Dollar weakens broadly as the week starts as gold makes another record high above 1130 level. Strong than expected Japan GDP report also lifted Asian equities mildly which gives some additional pressure to the greenback. Dollar index falls to as low as 74.98 and remains soft in early European session. Some more weakens could be seen in the greenback in general going forward. Risk appetite will remain the main driver in the forex markets and US retail sales and empire state manufacturing index will be closely watched by all investors.

Q3 GDP in Japan rose more than expected by 1.2% qoq, 4.8% annualized, fastest pace in more than two years. Also, it's the second straight quarter of advance and beat expectation of 0.7% qoq, 2.9% annualized. Nevertheless, Nikkei 225 just managed to rise slightly by 0.13% only and is staying in tight range. Hence, while the Japanese yen softens a bit, it's still slightly stronger than dollar, which is pressured by stocks and gold.

Other data released today so far saw UK Rightmove house price dropped -1.6% mom, rose 1.6% yoy in November. Eurozone CPI is expected to show 0.3% mom rise in October with yoy rate up from -0.3% to -0.1%. US retail sales will be the main focus of the day and is expected to rebound by 0.9% in October after falling -1.5% in September. Ex auto sales is expected to rise 0.4%. Empire state manufacturing index is expected to drop from 34.57 to 28.5 in November.

Dollar index's fall form 75.76 is still in progress and would probably extend further retest 74.78 low first. Break will bring medium term fall resumption. But after all, the dollar index might continue to lose downside momentum on next fall and strong support could be seen at 74.31 level and bring sizeable rebound. Nevertheless, break of 75.76 minor resistance is needed to be the first sign of bottoming. Otherwise, risk will remain on the downside.

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EUR/USD Daily Outlook

Daily Pivots: (S1) 1.4839; (P) 1.4888; (R1) 1.4952; More

EUR/USD's rebound from 1.4821 extends further to as high as 1.4991 so far today and remains firm. With 1.4810 support intact, rise from 1.4626 is likely still in progress. Further rise should be seen to retest 1.5047/5061 resistance zone first. Break there will indicate that whole medium term rise has resumed and should target 123.6% projection of 1.2329 to 1.4719 from 1.2456 at 1.5410 next. On the downside, below 1.4810 will indicate that rise from 1.4626 has completed and will bring deeper fall to this support first.

In the bigger picture, there is no clear indication of completion of medium term rise from 1.2456 yet. Such rise could still extend further to retest 1.6039 high on breaking of 1.5061 resistance. Nevertheless, upside momentum is diminishing as seen in bearish divergence condition in daily MACD. Hence, focus will remain on reversal in case of another rise and upside will likely be limited below 1.6039 high. On the downside, break of 1.4626 support will be an important signal of topping with a double top pattern (1.5061, 1.5047). In such case, deeper fall should be seen to 1.3747 support for confirmation.

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Economic Indicators Update

GMTCcyEventsActualConsensusPreviousRevised
21:45NZDPPI Inputs Q/Q Q3-1.10%0.00%0.00% 
21:45NZDPPI Outputs Q/Q Q3-1.4%0.30%-0.70% 
23:50JPYGDP Q/Q Q3 P1.20%0.70%0.60%0.70%
23:50JPYGDP Annualized Q3 P4.80%2.90%2.30%2.70%
23:50JPYGDP Deflator Y/Y Q3 P0.20%0.10%0.50% 
0:01GBPRightmove House Prices M/M Nov-1.60%--2.80% 
0:01GBPRightmove House Prices Y/Y Nov1.60%--0.20% 
10:00EUREurozone CPI M/M Oct 0.30%0.00% 
10:00EUREurozone CPI Y/Y Oct -0.10%-0.30% 
10:00EUREurozone CPI Core Y/Y Oct 1.10%1.20% 
13:30CADManufacturing Shipments M/M Sep 1.30%-2.10% 
13:30USDAdvance Retail Sales Oct 0.90%-1.50% 
13:30USDRetail Sales Ex Autos Oct 0.40%0.50% 
13:30USDEmpire Manufacturing Nov 28.534.57 
15:00USDBusiness Inventories Sep -0.60%-1.50% 
17:15USDFed Chairman Bernanke Speaks on Economic Outlook in New York ----