Yesterday we could notice a considerable movement in the market especially after the publication of several significant indexes in the...

... US market; Retail sales index increased by 1.2 percent last month after rising by 0.2 percent in October.


A separate report, which was published by the Labor Department showed
that higher energy costs pushed wholesale prices up 3.2 percent, which increased
twice as much as forecast in November.
The core index, which excludes food and energy, also raised yesterday a much more
than predicted by 0.4%, which again was above the Wall Street's forecast of 0.2
percent.

The rising prices set off the Federal Reserve's alarm that energy and commodity
costs may increase inflation in the short run at the consumer level and the high
inflation could force the Fed to pull back on future rate cuts.
Treasury notes slipped down after the publication of the reports, which were
published the same time. Stock-index futures pared their decline, while the dollar
remained significantly higher against the EUR and other major currencies.

Also yesterday, the Labor Department report showed that the state of employment in
the U.S economy seems to be holding up. Last week, jobless claims declined to
333,000; which was to some extent better than expectations.
New applications for state unemployment insurance benefits fell to a seasonally
adjusted 333,000 in the week ended Dec. 8 from an upwardly revised 340,000 the week
before. The quantity of people enduring to receive jobless benefits after an initial
week of aid rose to 2.64 million in the week ended Dec. 1.

Today, allot of awareness will revolve around the announcement of the US CPI
inflation data. In the case that the CPI will spring an upside surprise and release
higher than expected, it will give an additional element to the Federal Reserve's
uncertainty whether to make an additional move regarding cutting interest rates
further in the short run.

* EUR
Yesterday was a relatively empty economic calendar suggesting that the direction of
the EUR may depend on shifts in global risk sentiment. The US dollar continued to
move forward and increased against the EUR and other major currencies., striking a
six-day high especially against the 13 nation currency, principally after the
publications of stronger than expected US retail sales and PPI data. It is almost a
week since the EUR/USD encountered a rough patch and will face allot of difficulty
to maintain gains over the 1.4725 level.

The main question at the moment which is being asked by many traders is if the
greenbacks strength has returned and little by little we will notice positive signs
from the US market after the credit and the mortgage crises. As it seems at the
moment, if we will witness better news coming from the US then the probability is
that the market will notify a bullish USD and possibly a turnover of the pessimistic
sentiment.

In addition, The Swiss National Bank kept interest rates unchanged on Thursday for
the first time at a policy meeting in over two years. The NSB raised its inflation
forecast for 2008 to 1.7 percent from 1.5 percent but lowered it for 2009 to 1.5
percent from 1.8 percent.


* JPY
Today during the early trading ours in Asia, Japanese large manufacturers' business
sentiment descended to a two-year low, The Tankan index of manufacturer sentiment
fell to 19 points in December from 23 in September, providing once again a potential
of a BOJ rate hike during next year. As a consequence, the Japanese currency began
to depreciate against the US dollar and as it seems we may see the USD JPY pair
reach the 113.00 level. The JPY traded at 112.50 per dollar at 11:10 a.m. in Tokyo
from 112.33 before the report was published, and after the report came out, the USD
JPY peaked to 112.63.
The economy of Japan developed much slower than was estimated by the Japanese
government in the three months ended Sept. 30. The growth of many large companies
decreased to 1.3% in the third quarter from 14% in the second, as a 10% gain in the
JPY over the earlier six months cut margins, and in addition to this fact, in many
small and medium companies, salaries dropped by 4%. The direction of the JPY remains
heavily depended on the performance of U.S stocks and the Nikkei, as this will
influence the level of investor's risk appetite, which drives carry trades. In the
short term the JPY should remain under pressure, as the confidence of investors to
take risks is returning.


Technical News
* EUR/USD
After touching a base at 1.4575, the pair now consolidates higher at 1.4655. All
oscillators show that the bullish momentum will probably continue, and that a breach
through the next key level of 1.4680 is quite imminent. If the key support level
will hold, we might see a correction back to the 1.4600 levels.


* GBP/USD
In the past few days the pair is going through a choppy period, and is giving mixed
signals on the daily charts. However the hourlies remain bullish and it looks as if
this pair could breach the 2.0500 level again. A preferable strategy might be going
long on an intraday trade.


* USD/JPY
On the 4 H chart we notice that the bullish trend is running ahead. The volatility
is increasing, especially after the pair has broken the 112.00 resistance level. The
price should continue to move upwards in a range of 112.50-113.00. As it stands, the
bullish pressure will continue to gather momentum on the USD JPY today as well.


* USD/CHF
This pair is still in the midst of a steady bullish channel that has continued over
the last 2 weeks. However it is now hovering near the top of this channel setting up
the potential for a mini-correction downwards. Nevertheless the longer term outlook
remains bullish, so the preferred strategy here could be a buy and hold scenario.


The Wild Card
* Gold
On the 4 H chart we can see that gold is in the middle of an upward channel. It was
heading back towards the top of this channel but now it seems that it may correct
again before moving up. So this gives
Forex traders the opportunity to maximize profits by waiting for the correction and
then enter an early long.


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