Ok maybe not but the Philly Fed Index did drop to -4.3 compared to last month's index which was at 5.1. This was much lower than the expected 3.0 figure that was forecasted and shows that the manufacturing sector is still softening. Recall that the Empire index was relatively flat, and even though it's usually firmer than the Philly Index, this is a wider than normal difference between the 2 reports. However, if you look at the entire picture, it actually makes sense that the manufacturing sector is decreasing.

Real GDP in Q3 was revised down to 2.0% which was slightly lower than the 2.2% forecast. However, the more important rate of change to pay attention to is the year-over-year growth. Year-over-year growth for real GDP is 3.0% in Q3 compared to 3.5% in Q2. So what does all that mean? Well if you take a look at a what the year-over-year rate of growth has been for GDP over the past few months, you'll see that it is declining. Remember, GDP is the broadest measure of our economic health and if we see that GDP is dropping, it should raise some red flags!

Now let's break this down even further. What makes up roughly 2/3 of GDP? If you guessed consumer spending, then you are absolutely correct! So if GDP is dropping, that means a big reason is because consumer spending is dropping. If consumers stop spending, then businesses stop producing, and there lies the culprit for weaker manufacturing reports. Expect to also see weaker Industrial Production and ISM manufacturing reports in the next few weeks.

I still think consumer spending is going to spike up because of the holidays which will in effect, temporarily increase GDP and industrial production but the long term trend looks weak and if year-over-year GDP growth ever slips below 2.5%, the economy will be in deep "doo-doo".

Coming Up:

US Durable Goods (Overall and Core)
8:30 am ET; 13:30 GMT
Previous= -8.3%; Consensus= 1.2%; Forecast Range= -1.5%-3.5%
(Core) Previous= -1.7%; Consensus= 1.1%

US Personal Income & Personal Spending
8:30 am ET; 13:30 GMT
(Personal Income) Previous= 0.4%; Consensus= 0.4%; Forecast Range= 0.3%-0.6%
(Personal Spending) Previous= 0.2%; Consensus= 0.6%; Forecast Range= 0.4%-0.8%

US Core Personal Consumption Expenditures (PCE) Deflator
8:30 am ET; 13:30 GMT
Previous= 0.2%; Consensus= 0.2% (flat); Forecast Range= 0.0%-0.2%

US Consumer Sentiment
10:00 pm ET; 15:00 GMT
Previous= 90.2; Consensus= 91.0; Forecast Range= 90.0-92.0

Chart Analysis:

EUR/USD

The Euro moved down to 3150 like I thought it would and has bounced back slightly, resting at around 3170. Daily stochastics is still trending up and 4hr stochastics has crossed up (although it hasn't reached oversold territory). All news aside, we may see another push to 3150, followed by a move to 3200.

GBP/USD

The Cable followed my chart analysis pretty well today as it did spike down to 9550 and then bounced back up. Now the price is slightly above 9600 which is also where the 4hr. 50 SMA happens to be. Daily stochastics has almost crossed back down although it hasn't made it up to overbought territory yet. 4hr. stochastics has crossed up and appears to be moving higher but it hasn't reached oversold territory yet. So I'm seeing very weak and conflicting signals for this pair right now. I really have no good technical indications to make an educated guess as to where the Cable will go and I'll leave it at that.

USD/CHF

The Swissy played right into the charts and moved to 2200 like I mentioned yesterday. Daily stochastics is trending down and 4hr stochastics has crossed down but it hasn't reached overbought territory yet. My best guess is that the pair may range between its 4hr, 200 and 50 SMA.

USD/JPY

The Yen still won't budge even though the charts have been screaming for it to go down. As far as the technicals go, all signs point for the pair to fall to at least 118.00 and possibly 117.50.

Conclusion:

There are a good batch of US reports coming out tomorrow but trading volume may be low since it is the Friday before Christmas. If news is extreme (either positive or negative) then we may see a repeat of Thanksgiving where the dollar moved like crazy because of the lack of volume.