FOREX: Euro Threatened as Irish Government Faces Election Loss

Key Overnight Developments

Swiss Franc Underperforms as Korea Conflict Fears Subside Australian Dollar Weaker as Prices Retrace NY Session Gains Japan’s Trade Balance Surplus Widens as Imports Soften Critical Levels

The Euro and the British Pound kept to narrow ranges in Asian trade, with sterling spiking higher only late into the session after the Bank of England’s Andrew Sentence – the standby hawk on the rate-setting MPC committee – said policymakers need to gradually raise interest rates. We remain long the US Dollar against the Euro, Japanese Yen and New Zealand Dollar.

Asia Session Highlights

Corporate Service Price (YoY) (OCT)

Merchandise Trade Balance Total (Yen) (OCT)

Adjusted Merchandise Trade Balance (Yen) (OCT)

Merchandise Trade Exports (YoY) (OCT)

Merchandise Trade Imports (YoY) (OCT)

BOJ’s Nakamura Speaks on Japanese Economy

Private Capital Expenditure (3Q)

Currency markets saw quiet trade in overnight hours, with the Swiss Franc underperforming the majors having surged earlier in the week as geopolitical fears eased amid fading concerns about an escalation of violence between the Koreas. The Australian Dollar also tipped lower, retracing some of its recent gains having followed Wall Street higher in North American trade.

Japan’s Merchandise Trade Balance surplus undershot expectations, printing at 821.9 billion yen in October. While this marks an improvement in the headline reading from the previous month, the outcome seems far from encouraging considering it comes courtesy of the weakest import growth in 10 months as opposed to robust overseas sales. Indeed, exports grew at an annual pace of just 7.8 percent, the weakest since November 2009. Given strongest Yen in over a decade, which ought to boost imports, such dismal figures seem to point to little more than the anemic state of Japanese domestic demand, reinforcing deflationary pressure and keeping the perennial low-yielder’s funding currency status firmly intact for the foreseeable future.

Euro Session: What to Expect

French Consumer Confidence Indicator (NOV)

Italian Business Confidence (NOV)

All eyes are focused on Ireland, with the ruling Fianna Fáil party expected to do poorly in a by-election in Donegal South West. This would reduce the government’s majority in the lower house of parliament (the Dáil) from three to two seats, making the possibility that the current administration will lose support before the budget vote on December 7 more likely. While the markets have arguably priced in the loss already considering it has been well-telegraphed in recent polls, a particularly skewed outcome in favor of the opposition may stoke risk aversion and compound selling pressure on the Euro.

The data docket looks lackluster, with third-quarter Swiss Employment figures amounting to the only bit of notable event risk. Turning to sentiment, stock index futures tracking the major European bourses are ticking higher ahead of the opening bell, hinting risk-correlated currencies may find a bit of support, absent shocking news out of Ireland of course.

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Forex: Euro, British Pound To Face Headwinds As Risks For Contagion Intensify

By David Song, Currency Analyst Mon Nov 22 12:30:00 GMT 2010 Talking Points

Japanese Yen: Higher Against Most Majors British Pound: Stands Ready To Aid Ireland Euro: Risks For Contagion Gathers Pace U.S. Dollar: Chicago Fed Index on Tap The Euro fell back from a high of 1.3785 during the overnight trade as Ireland opted to seek a bailout from the EU, and the single-currency may face increased headwinds going into the North American trade as the risks for contagion intensify. In response to the bailout, Moody’s Investor Services said that Ireland is likely to face a “multi-notch” downgrade, while European policy makers argued that it’s still premature to speculate on the size of the rescue package. In an effort to stem the risks for contagion, the EU announced that Portugal’s banking system is healthy and resilient, but went onto say that the euro-area continues to face an uneven recovery as the governments operating under the fixed-exchange rate system struggle to manage their public finances.

At the same time, European Union Economic and Monetary Commissioner Olli Rehn said that the issues Portugal faces are “very different” than Ireland’s as the country “has taken very bold decisions concerning fiscal consolidation and continuing its structural reforms,” but the risks for contagion could lead the European Central Bank to support the economy going into 2011 as it aims to balance the risks for the region. As fears surrounding the debt crisis exacerbates, the ECB may put its primary mandate on the line as it aims to restore financial stability, and speculation surrounding the outlook for monetary policy could play an increased role in driving price action for the euro as the central bank talks of reestablishing its exit strategy in the coming months. As the EUR/USD continues to hold below the 20-Day SMA at 1.3810, the euro-dollar may pare the rebound from the 50.0% Fibonacci retracement from the 2009 high to the 2010 low around 1.3490-1.3500, which could lead to a test of the August high (1.3333) in the coming days.

The British Pound pared the overnight rally to 1.6083 as the U.K. pledged to assist Ireland, and fears surrounding the European debt crisis could drag on the exchange rate as Britain struggles to manage its own public finances. U.K. Chancellor of the Exchequer George Osborne said that he stands ready to help the “friend in need” while speaking on the BBC radio, and went onto say that the U.K. has made “a commitment for a bilateral loan” in an effort to ease the turmoil in the European financial system. As the U.K. aims to curb its budget deficit and tightens fiscal policy, there could be increased pressures on the Bank of England to support the economy in 2011, but the stickiness in price growth could spur an increased split within the MPC as policy makers expect inflation to hold above target throughout the following year. As the economic outlook remains clouded with uncertainties, the GBP/USD may work its way back towards the 50-Day SMA (1.5874) to test for near-term support, but we should see the exchange rate push higher throughout the remainder of the year as it maintains the upward trend from May.

U.S. dollar price action was mixed overnight, with the USD/JPY bouncing back to reach a high of 83.56 on Monday, and we may see a clear trend develop during the North American trade as equity futures point to a lower open for the U.S. market. As the economic docket remains fairly light for Monday, risk sentiment is likely to dictate price action in the currency market, and we may see little reaction to the Chicago Fed’s National Activity index, which is expected to increase to -0.24 in October from -0.58 in the previous month, as speculation surrounding Ireland’s bailout takes center stage.

Will the EUR/USD Retrace The Advance From September As European Debt Woes Intensify? Join us in the Forum

Related Articles: Forex Weekly Trading Forecast - 11.15.10

To discuss this report contact David Song, Currency Analyst:dsong@fxcm.com

FX Upcoming

Chicago Fed National Activity Index (OCT)

Euro-Zone Consumer Confidence (NOV A)

ECB President Jean-Claude Trichet Delivers Annual Report

Fed's Narayana Kocherlakota Speaks on Monetary Policy

New Zealand Net Migration s.a. (OCT)

Contracts for 23 straight months.

Convenience Store Sales (YoY) (OCT)

Falls for first time in three-months.

Slowest rate of growth since April.

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Mon Nov 22 12:30:00 GMT 2010

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Kiwi Stands Out in Early Monday Trade; Euro Bid on EU/IMF Bailout

An interesting and exciting start to the week, with currencies trading all over the place and in different directions on the back of varying market drivers. The Euro has jumped out to some early gains on Monday with the weekend news of an EU and IMF bailout for Ireland of some Eur80-90B helping to bolster sentiment in the region. However, there are those who feel that the need for the bailout should be viewed as more of a net negative, with fears now spreading to other beleaguered economies within the Eurozone. Much of the attention from those with such views has no shifted over to Portugal, and it will be interesting to see how things play out and if indeed the Euro can sustain the positive momentum from the bailout news.

We continue to find it quite amusing that we now live in a world where news that recognizes major setbacks within the global economy is recognized with a positive sentiment reaction. Whether it is the latest bailout of Ireland, or the announcement from the Fed of more quantitative easing, the markets continue to translate these distressing actions as risk positive which continues to leave us highly concerned and distraught.

Another big story on the day has come out of New Zealand, with Kiwi getting slammed across the board following the news that S&P has revised its foreign currency sovereign debt outlook from “stable” to “negative.” The rating agency cited New Zealand’s “vulnerability to external shocks, arising from its open and relatively undiversified economy” as the main source for its concern. Interestingly enough, we have gone ahead and initiated a position in the Kiwi, but our position is long Kiwi against the Australian Dollar.

The Aud/Nzd cross has jumped well over 200 points on the day to more than double its average daily true range, leaving the hourly RSI above 80. This suggests that at a minimum we should see some form of a corrective move following the parabolic price action, and as such, the short trade makes sense. Fundamentally, New Zealand’s banking sector is largely owned by Australian banks and we contend that any fallout in New Zealand from the rating agencies could very well be a red flag for the Australian economy. Recent tightening actions in China should also not be ignored, and Australia is far more exposed to the fallout from such actions which ultimately will curb growth and force a material slowdown in the overdone Australian economy. This further supports our current Aud/Nzd short position.

Looking ahead, the European session is very quiet on the economic release front, with the only noteworthy data series coming in the form of some Swiss money supply due at 8:00GMT. Eurozone consumer confidence (-10 expected) is due out in North American trade at 15:00GMT, but not before the release of the only US data in the form of the Chicago national Fed activity index at 13:30GMT. On the official circuit, ECB President Trichet delivers his annual report at 15:00GMT, while Fed Kocherlakota speaks in South Dakota at 18:30GMT. US equity futures and commodities prices are fairly well bid on the day.

Written by Joel Kruger, Technical Currency Strategist

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Gold - FOREX Correlations Strengthen as Ireland Fuels Risk Aversion

Gold has been receiving an increasing amount of attention recently as the metal soars to new record levels. But you don’t have to trade gold to benefit from the metal’s recent volatility. In fact, many of the popular currency pairs have been moving in tandem with gold, offering forex traders an opportunity to piggyback on the uptrend or bet against it, with the added benefit of trading within the world’s deepest and most liquid market.

The following table includes the correlation between gold and the most popular currency pairs over various timeframes. A value close to +1 indicates a strong positive relationship between gold and the pair, while a value close to -1 indicates a strong negative relationship.

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Weekly Commentary: Gold – Forex correlations strengthened across the board this week, with intraday correlations in particular making a huge comeback. News flow was dominated by developments in the Irish debt crisis, which led to risk aversion across all financial markets.

Some readers may recall that the situation in Ireland began to impact markets as far back as last week, but at that time the damage was limited to the Euro. The U.S. dollar continued to fall against other currencies, while gold hit a new record high. Thus, we saw the correlation between gold and EUR/USD weakened significantly, while that between gold and the other pairs held firm.

But that was last week. This week EUR/USD continued to fall, but this time other dollar-rivals joined in the declines. Gold fell sharply as well. That has allowed the correlation between EUR/USD and gold to rebound notably. At the same time, gold’s correlation between other pairs strengthened even further.

That being said, now is probably not the time to jump into EUR/USD for proxy gold exposure. The long-term relationship between the Euro and gold is highly unstable, and the fundamentals do not support a strong positive correlation. Gold is garnering support from the view that it is a safe haven against the debauchment of fiat, or “paper,” currencies. Like in the United States, monetary policy in the Eurozone is extremely loose, which leads to a weaker currency all else equal.

Instead, traders should continue to look to the commodity currencies which are benefitting from much tighter monetary conditions. AUD/USD in particular looks compelling as it is bolstered by the highest overnight interest rates of all the majors, as well as the prospect of further tightening of monetary conditions in the future. The pair saw its daily correlation with gold strengthen to 0.79 from 0.77 last week, while the 60-minute intraday correlation rose to 0.84 from 0.66.

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Gold ETF holdings fell for the fourth time in five weeks, while gold tumbled almost $95 peak-to-trough from last week’s record level of $1424.60. Although prices have rebounded from the recent lows under $1330, we can’t help but wonder if the advance is getting long in the tooth. ETF holdings are near levels they were at back in July, but gold prices are $100 higher than they were at that time. Over the last several years we have observed an extremely strong relationship between these two variables, thus caution is warranted. Nevertheless, there is always the possibility that demand is coming from other segments of the gold market such as the physical investment side, which we cannot measure in real-time.

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Greenback to Take A Hit on Friday As Investors Digest Latest Fed Speech

By Joel Kruger, Technical Strategist Fri Nov 19 06:36:00 GMT 2010 Fed Chair Bernanke has been under some intense scrutiny over the past several days, with pressure and criticisms on the latest injection of liquidity into the system coming both domestically and internationally. Most recently, a letter from the Republicans calling into question the current ultra-accommodative policy has been getting a lot of attention, and the Fed has been forced to step up and defend its actions. The Fed has released the prepared text of a speech the Fed Chair is set to deliver at the European Central Bank conference in Frankfurt today, and the message is clear. The central bank will continue with the current policy as it is the only way to help the economy recovery from the latest crisis. There are two key takeaways from the speech. The first is that the central bank will continue to lower long-term rates, and the second is that foreign central banks are interfering with the Fed’s current policy through intervention efforts to weaken their own currencies.

The net takeaway from the speech is very USD bearish, and we would expect the buck to come under some more pressure on Friday once market participants take time to fully digest the text of the Fed speech. We have written in recent commentary of the likelihood for some broad based USD selling following the latest rally in the buck, and this should help to put more pressure on the Greenback into the weekend. However, we have still not given up on the buck, and feel that the USD will once again find bids into the early stages of next week.

On the surface, the tone of the speech is certainly very USD bearish, but the speech is also more likely than not in reaction to criticisms of current policy decisions that would only provoke a necessary defense from the Fed of such policy. It therefore stands to reason that the Fed would not come out and make a statement that calls into question their current efforts as that would only serve to undermine their decision making. But we do believe that there is another side to the Fed that is very much concerned with the longer-term threats of current monetary policy actions, and is looking for signs to start to reverse policy and rein in QE. Unfortunately, the Fed believes that current market conditions still do not warrant a reversal in policy, with the recovery still too fragile, and the priority still needing to be on the shorter-term threats to the economy. But irrespective of this latest speech, we have seen signs of a more balanced and reserved central bank in recent weeks. After all, the Fed only pumped in what they felt was necessary despite pressures from the markets to pump in more, and they also made it clear that they could rein in these measures at any time.

In the end, the latest speech is very USD bearish on the surface and we believe should open more USD selling on Friday. At the same time, we believe that the speech should be taken into the proper context as its intention is to highlight and defend current policy efforts. There clearly is another side to the Fed (not included in this speech) that is also very aware of the threat of current policy and looking to see more signs of recovery in the US economy so that it can begin to reverse policy. Economic data over the coming weeks in the US will be critical and this ultimately will determine what direction that Fed takes going forward. We believe that data will continue to show signs of improvement and this will allow the Fed to begin the long, slow and steady path of reversing policy, which should ultimately narrow yield differentials back in favor of the Greenback.

Elsewhere, it is worth noting that the Australian and New Zealand Dollars have been relatively underperforming in early Friday trade on the back of growing speculation and fear that China will once again look to tighten policy. Looking ahead, the economic calendar on Friday is basically non-existent, and the key focus will be the many central bankers that are slated to speak throughout the day, with many coming from the ECB conference in Frankfurt. US equity futures are trading flat into the European open, while commodities are mixed.

Written by Joel Kruger, Technical Currency Strategist

If you wish to receive Joel’s reports in a more timely fashion, email jskruger@fxcm.com and you will be added to the distribution list.

If you wish to discuss this or any other topic feel free to visit our Forum Page.

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Fri Nov 19 06:36:00 GMT 2010

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Crude Oil Wipes Out November Rally Despite Plunge in Inventories, Gold Falls for a Fourth Day but Rebounds Overnight

Commodities – Energy

Crude Oil Wipes Out November Rally Despite Plunge in Inventories

Crude Oil (WTI) - $80.91 // $0.47 // 0.58%

Commentary: Crude oil fell for a fourth day in a row despite a steep drop in U.S. crude oil inventories. The move in crude was interesting considering that U.S. equity markets were virtually flat the entire day. Crude was down between $0.50 and $1.00 before the inventory report, proceeded to rally up to unchanged after the numbers, and then sold off for the rest of the day to end down $1.90, or 2.31%, to $80.44. Crude has virtually wiped out this month’s entire run.

We can only speculate as to why crude underperformed to such a degree on Wednesday. OPEC could be keeping a lid on prices by raising production, or the impact from the diesel-related spike in demand from China could be abating as imports make their way to the region. We have seen crude oil imports into the U.S. plunge in recent weeks, with distillate imports in particular virtually disappearing, which could be an indication that supply has simply been shifted from North America to Asia.

As we said in our latest report on petroleum inventories: “Imports remain extremely depressed and fell further last week to the lowest since 1997. Such a low level of imports is likely a function of weak demand rather than tight supply. U.S. inventories were and still remain extremely elevated—especially on the product side. Thus, we have seen refineries cut production to bring stocks to more normal levels. Imports fell as refineries demanded less crude. Furthermore, a spike in diesel demand in China has led to premium pricing in that part of the globe, which is another factor that has led to reduced volumes coming into the U.S. Indeed, we have seen U.S. distillate imports completely evaporate, but even so, stocks remain more than ample.”

Technical Outlook: Prices have continued to tumble, with the bears just a hair away from challenging the horizontal barrier at $79.49. A break below this boundary exposes a rising trend line set from May’s spike low, now at $77.04. Near-term resistance remains at $83.27.

Commodities – Metals

Gold Falls for a Fourth Day but Rebounds Overnight

Gold - $1348.20 // $12.20 // 0.91%

Commentary: It’s been awhile since gold fell four days in a row, but that was the case on Wednesday as the metal shed another $3.70, or 0.28%, to settle at $1336. It was a day of pause for the rally in the U.S. dollar as the currency fell just slightly versus most of its rivals. Tomorrow we will publish our weekly Gold – Forex Correlations report and all indications are that the numbers will show that this week was another in which gold and the dollar held true to their inverse relationship.

Now that gold prices are $90 below last week’s all-time highs, some may be anxious to dip their toes into the water. We would be extremely cautious here, however, for the potential downside remains significant. Consider that it was less than two months ago that gold first surpassed $1300. Meanwhile, gold ETF holdings have risen only slight over the last five months.

Technical Outlook: Prices have stalled above support at $1322.39, the 38.2% Fibonacci retracement for the 7/28-11/9 advance. Near-term resistance stands at a previously broken rising trend line set from late July, now at $1358.96. Alternatively, renewed selling pressure that takes prices through current support will target the 50% Fib at $1290.81.

Silver - $26.18 // $0.54 // 2.11%

Commentary: Silver again bucked the trend in gold prices to advance $0.16, or 0.62%, to settle at $25.63. From peak-to-trough silver had fallen from $29.36 to $24.99, or 15% in a little over one week. A bounce is to be expected, but given how frothy silver remains, it will likely be some time before prices make another significant run higher.

The gold/silver ratio fell to 51.5, but remains higher than levels earlier this month near 50. (The gold/silver ratio measures the relative performance of the two precious metals. A higher ratio indicates gold outperformance while a lower ratio indicates silver outperformance).

Technical Outlook: Prices are testing higher through resistance at 26.10, the 50% Fibonacci retracement of the 10/22-11/09 upswing. A daily close above this juncture exposes the 38.2% Fib at $26.87. Near-term support stands at $25.33, the 61.8% level, with a reversal lower through this boundary exposing the 76.4% Fib at $24.37.

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FOREX: Dollar Rally Cools Post Breakout as Investors Mull Financial Cracks, US Inflation

By John Kicklighter, Currency Strategist 18 November 2010 03:22 GMT Dollar Rally Cools Post Breakout as Investors Mull Financial Cracks, US Inflation Euro Buys Time with Irish Bailout Rebuke but Region-Wide Troubles will Force the Issue British Pound Traders Find Little Confidence in Employment Figures, What about Deficit Progress? Canadian Dollar Prepares for Capital Flows, Growth Forecast and BoC Quarterly Review New Zealand Dollar Boosted by Accelerated Inflation and Improved Consumer Confidence Dollar Rally Cools Post Breakout as Investors Mull Financial Cracks, US Inflation

Most experienced traders are familiar with the concept that a significant breakout is often followed by a short-term correction whereby the market makes it ultimate decision to catalyze the new-found trend or reverse the move to draw price back into a comfortable trading range. Both the dollar and risk appetite trends are currently in this transition period. Looking for the logic behind this pause during a period that many would think is a clear signal to plow into a new trend, there is both a technical and fundamental motivation. From the technical side of things, former support is often treated as new resistance (and vice versa) as the initial breakout flashes through momentum by clearing nearby entry and stop orders. As this accelerant is burnt off, the many speculators used to the old trend will attempt to jump back in on what they think is a ‘cheap’ price. Yet, as it becomes evident that the market is struggling to overtake that former floor, reality begins to set in and the eager traders capitulate. That said, a false breakout is the scenario where there is enough participation to push beyond the technical boundary and put the market back on its original path. We can see that most market benchmarks are in the process of determining which scenario will prevail. The Dollar Index, is pulling back towards the five-month trend and 50-day moving average that it just recently overtook. Reflecting on a broader theme, the S&P 500 marked a very tentative and modest bounce after posting its biggest drop in months to break a preternaturally consistent, two-month bull trend.

The fundamental aspect of this trading phenomenon is unique to our current situation. There are still very serious reasons to doubt the outlook for economic activity, financial stability and the prospect for returns; but it is difficult for market participants to throw in the towel on the impressive trend of the past few months. Since the beginning of September, considerable leverage was dedicated to taking part of the steady climb ahead of the Fed’s second stimulus program. Eventually, investors in equities, corporate debt and other risky assets will submit to the troublesome forecast; but there is currently a lull that is allowing traders to ignore reality. The most prominent threat, European financial stability, has recently found a temporary period of calm after Ireland refused stimulus at Tuesday’s EU meeting. However, this doesn’t improve the situation in the country’s banking system. In fact, it merely postpones a solution while financing costs across the region continue to balloon and the lines of support start to breakdown. Another building threat to risk appetite trends exists in China’s threats to curb inflation. This may seem a prudent economic policy; but the side effect is curbed speculation in one of the market’s favorite trading destinations.

The US is providing its own contribution to the global risk scheme. Adding credence to the Fed’s decision to add a second round of stimulus this month, the core measure of annualized CPI growth slowed to its weakest pace on record at 0.6 percent. This doesn’t really diminish the dollar any further because the expansionary policy has been largely priced in at this point; but it does remind us that there are lasting economic and market troubles related to deflation or stubborn disinflation. The data that we should pay more attention to is the housing starts data. Construction on new developments plunged 11.1 percent to its second lowest level on record owing largely to multi-home dwellings. Yet, this data should be put into context of the larger US housing sector problems. Not only is construction activity anemic; the wealth in home prices is further curbing confidence, a backlog of reposed properties is threatening to keep this sector from contributing to a recovery and ongoing issues with foreclosures threaten to trigger the financial mess tied up in real estate-based mortgages. US housing may pose a second wave crisis.

Related:Discuss the Dollar in the DailyFX Forum, John’s Analyst Picks: AUDUSD and AUDCHF offer Short-Term Setups in Eerily Quit Markets

Euro Buys Time with Irish Bailout Rebuke but Region-Wide Troubles will Force the Issue

Have conditions improved in Europe? It would seem so with the euro slowly retracing its steps after its significant decline of the past week. However, this tentative recovery is more accurately attributed to a pause in more pervasive financial concerns. Ireland is still the most immediate threat to the future of the shared currency. Finance Minister Lenihan’s decision to snub financial support from the EU at the group’s monthly meeting late Tuesday has not improved the situation. In fact, the uncertainty increases the risk for instability for the broader region. However, as the market awaits the EU, ECB and IMF’s assessment of the country’s ability to stabilize its own banking sector, there is time for reflection.

Yet, the market may not simply wait for policymakers to give them the official assessment of the market’s health. It was reported Wednesday that LCH.Clearnet – one of the largest clearing houses for European fixed income – raised its margin on Irish government debt by 15 percent for the second time in a week. The steps to smother confidence are progressive in this way. In the meantime, Ireland isn’t our only concern. Following up on its threat to withhold its next tranche of support to bailout Greece, Austrian officials said the EU was pushing back its December payment to January. Elsewhere, Portugal struggled in its recent bond auction; and it was rumored that the ECB had to buy Portuguese and Greek bonds.

British Pound Traders Find Little Confidence in Employment Figures, What about Deficit Progress?

Even though risk appetite took a slow turn north, the British pound was still struggling to gain traction. This was particularly surprising given a surprise decline in jobless claims through October; though the noncommittal BoE minutes help offset that fundamental marker. Perhaps speculation of a future stimulus program will carry more weight as we look ahead to public borrowing figures.

Canadian Dollar Prepares for Capital Flows, Growth Forecast and BoC Quarterly Review

The Canadian dollar has merely been following risk appetite and US dollar-based trends the past few days; but perhaps the currency’s own fundamental backdrop will carry more weight over the coming 24 hours. On the docket for Thursday are the Leading Indicators index and capital flows figures. For actual market influence though, the BoC’s quarterly review will likely carry the most weight for policy and growth forecasts.

New Zealand Dollar Boosted by Accelerated Inflation and Improved Consumer Confidence

It certainly helps that risk appetite trends were bullish; but the New Zealand dollar found an extra push through its own fundamental docket early Thursday morning. For interest rate hawks, the 1.2 percent reading on the 3Q producer price index output doesn’t necessarily promise future hikes; but it sets up the CPI numbers for the occasion. Also, consumer confidence would show relief in a bounce from a year low.

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ECONOMIC DATA

Next 24 Hours

Average Weekly Wages (QoQ) (AUG)

Average weekly wages rose in May by the smallest amount since 2006.

Average Weekly Wages (YoY) (AUG)

ANZ Consumer Confidence Index (NOV)

Sits at lowest reading since 2009.

Trade Balance (Swiss franc) (OCT)

Swiss exports declined in September, as European slowdown and strong franc hurt exports.

Euro-Zone Current Account s.a. (euros) (SEP)

Euro-Zone posted a current account deficit in the last 8 months.

Euro-Zone Current Account n.s.a. (euros) (SEP)

Retail Sales ex Auto Fuel (MoM) (OCT)

U.K. retail sales unexpectedly fell in September for a second month as consumers braced for the deepest budget squeeze since World War II.

Retail Sales ex Auto Fuel (YoY) (OCT)

Retail Sales inc Auto Fuel (MoM) (OCT)

Retail Sales inc Auto Fuel (YoY) (OCT)

Public Finances (PSNCR) (Pounds) (OCT)

U.K. posted the largest budget deficit for any September since modern records began in 1993.

Public Sector Net Borrowing (Pounds) (OCT)

Public Sector Net Borrowing ex Interv. (OCT)

Fell to six-month low in October.

Leading Indicators (MoM) (OCT)

Fell in Sept. for first time since '09.

International Securities Transactions (C$) (SEP)

Increased in the last two months.

Sales beat expectations in August.

Initial Jobless Claims (NOV 13)

Jobless claims fell last week to the lowest level in four months.

Increased in the last three months.

Likely rose for a third month in Nov.

RPX Composite 28 Day (YoY) (SEP)

RPX composite declined annually in August for a second straight month.

RPX Composite 28 Day Index (SEP)

ECB's Yves Mersch Speaks at Euro Finance Week

ECB's Trichet, Gonzalez-Paramo, Bini Smaghi Speak on Policy

BoE's Adam Posen Speaks on Monetary Policy

Bank of Canada Publishes Quarterly Review

Fed's Kevin Warsh Speaks on Financial Markets

Fed's Narayana Kocherlakota Speaks on Monetary, Fiscal Policy

Fed's Charles Plosser Speaks on Monetary Policy

SUPPORT AND RESISTANCE LEVELS

CLASSIC SUPPORT AND RESISTANCE - 18:00 GMT

CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT

INTRA-DAY PIVOT POINTS 18:00 GMT

INTRA-DAY PROBABILITY BANDS 18:00 GMT

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Written by: John Kicklighter, Currency Strategist for DailyFX.com

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18 November 2010 03:22 GMT Nov, 17 02:36 GMT FOREX: Dollar Rally Fortified by Crucial Reversal in S&P 500, Risk AppetiteNov, 16 02:36 GMT FOREX: Dollar Index Scores a Meaningful Bullish Breakout but European Issues, Risk Trends Still BlurredNov, 13 04:27 GMT FOREX: Dollar Ready to Rally as Europe Devolves into Crisis, G20 Sanctions Speculative Capital CurbsNov, 12 02:36 GMT FOREX: Dollar Finds Traction but Momentum Requires Risk Trends, G20 Surprises or Euro WeaknessNov, 11 02:36 GMT FOREX: Dollar Climb Winded as Reserve Diversification Calls Grow ahead of G20, Fed Reminds of QE2

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