The greenback has shown a bit of weakness overnight as traders pare bets on predicted Fed rate hikes in 2010. USD skepticism received a boost after a Barclay's report estimated that global central banks bought and kept fewer U.S. Dollars in reserve in Q3. EURUSD came close to 1.4400 and gold likewise made gains above $1110. Most FX pairs were range-bound however as the last, and by all expectations, the quietest week of the year begins. Liquidity should be at minimal levels since many traders are on holiday. While the expectation is for the market to remain in a range, unexpected news can cause great volatility even on low volumes.
The Yen traders were unsurprised by Japanese data out overnight: Retail Sales and Preliminary Industrial Production for November were released as forecast at -1.0% and +2.6% respectively. The Nikkei 225 reacted well to the positive close in the U.S. on Thursday and is currently almost 1% in the green. Japanese equity traders are showing confidence that the strong Industrial Production figure is an indication that the manufacturing sector will lead the country further out of recession in 2010. Meanwhile Japanese domestic consumption continues to falter. USDJPY has opened the week in a tight 91.40 - 91.76 range with Japanese exporters rumored to be selling under 92.00 and U.S. corporations buying on dips. Likewise EURJPY traded narrowly between 131.37 and 131.80. In other news, the Japanese government revealed a record $1 trillion fiscal budget.
Crude oil refuses to sit still despite the holidays and continues its climb from $69, crossing above $78 overnight. This gain comes despite a persistent lack of demand in the real economy, and leads us to suspect that low volumes are helping bullish speculators push up the price without qualified resistance. The EIA's inventory data out on Wednesday will more likely than not have a dramatic impact on the price.
EURUSD Support/Resistance: 1.4353/1.4420
USDJPY Support/Resistance: 91.11/91.85
EURJPY Support/Resistance: 131.39/131.81
Gold Support/Resistance: 1120/1105
Crude Oil Support/Resistance: 77.40/78.87
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