Posted: 17 Dec 2009 05:12 AM PST

Canadian consumer prices rose more than expected. This might lead to an early rate hike in Canada, and helps the Canadian dollar weather the huge strength of the American dollar. Contrary to other currencies, USD/CAD didn’t breach a technical barrier and is ready to move in the other direction.

Canadian CPI rose by 0.5% in November, more than a 0.3% rise that was predicted. It’s also far better than the drop of 0.1% in prices that was seen last month.

Core CPI, which is regarded by some as even more important, rose by 0.4%, double the expectations, and higher than last month’s 0.1% rise.

Mark Carney, governor of the Bank of Canada, talked about the end of Q2 2010 as a possible due date for a rate hike. With inflation lifting its head, he could make a move earlier.

His counterpart from the south, Ben Bernanke, continued the stance of low rates for an extended period of time. Note that American CPI, that was published just yesterday, came out below expectations – another advantage for the Canadian dollar.

6 hours after the Fed decision, the markets began to move. The dollar swept the board and made big gains. Some currencies suffered more than others. The rage is blamed on the full half of the glass that traders relate to – the cautious optimism for future improvement in the American economy. EUR/USD, AUD/USD, NZD/USD and also GBP/USD broke major support lines.

On this background, USD/CAD handles the situation in a better manner. Yes, the greenback strengthened against the loonie, but no major resistance lines were broken.

Canadian CPI helped USD/CAD stay below the 1.0750 resistance line. It now trades at 1.0720, still in the 1.04 – 1.0750 range.

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Fed Found a Third Way – Markets Back to Normal

Posted: 16 Dec 2009 02:47 PM PST

Ben Bernanke, Time’s Man of the Year, managed to find a creative wording for the FOMC statement that eventually left the markets unchanged, in the last major event for 2009.

Ben Bernanke just won the title “Man of the Year” for 2009. Time Magazine praised him for the way he dealt with the huge financial crisis. Also in his last decision for 2009, he was creative.

The wording about interest rates being low for an extended period of time was not changed. This was a stabilizing message that kept Wall Street strong, and prevented a shock.

On the other hand, he did express a little bit more optimism about the economic situation, so the statement wasn’t too depressing.

In the preview before the FOMC meeting, I wrote that there’s no middle ground – that he’ll either leave the “extended period” unchanged and send the dollar down, or remove these words and send it up.

Looking again at the poll I ran with the Currensee community, I now see that the results have fully stabilized as well: 50% said that the dollar would go up and 50% down. Earlier, the dollar bulls had a small advantage.

Well, Bernanke found a very creative way of balancing the words and keeping everything stable. It took time for traders to understand his complex message. During this time, the dollar strengthened and trading was choppy.

But after the initial moves up and down, the major pairs returned to the levels before the decision. EUR/USD is at 1.4530. GBP/USD is at 1.6340, enjoying higher levels after the ground-breaking employment numbers. Other pairs are also back to normal.

The next event in the same scale is already in 2010 – Will Non-Farm Payrolls show growth in jobs?

Forex Daily Outlook – December 17th 2009

Posted: 16 Dec 2009 02:00 PM PST

Life goes on after the FOMC Statement which creatively left the market unchanged. Today’s highlights are British retail sales, Canadian CPI and American jobless claims. Let’s see what’s up for today in forex trading:

There are no significant events in Europe today, but I recommend reading Casey Stubbs’ article about the dollar strength and the Euro.

A day after the disappointing Australian GDP, the RBA Monthly Bulletin is posted. It should give another view of the economy. In its neighbor, New Zealand, the NBNZ Business Confidence will also give a broad view of the economy.

In Britain, Retail Sales are expected to rise by 0.5%. After yesterday’s ground-breaking job figures, these number could also be better.

British Consumer Inflation Expectations are also expected to rise, following the strong CPI. Later in Britain, CBI Realized Sales are predicted to edge up from 13 to 16 points. This will add to the retail sales published earlier.

For more on the Pound, read the GBP/USD forecast.

In Switzerland, the ZEW Economic Expectations are expected to help the Swissy.

Canadian CPI is expected to turn positive and rise by 0.3%. Core CPI is also expected to edge up and rise by 0.2%.

Later in Canada, Foreign Securities Purchases, which can be interpreted as trust in the Canadian dollar, are expected to drop to 6.11 billion. For more on the Canadian dollar, read the USD CAD forecast.

American Unemployment Claims rose last week, and are now expected to drop back to 466K. Regarding employment, eyes are on the next Non-Farm Payrolls release.

Also in the US, the Philly Fed Manufacturing Index will draw attention, with an expected to drop to 16.1 points. The CB Leading Index is expected to rise by 0.8%, stronger than last month.

That’s it for today. Happy forex trading!

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Forex technikal and fundamental analysis

Dec 17, 2009

Forex Crunch Canadian CPI Saves Loonie from the Greenback Storm

Forex Crunch Canadian CPI Saves Loonie from the Greenback Storm

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