EUR/USD

The pair is expected to continue be vulnerable to the European official jawboning on this current high EURUSD level and its negative impact on European industries and the competitivity of the European exports and the European growth which has been already cut this year to 1.8% from 1.9 % and 1.9% from 2.3% for 2005 by the ECB which has raised the y/y EU HICP from 1.8% to 2% and Trichet has said it clearly in his last press conference after the recent ECB decision to leave interest rate unchanged that
ECB has not discussed cutting rate in its meeting. In the same time the rate outlook differential between US and EU is expected to contain the market sentiment this week. It is expected to have an upbeat economic assessment accompanied with a .25% tightening rate decision is already widely discounted this week. It is expected to watch another weak release of the germane IFO for this month on the accumulated pressure of the new high levels of oil prices and EURUSD. Also EU PMI manufacturing figures of Nov was at 50.4 and this is really showing how much it is unwelcomed to see EURUSD recording new highs by the end of this year. We may see contracting PMI figures soon. It is important to wait for US Nov Retail Sales, FOMC Interest Rate Decision, US Oct International Trade Balance and US Nov CPI.

USD/CHF
It is important to wait for the release of Oct US trade balance. The market eye this week is on the FOMAC meeting and it is expected to see a USD appreciation on a widely anticipated .25% rate hike and better US economy assessment can show that the pace of monetary tightening can be faster than the market discounting. Especially, if there is any new comment on the inflation outlook in US can show that there is an increase of the prices and this can be helped by the recent drop of the greenback. So it is important to watch this week US Nov CPI after the higher than expected release of PPI of the same period last Friday.

GBP/USD

GBP is still related to the EUR on its rise and decline against the greenback. We have seen the pair correcting strongly last week and this relation is expected to continue in the short run but on the long run the UK economy can do better than the eurozone. See the strong PMI manufacturing figure of Nov of UK which has been 55 while it was just 50.4 in Eurozone and the interest rate outlook is still by the GBP side. It is important to watch this week UK Nov Retail Sales and UK Nov labor report.


USD/JPY

The disappointing Q3 Japanese GDP has helped the pair to come over 106 making its strongest weekly rally in 6 year and it is expected to watch another weak figures this week on Japan`s Q4 tankan survey which can show further weakness in the Japanese economy but USD is still in need to go further down to finance its trade deficit and this is looking the strong USD policy! It is important to watch this week Oct US trade balance and Japan`s Q4 tankan survey.

Best Wishes
FX consultant
Walid Salah El din
http://www.fx-recommends.com
Cairo, Egypt.