Forex Major Currencies Outlook (December 16, 2013)

US Empire State manufacturing index and flash manufacturing PMI could be the movers for the dollar today, as both indices are expected to show improvements. Also due today are the revised non-farm productivity and labor costs data. Later on, we’ll see industrial production and capacity utilization figures as well. Overall, strong figures could allow the dollar to extend its rallies.

EUR

The euro was in a weak spot last Friday but it managed to start this week on a good note. However, this depends on the outcome of the upcoming PMI releases from France and Germany. Both manufacturing and services sectors of these economies are likely to show improvements, which could be very positive for the euro and allow EUR/USD to break past its previous highs. ECB President Draghi is set to give a speech later today and possibly add to the volatility among euro pairs.

GBP

The pound wasn’t on solid footing last Friday, as GBP/USD slid to the 1.6300 area and formed a reversal chart pattern. There are no reports lined up from the UK today, which suggests that the pound could trade sideways or continue to tread lower. Watch out for any changes in market sentiment that might also have an impact on pound pairs.

CHF

The franc held on to its gains against its counterparts, despite the SNB’s pledge to defend the peg. There were no major reports released from Switzerland last Friday and none are due today, which suggests that the Swiss currency could consolidate or keep rallying on risk aversion.

JPY

The yen got a dose of good news in today’s Asian trading session, as Japan’s Tankan figures printed stronger than expected results. The manufacturing component climbed from 12 to 16 while the non-manufacturing index improved from 14 to 20, reflecting strong prospects for the Japanese economy. This led some traders to believe that the strength in the economy means that there’s a lower likelihood of additional BOJ stimulus.

Commodity Currencies (AUD, NZD, CAD)

The comdolls were off to a shaky start, although the Kiwi was able to enjoy a bit of support from better than expected Westpac consumer sentiment data. Over the weekend, New Zealand reported a climb from 115.4 to 120.1. However, the comdolls weren’t able to sustain their gains when China’s HSBC flash manufacturing PMI printed weaker than expected results. The figure was projected to improve from 50.5 to 51.0 but the actual figure came in at 50.5 and the previous month’s reading was revised from 50.5 to 50.8. No other reports are due from these economies for the rest of the day.

By Kate Curtis from Trader's Way