The TIC makes the Dollar Tick!

The Dollar made yet another rally as Treasury International Capital unexpectedly rose to $82.3B in November from a revised $70.2B in September. This was way above the $65.0B consensus. This increase shows that foreigners’ investments in the US are rising which is basically good for the US since we need their investments to finance our debt. The biggest gains in foreign investments were in treasuries and equities. Their equities investments should add enough fuel to the fire for a year-end rally in the stock market. So why the sudden interest by foreigners for US securities? Well we’ve seen a narrower trade gap, narrower government debt, and high tax receipts which all make the foreigners’ eyeballs fill with $$$. Big Pippin says: "Holla at the Dolla! "

CPI was flat mainly due to lower energy prices, but unlike last month, they weren’t the only culprits for the soft number. Many of the other component sectors also showed declines which means that this might actually be a better representation of inflation and not just a spike due to low energy costs. Big Pippin says: "Dolla, you as flat as a pancake!"

Overall industrial production rose 0.2% which was slightly above the 0.1% consensus. The bulk of the gain was seen in the motor vehicles sector which was up 3.7%. Other than that, the rest of industrial production was flat following a drop last month. Overall capacity utilization came out at 81.8% which was slightly lower than the 82.1% consensus. So as far as manufacturing goes, we’re still seeing soft numbers but at least they are not declining. Big Pippin says: "Dolla, you lookin good!"

Coming Up:

US Current Account
8:30 am ET; 13:30 GMT
Previous= -$218.4B; Consensus= -$225.0B

Chart Analysis:

EUR/USD

Mmmmm….the Euro is looking mighty tasty to buy. With all the dollar runs this week, the pair is headed right for its 38% Fib retracement level. 4hr. stochastics is oversold and the daily stochastics is almost there. Not to mention, the 200 SMA is also approaching the 38% Fib line as well as the 50 SMA on the daily chart. All those factors make the 38% Fib line look like a mighty fine support line.

Trade Idea:

Buy at 1.3030; Stop Loss= 1.2980; Target= 1.3100

GBP/USD

The Cable has hit my 9500 inflection point but I’m not so sure now if I still want to buy at this level. I still think the pair is going to go up but I’m just not sure when. The 38% Fib line is fast approaching but other than the fact it is a Fib level, I don’t see any other reason why the price would hold here. 4hr. stochastics is in oversold territory so that might be some reason for the Cable to go up, but the daily stochastics is still headed down with plenty of room for selling power. I’m still going to wait for a better opportunity to enter this pair.

USD/CHF

Arghh! (That’s my pirate grunt). My Swissy trade went to the poop shoot after the positive US reports today and cost me 80 pips. However, I’m still not ready to give up on this pair daggone it. Don’t confuse this for stubborn emotion though. On the contrary, the indicators are still telling me that this pair is going to drop. Reason #1: The price his approaching its 200 SMA on the 4hr chart and its 50 SMA on the daily chart. 2250-2280 looks to be the next resistance point. Reason #2: A bearish hidden divergence is forming on the daily chart. We are seeing higher highs on the stochastics with lower highs on the price which is another reason why I think the pair is going down. Reason #3: Stochastics on the 4hr chart is overbought and has been overbought for an extended period. Stochastics on the daily chart is also in overbought territory which gives me 2 "stochastical" reasons to go short, hahaha…I crack myself up sometimes.

Trade Idea:

Short at 1.2270; Stop Loss= 1.2310; Target= 1.2200

USD/JPY

My Yen trade is still going and I still think the pair is going to fall my way. 4hr stochastics is now moving down out of overbought territory and the the daily stochastics is still in overbought territory. The bearish hidden divergence on the daily chart is also still in place so for now I think the trade still looks good. My original target was 116.50 but the market has changed since then and now my new target is 117.00 because there are a bunch of moving averages hovering around that level which could be a good support area.

Conclusion:

It’s been a good week for the buck and next week will definitely give us more indication as to where the dollar will go. We have PPI, Housing starts, GDP, Durable goods, and Personal Income just to name a few of the major economic events so it should be a pretty exciting week. Get ready to do some trading!