Forex Outlook: Weekly Technical Analysis

The US dollar had an fine week, winning against currencies across the board, with the Aussie and the loonie suffering the biggest losses.  German ZEW Economic Sentiment, Rate decision in Japan and the UK as well as US Unemployment Claims and housing data are the main events on our calendar. Let's have an approach on the main market-movers for this week.

The US manufacturing sector registered strong performance with a remarkable rise in Empire Manufacturing. Together with a rise in retail sales and solid inflation numbers, the US dollar left the disappointing NFP behind and enjoyed gains. The pound managed to give a fight to the dollar thanks to superb retail sales, but the rest were on the defensive. The Canadian dollar reached a new four year low against the greenback, and the Aussie collapsed to new 3 year lows after a terrible jobs report. Even the “Teflon” euro eventually depreciated. Volatility continues to provide opportunities.

UK employment data: Wednesday, 9:30. The number of jobless claims in the UK fell by 36,700 in November to 1.27 million, and the unemployment rate fell to 7.4% in October, to its lowest rate since 2009. Prime Minister David Cameron remarked that the plan is working, but there is still much work to be done. The workforce should be larger in order to provide solid economic recovery. A further decline of 32,300 jobless claims is forecasted while unemployment is expected to decline to 7.3%.

Source	Office for National Statistics (latest release)
Measures	Percentage of total work force that is unemployed and actively seeking employment during the past 3 months;
Usual Effect	Actual < Forecast = Good for currency;
Frequency	Released monthly, about 45 days after the month ends;
Next Release	Feb 19, 2014
Why Traders Care	Although it's generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions. Unemployment is also a major consideration for those steering the country's monetary policy;
Also Called	ILO Unemployment Rate, Jobless Rate;

US Unemployment Claims: Thursday, 13:30. The number of Americans filing initial claims for unemployment benefits fell 2,000 last week to a seasonally adjusted 326,000, pushing the four week average by 13,500 to 335,000. The total number of Americans collecting unemployment benefits is expected to decline since a special federal program expired last month and is starting to affect recipients. Nevertheless, the number of new claims stabilized near pre-recession levels, indicating a solid recovery in the US economy. Jobless claims are expected to increase to 331,000.

Source	Department of Labor (latest release)
Measures	The number of individuals who filed for unemployment insurance for the first time during the past week;
Usual Effect	Actual < Forecast = Good for currency;
Frequency	Released weekly, 5 days after the week ends;
Next Release	Jan 30, 2014
FF Notes	This is the nation's earliest economic data. The market impact fluctuates from week to week - there tends to be more focus on the release when traders need to diagnose recent developments, or when the reading is at extremes;
Why Traders Care	Although it's generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions. Unemployment is also a major consideration for those steering the country's monetary policy;
Also Called	Jobless Claims, Initial Claims;

US Existing Home Sales: Thursday, 15:00. U.S. home sales declined sharply in November to an annual rate of 4.90 million units, the lowest level in nearly a year, due to an increase in interest rates. This drop suggests the housing market is losing its growth momentum. The Fed tapering worsened the situation further as well as the Federal Housing Finance Agency’s plan to reduce the maximum size of mortgages which can be bought by taxpayer which is expected to have its toll on the housing sector. A rise to 4.99 million units is expected now. 

Source	National Association of Realtors (latest release)
Measures	Annualized number of residential buildings that were sold during the previous month, excluding new construction;
Usual Effect	Actual > Forecast = Good for currency;
Frequency	Released monthly, about 20 days after the month ends;
Next Release	Feb 21, 2014
FF Notes	While this is monthly data, it's reported in an annualized format (monthly figure x12). Existing homes make up the majority of total sales and therefore tend to have more impact than New Home Sales;
Why Traders Care	It's a leading indicator of economic health because the sale of a home triggers a wide-reaching ripple effect. For example, renovations are done by the new owners, a mortgage is sold by the financing bank, and brokers are paid to execute the transaction;
Also Called	Home Resales;