to remain above the target range till mid-2007. Hence, the most likely rate outcome is for the Reserve Bank of Australia to be on hold for a considerable time period while it assesses the impact of the tightening it has already delivered...My view has been that core inflation pressures are continuing to build in the economy, and there will be insufficient evidence that the previous three rate increases have slowed the economy enough to give the bank confidence that inflation will slow.

CAD - The bank's comments point to unchanged policy at the next fixed announcement date on Jan. 16, and likely beyond. We continue to expect rates to remain stable through 2007. The Canadian trade picture is continuing to soften, whereas in the U.S. their trade deficit shrank substantially which of course is a good thing. Clearly a Canadian dollar negative and indeed we are seeing a further push in that direction. It has indeed played out precisely as you'd expect

FX Trading Signals for Dec 13

1. Wednesday, December 13th, 2006 (8:30 am New York Time) USA
We have US retail sales coming out. We have the headline number and the number X autos. Autos is a very expensive and volatile item, which can greatly throw off retail sales either direction, therefore most economists focus on the X autos number. X autos is expected to gain 0.3% in the month of November, versus a loss of -0.4% back in October. If the Retail Sales X autos come out at 0.5% or higher, it would signify that the month of November not only recovered the losses in retail sales throughout October, but even came ahead. So if the number comes out at 0.5% or higher, I may possibly go short on GBP/USD, since it would be positive for the U.S. dollar. On the other hand, if the number comes out at 0% or negative, I may possibly go long on GBP/USD. No gains in retail sales in a holiday month of November, after a huge drop of -0.4% in October would be looked at as very negative for the dollar. So if the number comes out at 0% or negative, I may possibly go long on GBP/USD. If the headline number conflicts with the x autos number by at least 0.2% or more, I will be looking to exit right away. If my triggers are hit, I expect this report to give us at least 30 to 50 pips, depending on the deviations.

2. Wednesday, December 13th, 2006 (4:45 pm New York Time) NEW ZEALAND
We have New Zealand retail sales coming out for the month of October. It's expected to come out at around 0.1%, which is a relatively small gain, due to a huge gain of 1.2% back in September. If the number comes out at 1.0% or higher, it would be a very pleasant surprise for NZD, so I may possibly go either long on NZD/USD or short on AUD/NZD. If the number comes out at -0.9% or lower, it would be the biggest drop since February of 2004, and would be shockingly bad in the short term for New Zealand dollar. So if the number comes out at -0.9% or lower, I may possibly go short on NZD/USD or go long on AUD/NZD.

FX Trading Signals for Dec 12

This is one of the best trading day, here we're going to see whole lot of heavyweight economic data coming out...The only two things that i'll be keenly waiting to trade are CPI from UK and Trade Balance from USA and anything hawkish or dovish stance from US Fed...

1. Tuesday, December 12th, 2006 (4:30 am New York Time) UK
We have CPI coming out of UK. It's a biggie, because it's an inflation measure, and this reading may help the UK government decide whether to do another rate hike or not. My focus will be the monthly headline number, which is expected at around 0.2%. If it comes out at 0.3% or higher, I may possibly go long on GBP/USD. If it comes out at 0.0% or lower, I may possibly go short on GBP/USD. Just watch out for the core yearly number, which is expected at around 1.5%. If the yearly core conflicts by even 0.1%, I would exit my position immediately, and stay out. Reason my short trigger is higher, is because the consensus at 0.1% or 0.2% is very split, however almost nobody is expecting 0%, and nobody is expecting 0.3%. If my triggers are hit without conflicts, we should probably see the pound move by 50 to 120 pips in the first hour of this report.

2. Tuesday, December 12th, 2006 (5:00 am New York Time) GERMANY
We have Zew Economic Sentiment coming out of Germany. This is one of the rare reports out of a E-12 country that actually matters and moves the market consistently. It's expected to come out at -25. If it comes out at -30 or more negative, that would be the lowest reading in many years, if not ever, plus it would be a psychologically bad number being over -30, almost nobody is expecting that, so if it happens, I may possibly go short on EUR/USD. If it comes out at -19 or less negative, I may possibly go long on EUR/USD, because -19 or or less negative would be the highest reading since August, it would be below the psychological -20 level, and would signify a drop of almost 10 points from previous number at -28.5. If my triggers are hit, I expect at least 20 pips move on this one.

3. Wednesday, December 12th, 2006 (8:30 am New York Time) USA
We have U.S. trade balance coming out. It's another biggie. Remember, the more negative the trade balance, the more money flows out of the United States, because it imports more than exports, and that devaluates the dollar by a simple principal of supply and demand. I'd probably want to see a deviation of at least 2 billion to be safe on this one. The expectation is -63 billion, so if it comes out at -65 billion or more negative, it would be bad for the dollar, so I may possibly go long on GBP/USD. If it comes out at -61 billion or or less negative, it would be good for the dollar, so I may possibly go short on GBP/USD.

4. Wednesday, December 12th, 2006 (2:15 pm New York Time) USA
We have FOMC interest rate statement coming out of the U.S. It's widely & unanimously expected that the U.S. will keep the rates unchanged at 5.25%. I mean, this is like 99.99% sure. If for some reason they hike the rate to 5.50%, I may possibly go short on GBP/USD, since it would be good for the dollar, or if they cut the rate to 5.00%, I may possibly go long on GBP/USD, since it would be bad for the dollar. But you probably have a bigger chance of seeing a flying pig tomorrow, than U.S. doing anything with the rates :) It's highly unlikely. What I will be focusing on is the comments after the rate hike. Most likely the comments will be hawkish, stressing the inflation threats. If the Fed says anything directly about another rate hike, I may possibly go short on GBP/USD. If they make a direct comment about cutting rates next year, I may possibly go long on GBP/USD. Unless they make a directly related interest rate comment, I won't be trading this.

FX Trading Signals for Dec 11

Only one report, and it might be a tough one to trade, because of two conflicting figures, but I think we could squeeze something out of it.

1. Monday, December 11th, 2006 (4:30 am New York Time) UK
We have UK Trade Balance coming out of UK. We will actually have three figures on the trade balance, and we will also have PPI numbers coming out. PPI output is more important than PPI input. PPI stands for Producer Price Index, and it's an inflation measure, not a very reliable one, because it only covers producer prices, but it can shock the market if it deviates significantly. The trade balance here is the most important figure in my opinion, assuming that PPI doesn't do anything crazy. The biggest focus will probably be the visible trade balance, which is expected at -6,600 million, or -6.6 billion. A number of -7,000 million or more negative would be unexpected, so if it happens, I may possibly go short on GBP/USD. A number of -5,998 million or less negative would be this year's high, by beating April's number by only 1 thousand, April's number was -5,999 million. So such number would be positive for the pound, so I may possibly go long on GBP/USD. Watch out for conflicts on the monthly PPI numbers. PPI input is expected at -0.1%, output is expected at 0%, and output core is expected at 0.1%. If any of them come out deviating by at least 0.2%, as a conflict to the trade balance, I suggest staying out.

FX Trading Signals for Dec 08

We have a few reports coming out tonight. We have the German trade balance, Canadian housing starts, U.S. non-farm payroll, and U.S. consumer sentiment. I'll be keenly watching those data but NFP is the very most data to lookout for.

1. Friday, December 7th, 2006 (8:30 am New York Time) USA
We have non-farm payroll coming out. Expectations are at 100K. After the ADP Employment that came out at 158K, it seems like most people will be expecting a surprise on the upside rather than downside. If the NonFarm number comes out at 150K or higher, I may possibly go short on GBP/USD. If the number comes out at 69K or lower, I may possibly go long on GBP/USD. WATCH OUT FOR REVISIONS of previous number at 92K. If the previous revision comes out at 20K difference up or down and it's conflicting, exit immediately. Also, keep in mind the unemployment rate, which last month was at 4.4%, and now is expected at 4.5%. If the unemployment rate conflicts by at least 0.2% against the non-farm payroll, I will take my profits or losses, and exit the position.

Currency Focus

EUR - Trichet is not using any of the more hawkish
language to indicate a rate hike in the next two
meetings, and this is somewhat disappointing for those looking for a clear-cut sign of a rate hike. His comments are disappointing for euro bulls.

GBP - This will have been an open and shut case for the Monetary Policy Committee. January is also shaping up to be a formality, so roll-on February. The continued acceleration in house prices will heighten the Monetary Policy Committee's concern expressed in the minutes of the November meeting that strong housing market activity poses an upside risk to its forecast for household spending. Today's decision was no surprise but people should not be fooled into thinking interest rates have definitely peaked. It is still a 50:50 call as to whether interest rates go up again in the New Year.

JPY - The yen strengthened against the dollar, and rebounded from the lows versus the sterling and the euro on the rising expectations of a Bank of Japan rate hike as early as this month. Several Bank of Japan policy board members, including Atsushi Mizuno and Kiyohiko Nishimura have indicated that the bank may raise rates earlier than the market expects. Following recent BOJ comments, the market is quickly shifting towards a view that the central bank will hike rates before the year-end if machinery order data and the tankan survey are in line with its outlook of the economy.

AUD - We saw some strength in the Australian dollar strengthened after a government report showed the Australia economy added 36,200 jobs in November, exceeding the estimate of 10,000. The unemployment rate was maintained at a low level of 4.6%, also beating the forecast of a rises to 4.8%. The Aussie rose from 0.7840 to 0.7875 against the dollar on the strong job report. But the Australian dollar has weathered a lot of negative economic data this week. With GDP faltering a lot of people are calling an end to rate hikes, most people had become bearish the AUD by this morning. Then the employment data showed yet again that the economy remains at full stretch, and the AUD has escaped once again to the upside.

ECB raised, other 4 at unchanged

Well all the Central Bank's rate hiking meeting is over, as by me and by everyone anticipated only ECB hiked the rates by 25bps and other four like BoC, BoE, RBA and RBNZ all kepts its interest rate unchanged. So now everyone will wait for the US interest rate meeting on December 12...

ECB rates up by 25bps to 3.5%

ECB raised the interest rate by 25 bps to 3.5% from 3.25%.
ECB Trichet Speech...
Trichet said "Looking ahead, acting in a firm and timely manner to ensure price stability in the medium term is warranted." And then he said that ECB ECB "will monitor very closely all developments so that risks to stability over the medium term do not materialise." ECB interest rates are still low, and the monetary policy remains accommodative, commented by Trichet. Money and Credit growth strong, and liquidity in the euro area ample by all plausible measures," Trichet said. This rate hike is intended to counter inflation risks, anchor inflation expectations and support growth.

BoE Interest Rate Unchanged at 5.0%

Bank of England
BoE kepts its interest rate unchanged at 5.0% in todays meeting. And the minutes of the meeting will be published on Dec 20. In its quarterly economic projections, the central bank said it expects the annual CPI inflation rate to pick up in the near-term to a peak of around 2.7 pct towards the end of this year, before easing back quite dramatically towards the 2.0 pct target over a two-year horizon.

FX Trading Signals for Dec 07

1. Thursday, December 7th, 2006 (7:00 am New York Time) UK
We have interest rate statement coming out of UK. It's expected to stay unchanged at 5%. If for some reason UK hikes the rate to 5.25%, I may possibly go long on GBP/USD. If they bring the rate down to 4.75%, I may possibly go short on GBP/USD. These scenarios are pretty much impossible though...most likely UK will leave the rates unchanged. What will be important are comments after the rate announcement. If comments are hinting towards another rate hike next year, I may possibly go long on GBP/USD. If comments are suggesting that there will probably be no more rate hikes again, then I may possibly go short on GBP/USD.

2. Thursday, December 7th, 2006 (7:45 am New York Time) E-12
We have interest rate statement coming out of E-12. It's expected to be raised from 3.25% to 3.50%. If the raise happens, it's already priced in, but still i go long in it for 30 odd pips. However, if Euro zone changes the rate unchanged at 3.25%, I may possibly go short on EUR/USD. Or if the rate is raised to 3.75%, I may possibly go long on EUR/USD. Such scenarios are also extremely unlikely.

3. Thursday, December 7th, 2006 (8:30 am New York Time) E-12
Then we have Trichet speech, commenting on the interest rate statement. If Trichet hints towards more rate hikes in the future, I may possibly go long on EUR/USD. If Trichet hints that the current rate is comfortable and they most likely won't need to do another rate hike any time soon, then I may possibly go short on EUR/USD.

FX Trading Signals for Dec 06

1.Wednesday, December 6th, 2006 (4:30 am New York Time) UK
We have Industrial Production coming out of UK for the month of October. It's expected that the number will show slight growth of 0.1%. A negative number would be bad for the pound, because it would be the first decline since second quarter, on the other hand a number of 0.3% or above would signify the highest reading on this report since March of this year. In May it came out at 0.3%, but it wasn't necessarily considered high, because the month before the reading was at -0.5%. I hope I didn't confuse you with all these numbers :) Let me make it very simple. If the number comes out at -0.1% or more negative, I may possibly go short on GBP/USD. If the number comes out at 0.3% or higher, I may possibly go long on GBP/USD. I am hoping that if my triggers are hit, GBP/USD will move by at least 50 pips. Though it may depend on where the price is at before the report. I would think that a move of at least 30 pips is extremely likely if my triggers are hit. Just watch out for conflicts out of Manufacturing Production, which is expected at 0.2%. Usually the reports don't conflict, because manufacturing production is part of the industrial production.

2. Wednesday, December 6th, 2006 (8:15 am New York Time) USA
We have ADP Employment report coming out. It's supposed to give clues on the non-farm payroll, except ADP, which stands for Automatic Data Processing, samples much smaller part of the labor market. If ADP reads at 175K or above, I may possibly go short on GBP/USD. If it reads at 50K or below, I may possibly go long on GBP/USD. Will be very careful with this report, the move may be short lived. If I don't see any moves in the first minute after this number is released, I will exit.

3. Wednesday, December 6th, 2006 (3:00 pm New York Time) NEW ZEALAND
We have New Zealand interest rate statement coming out, which is expected at 7.25%. New Zealand gave some people hope for another rate hike earlier this year, by saying that "they see no reason to keep the rates unchanged". We were expecting a rate hike back in October, but it didn't happen due to some bad data released out of New Zealand earlier. There is still remains about 5% chance that New Zealand will hike their rate tomorrow, but it's extremely unlikely. If they hike the rate, I may possibly go short on AUD/NZD, and expect a move of about 150-200 pips. If there is no rate hike, which is 95% chance, I will look for some comments after the rate announcement, and if they are hinting of future rate hikes next year, then I may possibly go short on AUD/NZD. If they hint of no plans to do anymore rate hikes, I may possibly go long on AUD/NZD. We'll see...it'll depend as we get closer to this. But if the rate hike happens to be 7.50%, it would probably be a very nice trade on New Zealand Dollar strength, so either a long on NZD/USD or short on AUD/NZD.

4. Wednesday, December 6th, 2006 (7:30 pm New York Time) AUSTRALIA
We have Australian employment report coming out. It's expected to come out at around 10K. If it comes out at 30K or above, I may possibly go long on AUD/USD. If it comes out negative, I may possibly go short on AUD/USD. If these triggers are hit, this trade should be good for about 30 pips on AUD/USD. If you want bigger range, you can trade the AUD/NZD pair. I don't trade it on Australian reports, because my broker widens the spread to 25 pips on that pair, so it becomes too risky. Watch out for unemployment rate conflicts. Unemployment is expected at around 4.7%. If it comes out higher than that, that would be bad, so a conflict on a positive employment change number. If it comes out at 4.6% or lower, it would be a conflict on the negative employment figures number.

Fukui > Proceed with rate hike slowly

BoJ Governor Fukui Speech
“If the economy and prices develop in line with our medium-term outlook, we will maintain low interest rates and gradually make adjustments to interest rates. We will proceed with rate hikes slowly, which is not to hurt economic expansion but to support sustained growth. At every board meeting, we discuss economic and inflation developments and other various issues. We will continue checking data against our outlook.”

BoC interest rate at unchanged

Banl of Canada kepts its interest rate unchanged at 4.25% on todays meeting due to economy growth is below the expectations largely on weaker export. And they said that the interest rate will remain at these level for medium term. And onto inflation they said that by mid 2007 they'll bring the inflation back to the 2%. And also they stated that world growth, higher commodity prices and strong employment market in both Canada and USA.

USD - Clearly the downtrend in the USD has continued over the last several trading sessions. Major economic news will be released this week, starting with ISM non-manufacturing Tuesday and followed by ECB interest rate statement Thursday… and, of course, non farm payrolls on Friday. If you are swing trading, look for bounces in the USD to get short. If you are intraday trading, watch for a strong trend of the day (in either direction) and stick with it. Do not get caught trying to pick tops or bottoms in this market… the volatility is to high and the moves are too big.

EUR - I retain the view that robust growth and ample liquidity growth will imply that the Bank remains vigilant to the upside inflation risks. A tighter labour market should eventually put upside pressure on wages and inflation and should continue to keep the ECB vigilant to the upside risks to price stability and still favour more rate hikes in early 2007.

GBP - Sterling was unable to strengthen through the 0.6720 level against the Euro on Monday and was also blocked below 1.9850 against the US dollar. The UK currency drifted weaker in early Europe on Tuesday after another disappointing retail sales report with a move to 1.9750 against the dollar.

JPY - The BoJ's Mizuno has fuelled further yen gains after raising the possibility of a BoJ hike in rates. For the moment the market doesn't see a rate hike before the first quarter of next year, but this may be the first sign that overall the BOJ maybe more hawkish in the future.

AUD - A combination of rising interest rates, falling consumer confidence, the extended period of high gasoline prices and the worsening drought are all taking their toll on service sector activity. Significant headwinds will continue to buffet the economy as we move into 2007. It is apparent that a sustained period of stable interest rates would greatly assist the service sector in finding its feet in 2007. There is obviously no expectation that the RBA will look to change rates tonite. The ... market has now virtually priced out the possibility that the RBA could hike rates in the first quarter next year.

CAD - The Bank of Canada is expected to announce that it will keep its interest rate unchanged at 4.25% on Tuesday morning. USD-CAD is holding on to 1.1375-1.1400 support ahead of today’s BoC meeting. Any strong acknowledgement of the recent softer growth phase could weigh further on the CAD. The main support for the CAD at the present time is the fact that the market is already short. Net spec CAD shorts on the IMM did fall as of last Tuesday from 58.893 contracts to 40,282 –although the latter is still a sizeable position. Upside is favoured on USD-CAD in the short-term while above 1.1375-1.1400.

Interest Rate Decision from Central Bankers

So from today and in the next few days we'll hang up with the central banks meeting from 5 central banks like Bank of Canada, European Central Bank, Bank of England, Reserve Bank of New Zealand and Reserve bank of Australia all are sitting on the bench to decide the interest rate. Out of this 5 central banks the only one central bank namely ECB is going to hike the rate but others are not sure. May be we can see some action in meeting of BoC and everyones eyes will be on the meetings comments like whether the central bankers are going to hike the rates or may they take soe back step.

Tuesday
1400HRS > Bank of Canada Meeting
2330HRS > Reserve Bank of Australia
Wednesday
2000HRS > Reserve Bank of New Zealand
Thursday
1200HRS > Bank of England Meting
1245HRS > European Central Bank meeting

FX Trading Signals for Dec 05

1. Tuesday, December 5th, 2006 (4:30 am New York Time) UK
We have Services PMI coming out of UK. Services indicators are not as important as manufacturing indicators, because services is a much more stable industry. Whether the economy is doing good or bad, you still need to go to the doctor, or use accountant, or lawyer, et cetera. So the market doesn't care much about services indicators, however if there is a surprise, there is usually a short term reaction to it. Most economists expect this number to come out between 58 and 59. If it comes out at 60 or above, I may possibly go long on GBP/USD. If it comes out at 56.9 or below, I may possibly go short on GBP/USD. This trade should be good for about 30 pips if my triggers are hit...assuming that the price is not near some strong levels right before the release.

2. Tuesday, December 5th, 2006 (8:30 am New York Time) USA
We have Non-Farm Productivity and Unit Labor Cost coming out of the U.S. This report is not that hot, but may create a move of around 30 pips in the GBP/USD pair if the deviation is significant. It's a report for 3rd quarter, and the expectations is that it will come out at around 0.5%. If it comes out at 0% or negative, that would be bad for the dollar, so I may possibly go long on GBP/USD. If it comes out at 1% or higher, that would be good for the dollar, so I may possibly go short on GBP/USD. Again, this is a very short term trade.

3. Tuesday, December 5th, 2006 (9:00 am New York Time) CANADA
We have interest rate statement coming out of Canada. It's expected that Canada will keep the rates unchanged at 4.25%. If they drop rates to 4%, I may possibly go long on USD/CAD. If they raise rates to 4.5%, I may possibly go short on USD/CAD. These scenarios are extremely unlucky, especially a rate hike, so the main focus will be the comments out of Bank of Canada at the moment of decision. If they say that they are planning to do a rate cut next year, I may possibly go long on USD/CAD.

4. Tuesday, December 5th, 2006 (10:00 am New York Time) USA
We have U.S. non-manufacturing index coming out of the U.S. Another not so strong report that measures services. It's really nothing compared to the manufacturing report we had last Friday. Expectations that it will come out at around 55 or so. If it comes out at 58 or higher, I may possibly go short on GBP/USD. If it comes out at 52 or lower, I may possibly go long on GBP/USD. We'll be lucky to get a 30 pips move out of this report. 20-25 pips is a more realistic expectation, so plan accordingly. I'll take into consideration the other reports before this trade, and watch out for factory orders conflicts. Factory orders are expected to come out at -4%. A more negative number is bad for the dollar, and a more positive number is good for the dollar.

5. Tuesday, December 5th, 2006 (5:30 pm New York Time) AUSTRALIA
We have Australian interest rate statement. Expectations is unchanged rate of 6.25%. Of course if a rate hike to 6.50% or higher, it's a possibly long on AUD/USD. And a rate cut to 6% is a possibly short on AUD/USD, but the chances of either way rate deviations are pretty much at zero. You can trade the rate decision if you believe in the impossible :) I'll be watching it, and will be focusing on the comments at the time of the rate hike. If there are hints towards more rate hikes, I may possible go long on AUD/USD. If there are hints towards rate cuts, then I will go short on AUD/USD, but I highly doubt that it would happen.

6. Tuesday, December 5th, 2006 (7:30 pm New York Time) AUSTRALIA
We have Australian GDP coming out for the 3rd quarter. It's expected to come out at around 0.5%. A reading of 0.2% or lower would be the lowest reading in over 2 years, so I may possibly go short on AUD/USD. A reading of 0.8% or above would be the highest reading in over a year, so I may possibly go long on AUD/USD. If your broker has fixed spreads on AUD/NZD, then I suggest trading the AUD/NZD pair, because it will probably give you twice bigger range. We'll probably get only about 25-30 pips on the AUD/USD, if my trigger gets hit, on the other hand, AUD/NZD would probably get at least 45-50 pips.

Currency Focus

USD - The dollar rout continues unabatedly further fuelled by the surprisingly low ISM manufacturing number on Friday. The number came out below the psychological threshold of 50 –namely at 49.5. During the Greenspan era ISM numbers below 50 did trigger rate cuts from the FED. No wonder the long US interest rates took a further dive alongside the dropping dollar in the wake of the release. Now Fed are keenly keepinh eye on Core inflation which is at
the higher side. Now the Dollar weakness is purely driven by the people who are more familiar with the slowdown in US Economy. Most of the leading indicators are pointing the Dollars oversold region, still larger part of Dollar selling is not ruled out just coz we need to wait for Fridays crucial data "Non-Farm Payroll". And even we need to wait for ECB President Trichet any dovish on Euro if does so then it'll be a sigh of relif for Dollar.

EUR - Well most of the ECB members are not happy with the Euro gains against the Dollar or even Yen. So this week we have the Interest rate meeting and later a speak from ECB President Trichet. There is room for additional rate hikes in 2007. Survey and hard data have confirmed the strength and resilience of current expansion, particularly in Germany, and liquidity is still ample in the euro area.

GBP - Manufacturers enjpyed a very strong year on significant increase in exports but the real worry comes in 2007 on the sign of slowdown of worlds economy. In the past we saw a good numbers like Construction sector which is in good growth. Inflation is in under control and PMI is optimistic.

JPY - Japans Q3 Capital Spending dropped unexpectedly to 12% worse then expectations of 15.3%. Now the Coincident index and Leading Economic index which are due in this Wednesday to know the Japans Economy clues. On interest rate, BoJ is worried about the business activity which is peaking-out.

AUD - The 3 rate hikes is still not factored into the Aussie Dollar, and if we see on more rate hike in this week then in 2007 housing market, builders and traders will struggle in the second half of 2007. Looking ahead to the next six months, we believe low vacancy rates will push rents higher and that should encourage more building. Overall, we still remain pretty upbeat on house building in Australia.

Dollart Weak and Yen Gains

Dollar hammered after worst numbers of ISM Manufacturing Index,
against Swiss Franc it kissed the level of 1.1900 mark. It made
the low of 1.3350 against Euro, against Sterling it made the low
of 1.9850. And agsinst the Yen it made the low at 115 mark. But
nothing is happening in Dollar-Commodity pairs, against Loonie trading firm above 1.1400 mark and against Aussie it was weakned a little bit and trading just above 0.7900. But Dollar somewhat slightly stronger against Kiwi and even it rebounded very nice after the worst ISM Manufacturing Index.
EUR/JPY - Currently trading below 154 level, after making the high
of 154.09. EUR/CHF pair is back at the level of 1.5900 after making
the low of 1.5858. GBP/JPY failed to move above 229 mark and currently
trading just abve 228. Yen was really trading very stronger against
Loonie as it suggest that Crude was weaker, Loonie was weaker by 150
pips. AUD/NZD pair struck in the range of 60-70 pips of volatality.

FX Trading Strategy for Dec 01

1. Friday, December 1st, 2006 (4:30 am New York Time) UK
We have UK Manufacturing PMI coming out. Expected number is 54.0 If it comes out at 55.0 or above, I may possibly go long on GBP/USD. Remember, the highest this report came out this year was 55.1, so anything over 55 would be good for the pound in my opinion. On the other hand, if this report comes out at 52.9 or lower, that would be the lowest reading since March of this year, and a strong psychological barrier being broken under 53, so I may possibly go short on GBP/USD.

2. Friday, December 1st, 2006 (7:00 am New York Time) CANADA
We have Canadian employment change coming out. It's expected at 15K. If it comes out at 0 or negative, I may possibly go long on USD/CAD, because it would be bad for the Canadian dollar. On the other hand, if it comes out at 30K or higher, that would be a beacon of hope for the Canadian dollar, after such horrible GDP reading earlier today, and reconfirm strength in the Canadian employment market after super positive number previous month at 50.5K. I will be watching out for Canadian unemployment rate to make sure it doesn't conflict. It really shouldn't, but if for some reason unemployment rate conflicts by even 0.1%, I would exit the trade immediately. So at a 30K or higher reading, I may possibly go short on USD/CAD.

3. Friday, December 1st, 2006 (9:00 am New York Time) USA
Then we have Bernanke speech coming out. Most likely Bernanke will be hawkish again, trying to talk the dollar up. He might even do something ridiculously crazy as mentioning a possibility for another rate hike. He probably won't be dovish, so his speech should be short term good for the dollar. I'll probably be looking for a good entry on GBP/USD short half an hour to fifteen minutes before the speech. It will all depend on what levels the GBP/USD is at before the speech.

4. Friday, December 1st, 2006 (10:00 am New York Time) USA
Then we have manufacturing PMI coming out of the U.S. The market will probably be expecting a lower than expected reading, because some economists believe that Chicago PMI has a direct correlation to this number, and since it came out below 50 earlier today, they will probably be looking for weaker number than the expectation of 51.8. If the number comes out at 53.0 or higher, that should be extremely positive for the dollar, because not only will it come out better than previous month's number, but it would be better than September's number, which was at 52.9. So 53.0 or higher, would signify that I would possibly go short on GBP/USD, and look for a profit of about 40 pips or so...depending on where the pound is at before the report. Just remember, and be aware of those pound bulls if the price gets too low. On the other hand, if the Manufacturing PMI comes out at 50.9 or below, it would break the psychologically strong level of 51.0, and would show the lowest reading since June of 2003. So if it comes out at 50.9 or below, I may possibly go long on GBP/USD, looking to make hopefully at least 40-50 pips, depending on where the pound is at before the report.