The Yen’s break of 89.44 suggests continued downside momentum during the duration of the week.  Yen traders are closely watching whether the crucial support at 88 will be breached.

The US Dollar began the session trading down on continued weakness after last week’s poor non farm payroll report.  The continued strength of gold prices portend to a further weakening US Dollar encouraging Forex traders to pile on with bearish bets.

The British Pound showed the most modest gains against the US Dollar as a result of rumors concerning possible loss of BOE’s AAA status.  Forex traders are keeping a close eye on future quantitative easing.

Remainder of Week

Thursday

5:00 AM   EMU – :Report on Industrial Production

7:00 AM   United States MBA Purchase Applications

8:30 AM   US:Report on Jobless Claims

11:00 AM  United States: Petroleum Status Report

Friday

2:00 AM   German Gross Domestic Product Flash Report

2:45 AM   French Consumer Price Index

2:45 AM   French GDP Flash Report

5:00 AM   Italian Gross Domestic Product Report

Going into the rest of the week many Forex traders are keeping a close eye on the USD/Swiss Franc swap.  Todays chart shows action coming exceedingly close to the critical support level at 1.003.  Traders expect accelerated momentum should this swap pierce this threshold which has held for the past 15 months.

Of course, traders will also be focused on the USD as it continues its dramatic decline. Technicians will be affixed to charts watching for critical support level breaks, and fundamentalists will be reading the tea leaves in an attempt to predict future Fed policies.

Monday

Monday started off with a boost to the Euro from a strong October EU Manufacturing PMI. This follows mixed data from the previous week and encourage Forex traders to take more aggressive Euro positions. The salient question remains if the EU Zone can continue to exhibit economic strength while keeping inflation at bay.

The British Pound initially traded down against the USD and Euro, but it recovered after release of the UK PMI figures which indicated expansion within Great Britain’s manufacturing base. Forex trader’s eyes will remain fixed on the BOE gauging whether further stimulus will be deployed.

Tuesday

Tuesday saw the Euro fall off sharply after revelations of further European bank troubles. This brought into doubt a future hawkish position on behalf of the ECB hoped for by many traders.

The Australian Dollar fell sharply on Tuesday even after an interest rate hike by the Australian Central Bank. Forex traders because skeptical of an additional December hike which sparked the sell-off.

Wednesday

The Euro rallied against the US Dollar and other currencies on Wednesday on the back of a positive EU PMI Services report. Forex traders remained bullish on the Euro going into Thursday’s ECB meeting.

The Japanese Yen displayed weakness on Wednesday as a result of the Bank of Japan’s indication that it will remain dovish on interest rates for some time to come. Furthermore, a Japanese short fall in tax revenues was a harbinger of more government issued debt to come.

The British Pound trended slightly higher on Wednesday on the back of increased British consumer confidence. Forex traders on Wednesday were getting into Pound positions ahead of BOE’s Thursday meeting surrounding the future of their asset purchase program.

Thursday

The Euro made slight gains on Thursday as the ECB predicted a pickup in future EU productivity. Forex traders secured positions betting one way or the other pending the US nonfarm payroll report due Friday.

The BOE decided to expand its asset purchase program leading to a small rally in the British Pound.

A sell off in the Asian stock markets caused a flight to safety causing the Japanese Yen to trade higher on Thursday. A fight between the BOJ and the Japanese Government seems to be brewing over future economic policies.

Friday

The Euro traded slightly higher on Friday on the back of the much awaited US nonfarm payroll report. The main numbers were disappointing, however any potential Euro rally was muted as investors sought refuge in gold as opposed to Forex assets.

The British Pound did not react to the US employment report and traded mixed in advance of next week’s critical British unemployment report.

The Japanese Yen was the main beneficiary of the weak US jobs report and traded much higher on Friday. Yen traders accumulated positions ahead of next week’s slew of Japanese economic data reports.