• Dollar Shrugs off NFPs, Critical Time for Risk Trends Ahead
• Euro Facing a Definitive EU Decision and ECB Rate Decision
• Australian Dollar Virtually Guaranteed Volatility Between Risk Trends and Event Risk
• New Zealand Dollar Traders Look for Hawkish Sentiment to Come with a Time Frame
• British Pound won’t Settle for a BoE Hold with European Financial Stability at Risk
• Gold will Change Gears Should EU Summit Clear the Way for Speculators

Dollar Shrugs off NFPs, Critical Time for Risk Trends Ahead

The Dow Jones FXCM Dollar Index closed out its first weekly decline in three weeks as risk appetite posted an impressive climb over the same period. Just as with this past week, where the greenback heads moving forward is not a consideration of the currency’s own fundamentals. The dollar remainstapped into the underlying currents in market-wide investor sentiment and capital allocation. In other words, where goes risk appetite, the world’s reserve will move in the opposite direction.

That said, it is important to assess the quality of the impressive bull run for risk trends that prevailed last week. As my colleague Christopher Vecchio noted in theReal Time News feed, the S&P 500 enjoyed its 10th largest weekly run since 1950 following the worst Thanksgiving-week performance going back to 1932 all while the VIX Volatility Index held below the 30 percent mark that has more or less represented the floor for the activity gauge over the past three months. This is the epitome of a “melt up” scenario – a rally that is founded on speculators’ need to jump in so as not to miss the move rather than a true fundamental improvement. Feeding our skepticism should be the fact that the bulk of this performance occurred due to the coordinated effort to thaw liquidity for US dollar credit lines by the Fed and five other central banks. However, it is worth noting that while the benchmark stock index responded directly to the intervention effort; the euro (the European financial markets was arguably the target of this effort) moved little in the aftermath. The overriding fundamental bearing for the world’s economy and financial markets is bearish; so these policy efforts are essentially fighting against the current.

When the elemental changes in speculative positioning is at stake, standard economic event risk does not cut it for determining trend and momentum. The November labor stats are a good example of this reality. A sharp drop in the unemployment rate to a two-and-a-half, 8.6 percent low is quickly interpreted for the influences of temporary hires for the season as well as the 315,000-person drop in the labor pool. This tells us that next week,dollar traders should keep their sights on the bigger themes. Friday’s EU Summit is the scheduled event that presents itself as the deciding factor for whether the European sovereign and banking financial crisis will spread or not (which would inherently buy time in the lead up); but we may actually be actually be active right out of the gate. German Chancellor Merkel and French President Sarkozy are expected to offer proposals to vote on at the Summit Monday. If these proposals fall short, investors won’t wait to unwind risk.

Related:Discuss the Dollar in the DailyFX Forum,John’sVideo:Euro and S&P 500 Ready to Collapse if Latest EU Rescue Attempt Fails

Euro Facing a Definitive EU Decision and ECB Rate Decision

Buying time is what European officials are best at. However, each time they have tried to push meaningful decision making back by promising a solution at a later date or generally offering lackluster policy; the market has simply returned to its effort tomove capital away from the imploding EU markets. We have seen four official rescue programs setup by European leaders and countless other smaller efforts (including last week’s coordinated swap line action); and each one has failed to curb fears. In fact, with each disappointment, concern that this is an untenable situation grows. As such, the stakes are even higher this time around. What should we expect in the promised reforms expected to be discussed at Friday’s EU Summit? The German and French proposals will offer us guidance. Given comments, a common Eurobond and setting the ECB as a lender of last resort still seems impossible. Simply promising fiscal convergence over the longer-term doesn’t solve near-term issues. Using the ECB to funnel funds through the IMF for bailouts is possible; but the suggested 200 billion euro figure is simply too small to solve this issue. Traders suspiciously await guidance.

Financial stability interests will certainly carry the week; but another factor could mute or exacerbate the euro’s reaction: the ECB rate decision. Both the market and economists expect another 25 basis point rate cut to offer relief. Its yield is one of the euro’s saving graces against the dollar. If President Draghi announces a cut this time and more to come; the air will be quickly let out of the bullish argument for this currency.

Australian Dollar Virtually Guaranteed Volatility Between Risk Trends and Event Risk

Though the euro has the lock up on market-wide influence; the Australian dollar will certainly face its own wave of volatility next week. At the top of the list we havethe RBA rate decision. Like the ECB, the Aussie bank is expected to cut rates – a move that would certainly exacerbate any risk-off sentiment. This move is already largely priced in; so the issue is the pace of further action. Follow up drives to watch include the 3Q GDP and November employment figures. Will Australia remain above the global fray; or is it destined to fall into the same ditch?

New Zealand Dollar Traders Look for Hawkish Sentiment to Come with a Time Frame

In contrast to its fellow high-yield currency, the New Zealand dollar is not expected to suffer a dovish central bank decision. There is virtually no expected change from the RBNZ according to overnight swaps. However, Governor Bollard is vocal. Traders will look to ensure that he maintains his hawkish lean – a move that would close the gap with the Aussie rate (watch AUDNZD) and stabilize its risk bearing (NZDUSD).

British Pound won’t Settle for a BoE Hold with European Financial Stability at Risk

There will be perhaps a latent tinge of expectation surrounding the Bank of England policy decision; but the announcement will most likely be uneventful. Another increase to the bond purchasing program is likely in the near future; but the four-month time frame to work in the 75 billion sterling increase announced just a few months ago will likely encourage the group to take a wait-and-see approach.

Gold will Change Gears Should EU Summit Clear the Way for Speculators

Gold has been frustratingly quiet despite the clear trouble for the funding and credit markets. Risk appetite and risk aversion are not the fuel for this alternative store of wealth – doubt surrounding the viability or manipulation of government-backed financial assets is. Finding a definitive market sentiment for the European financial crisis with the EU Summit could finally unleash the precious metal.Be prepared.

For Real Time Forex News,visit:http://www.dailyfx.com/real_time_news/

**For a full list of upcoming event risk and past releases, gotowww.dailyfx.com/calendar

ECONOMIC DATA

Next 24 Hours

GMT	Currency	Release	Survey	Previous	Comments
21:45 (Sun)	NZD	Value of All Buildings SA (Q3)		-6.6%	Falling demand cutting into real estate, keeping inflation in check
22:30 (Sun)	AUD	AiG Performance of Service Index (NOV)		48.8	Services index may weaken again
23:30 (Sun)	AUD	TD Securities Inflation MoM% (NOV)		0.1%	Inflation estimate showing much lower price growth; will weigh into RBA decisions
23:30 (Sun)	AUD	TD Securities Inflation YoY% (NOV)		2.6%
23:50 (Sun)	JPY	Loans & Discounts Corp YoY (OCT)		-0.7%	Still shows low credit in Japan
0:01	GBP	Lloyds Employment Confidence (NOV)		-72	Expected to drop despite easing
0:30	AUD	Company Operating Profit QoQ% (Q3)		6.7%	Profit higher, led by trade
0:30	AUD	Inventories (Q3)		2.5%	Investment spending still robust
2:30	CNY	China HSBC Services PMI (NOV)		54.1	Index expected to follow official
8:45	EUR	Italian PMI Services (NOV)		43.9	Final services indices all showing downward pressure; may continue on debt crisis fears
8:50	EUR	French PMI Services (NOV F)		49.3
8:55	EUR	German PMI Services (NOV F)		51.4
9:00	EUR	Eurozone PMI Composite (NOV F)		47.2
9:00	EUR	Eurozone PMI Services (NOV F)		47.8
9:30	EUR	Sentix Investor Confidence (DEC)		-21.2	Continuing to drop further
9:30	GBP	PMI Services (NOV)		51.3	British service sector growing slightly
9:30	GBP	Official Reserves (Changes) (NOV)		$1387M	Reserves higher on austerity
10:00	EUR	Euro-Zone Retail Sales (MoM) (OCT)		-0.7%	Lower retail sales could be indicator of CPI in coming months
10:00	EUR	Euro-Zone Retail Sales (YoY) (OCT)		-1.3%
15:00	USD	ISM Non-Manf. Composite (NOV)	53.5	52.9	Services spending expected to gain
15:00	USD	Factory Orders (OCT)	-0.4%	0.3%	Index has been fluctuating

SUPPORT AND RESISTANCE LEVELS

To see updatedSUPPORT AND RESISTANCE LEVELS for the Majors, visithttp://www.dailyfx.com/technical_analysis

To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit ourPivot Point Table

CLASSIC SUPPORT AND RESISTANCE

EMERGING MARKETS &SCANDIES CURRENCIES 18:00 GMT

Currency	USD/MXN	USD/TRY	USD/ZAR	USD/HKD	USD/SGD		Currency	USD/SEK	USD/DKK	USD/NOK
Resist 2	16.5000	2.0000	9.2080	7.8165	1.3650		Resist 2	7.5800	5.6625	6.1150
Resist 1	14.3200	1.9000	8.5800	7.8075	1.3250		Resist 1	6.5175	5.3100	5.7075
Spot	13.6542	1.8295	8.0632	7.7675	1.2853		Spot	6.7521	5.5484	5.7878
Support 1	12.6000	1.6500	6.5575	7.7490	1.2000		Support 1	6.0800	5.1050	5.3040
Support 2	11.5200	1.5725	6.4295	7.7450	1.1800		Support 2	5.8085	4.9115	4.9410

INTRA-DAY PROBABILITY BANDS 18:00 GMT

\Currency	EUR/USD	GBP/USD	USD/JPY	USD/CHF	USD/CAD	AUD/USD	NZD/USD	EUR/JPY	GBP/JPY
Resist. 3	1.3615	1.5790	78.83	0.9370	1.0320	1.0377	0.7906	106.27	123.34
Resist. 2	1.3561	1.5744	78.63	0.9331	1.0287	1.0333	0.7872	105.84	122.95
Resist. 1	1.3507	1.5697	78.43	0.9292	1.0255	1.0288	0.7838	105.41	122.55
Spot	1.3400	1.5605	78.03	0.9215	1.0190	1.0199	0.7770	104.56	121.76
Support 1	1.3293	1.5513	77.63	0.9138	1.0125	1.0110	0.7702	103.71	120.97
Support 2	1.3239	1.5466	77.43	0.9099	1.0093	1.0065	0.7668	103.28	120.58
Support 3	1.3185	1.5420	77.23	0.9060	1.0060	1.0021	0.7634	102.85	120.18

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---Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com

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