Dollar is fluctuating and the pound is falling after the resignation of the British Deputy Prime Minister
The Dollar Index (USD/DXY) ended little-changed in subdued trading into the last full trading day ahead of the holiday. The Euro, Pound and Yen were mostly flat. The BOJ signaled it was in no hurry to change its policy settings while US data was mixed. Strong retail sales coupled with a higher inflation report boosted the Canadian Dollar.
Wall Street stocks rallied as the completed US tax bill awaits President Trump’s signature. Volumes were thin.
The yield on the US Ten year bond slipped back 2 basis points to 2.48%. Japanese Ten Year JGB yields were unchanged (0.05%). Canada’s Ten Year Treasury yield climbed 4 basis points to 2.02%.
Outlook: Markets today will be quiet and subdued with volumes dropping substantially as trading desks dwindle. Data releases today are limited.
The UK releases its final reading of Q3 GDP. A lower reading of the US Core Personal Consumption Expenditure Price Index for November, a significant indicator of inflation, is expected.
Trading View: There is little in the way of events and data to really stir markets today. It's worth noting that the final reading of Q3 US GDP was lower mainly due to a slowing in consumer spending, which makes up almost 70% of the US economy.
In the light of this, today’s US Core PCE Price Index will be important. However, it’s release comes early in the afternoon of US trading. Most trading desks would be pretty thinly manned by then.
Bond yields finished on a high and should continue into 2018. Global growth is on the move with Canada joining the rest of the world with strong retail sales and elevated inflation data.
The Dollar Index (USD/DXY) closed mildly lower at 93.277 (93.315 yesterday). The overall range was a quiet 93.26-93.500. Immediate support lies at the 93.20 level. The 93.00 level is strong and should hold. The US Ten year bond yield remains elevated at 2.48% and this should keep the Dollar Index above the 93.00 support level. Immediate resistance can be found at 93.50 and then 93.80.
EUR/USD – The Euro kept pace with the US Dollar and closed virtually flat at 1.1873 (1.1876 yesterday). Even amidst the Catalan election, results of which are yet to be known. The yield on the German Ten Year Bund closed up one basis point to 0.41%. Which has supported the Euro. Immediate resistance to the Euro lies at 1.1890/1.1900 (overnight high was 1.1890). Immediate support can be found at 1.1850 (overnight low 1.18493). The separatists are expected to win the Catalan election but with a reduced majority. This remains to be seen and any surprises could move the Euro into thin markets. Speculative Euro longs remained elevated too. Immediate resistance lies at 1.1890-1.1900 with immediate support at 1.1840/50. Likely range today 1.1850-1.1890. Look to sell rallies.
USD/JPY – initially rose to 113.63 after the BOJ left its ultra-easy monetary policy unchanged. BOJ Governor Haruhiko Kuroda said there was no need to reconsider the current policy framework. USD/JPY drifted lower to close at 113.35, pretty much unchanged from 113.38 yesterday. The two basis point fall in the US Ten year yield put pressure on the Dollar as Japanese yields were unchanged. Let’s not forget that speculative net short JPY bets are elevated. Immediate resistance for USD/JPY lies at 113.60 and then 113.80. Immediate support can be found at 113.20/30 (overnight low was 113.20). Likely range today 113.00/50. Look to sell rallies.
AUD/USD – The Aussie continued to grind higher supported by extended gains in metals. Copper prices rose to close near recent highs. Aluminum and zinc were up. AUD/USD broke through the resistance level at 0.7690 and traded to an overnight high of 0.7707 before closing just above 0.7 cents. Immediate resistance lies at 0.7710 and then 0.7730, which is strong. Immediate support can be found at 0.7680 and then 0.7660. A generally softer US Dollar and strong metals will continue to support the Aussie. However, the speculative community is still short of Aussie bets. Likely range today 0.7690-0.7720. Look to sell rallies ideally to 0.7730.
GBP/USD – Sterling steadied after initially falling following the resignation of Britain’s deputy prime minister. Today sees the final reading of UK Q3 GDP, which is forecast to remain unchanged from the previous reading. GBP/USD has immediate resistance at 1.3400 and then 1.3420. Immediate support can be found at 1.3360 and then 1.3330. Unless the data is much different from expectations, expect Sterling trade to be thin and quiet. Likely range today 1.3350-1.3400. Look to sell rallies.
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***Information contained in this newsletter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making but merely provides information from the market for its clients as additional information is made available as per the events occurring in the financial markets.
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