The Same Ol’ Story

Today was chalk full of fundamental juice to give the markets some nice movements. The overall theme still seems to be the same…the US economy is still in moderate growth and there is still a slight upside risk to inflation. So basically we’re still stuck in neutral.

PPI Report
Producer prices increased 0.9% in December compared to the previous 2% percent jump in November. Excluding food and energy, PPI rose a subtle 0.2% compared to the previous rise of 1.3%. Year over year growth for overall PPI is up 1.2% compared to November’s 0.9% and year over year core PPI is up 2% compared to November’s 1.8%. So the data is telling us that we are still seeing moderate growth in producer prices.

US Treasury International Capital
The US TIC report came in at a much lower than expected $68.4B compared to the forecast of $82.5B. This was also much lower than last months number which was $85.3B. Although the $68.4B is still almost $10B higher than the national trade deficit we did see a drop in foreign demand for US equities. In fact, there was a government report showing that investments in foreign stocks is at an all time high. This increased diversification into foreign assets hurts the dollar.

US Industrial Production and Utilization Rate
US Industrial Production bounced back up and rose 0.4% from a revised -0.1% previously. This was slightly better than the forecast of 0.1% growth. The Utilization Rate also increased slightly to 81.8% from a revised 81.6% in November. These numbers are again showing a moderate growth in the manufacturing sector.

Beige Book
The beige book basically showed that the economy is having moderate growth, but that the labor markets in several districts are tightening. Housing was reported as having continuous declines in almost all the districts. Basically, the overall feel for the report was that the economy is still moderate. You can see several words such as "modest", "moderating", and "steady" in the report which basically confirms the moderate economic outlook.

Coming Up:

US Consumer Price Index (Overall & Core)
8:30 am ET; 13:30 GMT
(Overall) Previous= 0%; Consensus= 0.5%; Forecast Range= 0.3% to 0.6%
(Core) Previous= 0%; Consensus= 0.2%; Forecast Range= 0.1% to 0.3%

US Housing Starts
8:30 am ET; 13:30 GMT
Previous= $1.59M; Consensus= $1.57M; Forecast Range= $1.50M to $1.62M

US Philadelphia Fed Index
12:00 pm ET; 17:00 GMT
Previous= -4.3; Consensus= 5.0; Forecast Range= -7.5 to 10.0

In addition to the reports, Ben Bernanke is speaking to the Senate Budget Committee to testify about long-term U.S. fiscal challenges at 10:00 am ET, 15:00 GMT.

Chart Analysis:

EUR/USD

The Euro pretty much bounced in between 2900-2950 today. Daily stochastics is starting to head out of oversold territory and 4hr stochastics is trending upwards which indicates that the pair is most likely headed up. The 4hr 50 SMA is right around 2970 and if the Euro can break that, then I have a good feeling it will hit 3000, which coincidentally enough happens to be where the daily 50 SMA is at.

Trade Idea:

Buy at 2970; Stop Loss= 2940; Target= 3000; Target 2= 3030 (38% Fib line on the daily chart)

GBP/USD

Unfortunately my trade idea from yesterday did not trigger. Right now the Cable is testing 9700. We saw a nice 100 pip rally in today’s Cable action and now its a question of whether or not the pair will continue to move up. I am seeing a possible bearish divergence on the 4hr chart, and a possible bearish hidden divergence on the daily chart. Both daily and 4hr stochastics are just entering overbought territory which means that we might see a little more movement to the upside before we see a turnaround. I’d like to buy the pair if it can break 9750 because we’ve seen it touch that level twice and bounce back down each time. If the pair can break that, there is a good chance it will move to 9800. On the other hand if the pair falls back below 9650, we are most likely seeing a correction of today’s move and the pair will probably fall to 9600.

Trade Idea:

Buy at 9760; Stop Loss= 9720; Target= 9800; Target 2= 9850

Short at 9640; Stop Loss= 9680; Target= 9600; Target 2= 9570

USD/CHF

The Swissy still cannot penetrate 2500. We’ve seen 5 days where the pair will spike past it but everyday it falls back down below it. Both stochastics on the daily and 4hr chart are trending down so from a technical stand point the indications point to the Swissy falling. The first place to land will most likely be the 50 SMA on the 4hr chart and if it breaks that, then 2400 seems like the likely landing spot.

USD/JPY

The Yen still hasn’t reached 121.00 but it’s still a possibility. Daily stochastics is still in overbought territory, indicating for the pair to fall but 4hr stochastics has crossed up and shows room for a little more buying power. There is a bearish divergence on the 4hr chart which strengthens the idea that the pair will fall. The question is when?

Conclusion:

We have another day full of fundamental reports which should give the markets something to "move" about.