FOREX: Dollar Slumps in Asia, All Eyes on US Consumer Confidence Report

http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2010/12/28/FOREX_Dollar_Slumps_in_Asia_All_Eyes_on_US_Consumer_Confidence_Report.html

Key Overnight Developments

• US Dollar Slumps vs Major Currencies in Thin Holiday-Week Trade
• Japanese Data Cautiously Improves But Rates Outlook Still Dismal

Critical Levels

CCY	SUPPORT	RESISTANCE
EURUSD	1.3152	1.3292
GBPUSD	1.5404	1.5522

The Euro and the British Pound advanced in overnight trade, adding 0.5 and 0.2 percent respectively against the US Dollar as the greenback came under broad-based selling pressure (see below). We remain short EURUSD and long USDJPY.

Asia Session Highlights

CCY	GMT	EVENT	ACT	EXP	PREV
JPY	23:30	Household Spending (YoY) (NOV)	-0.4%	0.3%	-0.4%
JPY	23:30	Job-To-Applicant Ratio (NOV)	0.57	0.57	0.56
JPY	23:30	Jobless Rate (NOV)	5.1%	5.1%	5.1%
JPY	23:30	Tokyo Consumer Price Index (YoY) (DEC)	-0.2%	0.1%	0.2%
JPY	23:30	Tokyo CPI Ex-Fresh Food (YoY) (DEC)	-0.4%	-0.4%	-0.5%
JPY	23:30	Tokyo CPI Ex Food, Energy (YoY) (DEC)	-0.5%	-0.5%	-0.6%
JPY	23:30	National Consumer Price Index (YoY) (NOV)	0.1%	0.1%	0.2%
JPY	23:30	National CPI Ex-Fresh Food (YoY) (NOV)	-0.5%	-0.6%	-0.6%
JPY	23:30	National CPI Ex Food, Energy (YoY) (NOV)	-0.9%	-0.8%	-0.8%
JPY	23:50	Industrial Production (MoM) (NOV P)	1.0%	0.9%	-2.0%
JPY	23:50	Industrial Production (YoY) (NOV P)	5.8%	5.5%	4.3%
JPY	23:50	Retail Trade s.a. (MoM) (NOV)	1.9%	1.1%	-1.9%
JPY	23:50	Retail Trade (YoY) (NOV)	1.3%	0.4%	-0.2%
JPY	23:50	Large Retailers' Sales (NOV)	0.2%	-0.3%	0.4%
JPY	1:30	Labor Cash Earnings (YoY) (NOV)	-0.2%	0.6%	0.5% (R-)
CNY	1:50	Leading Index (NOV)	101.58	-	101.57

The US Dollar slumped in overnight trade, down 0.5 percent on average against its major counterparts. Identifying a concrete catalyst behind the selloff has proven difficult, with much of the move likely owing to the volatility-amplifying effects of thin liquidity as traders turn their eyes way from the markets for the holiday period. Indeed, trading volumes on US Dollar Index futures have dropped dramatically, down 76.5 percent over the last two weeks.

Japanese economic data proved somewhat robust. Inflation managed to stay in positive territory for a second month in November, albeit at a slower pace, with the Consumer Price Index adding 0.1 percent from the previous year. Industrial Production topped expectations, with output rising 1 percent to post the largest monthly increase since April. Retail Trade figures also printed better than forecast, adding 1.9 percent in November to register the largest gain since January. Finally, the Jobless Rate held unchanged at 5.1 percent as expected in November. Still, the data is hardly robust enough to justify a fundamentally supported argument for a stronger Japanese Yen, with traders still pricing in near-zero interest rates for the coming year.

Euro Session: What to Expect

CCY	GMT	EVENT	EXP	PREV	IMPACT
EUR	6:30	French Gross Domestic Product (QoQ) (3Q F)	0.4%	0.4%	Low
EUR	6:30	French Gross Domestic Product (YoY) (3Q F)	1.8%	1.8%	Low
CHF	7:00	UBS Consumption Indicator (NOV)	-	1.716	Medium

The economic calendar is decidedly lackluster and risk sentiment looks indecisive with US stock index futures showing little conviction in late Asian trade. December’s US Consumer Confidence report due late into the session is the next significant inflection point, with expectations calling for the metric to rise to the highest in seven months.

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