SYNERGY FX ALERT BY TODD DEITERICH | 12.06.15

FOMC OVERSHADOWS SOLID RETAIL SALES REPORT

Yesterday's US Retail Sales report showed consumer consumption is on the rise and picking up momentum into the Northern Summer. Overall retail sales were up 1.2% last month and core sales rose .7% for the month. While these are encouraging data with the overall number posting higher than expected, the result on the USD was positive but somewhat muted. The most logical explanation for the limited impact would be that FX traders are looking ahead to next week's FOMC meeting for more clarification about the trajectory of the FED's interest rate normalization policy. Taking into account that most the recent economic data markers on employment, inflation, wage growth and retail sales have all met or exceeded expectations, we believe it's likely that the USD will rally into the FOMC meeting and accelerate its up move after the meeting. With an official rate hike the least expected outcome, the FED will need to keep on task with a hawkish statement to further prepare global capital markets for a tightening of the FED Funds rate by September. As such, it looks like the chart points from just after yesterday's Retail Sales release will act as pivot points going into the weekend. The EUR/USD dipped to 1.1180 just after the data release before settling in a 1.1230 to 1.1260 range for the rest of the session. The German Bund market and Greek negotiations remain important drivers of the single currency. However, neither the array of outcomes for Greece or the relatively higher yields on German Sovereign paper are particularly bullish for the Euro. We suggest selling the EUR/USD at 1.1280 or at 1.1180 on stop with an initial target of 1.0920 and 1.1480 stop. The 30 day moving average comes in at 1.1170 (see chart). A break of this level will open up the downside range extension to last week's low of 1.1060. The GBP/USD is at a critical juncture at 1.5500. A break of 1.5430 is needed to extend the down trend and a move back up to 1.5635 is within scope. We were stopped out of short positions at 1.5475 and will stay on the sideline over the weekend. A key support level in the EUR/GBP is at .7225. A break of this support level would point to .7140.....and support the Sterling. USD/JPY prices were subjected to several conflicting comments form BoJ officials which sent the pair from 124.50 to 122.40 on Tuesday. We still prefer the long side of this trade but will stay on the sideline over the weekend. The AUD/USD regained the .7700 handle on a semi-bullish domestic jobs report but has been capped at last weeks pivot point of .7750. The fundamentals are deteriorating quickly for the Aussie which gives scope to the .7600 support level. We suggested adding to short position at .7740 in our Monday update and remain short. The RBNZ cut its overnight rate by 25 basis points and maintained an easing bias. This is significant since the Central bank raised rate just over a year ago. This abrupt switch from tightening to easing suggests the RBNZ will steer the KIWI down into the .6800 handle in the near term. We suggest selling a bounce back into the

.7020 area for a short-term trade with a .7215 stop. SYNERGY FX