Dollar making record gains and gold touches the 1256 level
The Dollar’s upward grind against most of its Rivals extended amidst a fall in bond yields. The Japanese Yen was the main exception, which benefited as a result of the Nikkei’s sharp drop in Asia yesterday. Canada’s Loonie took a dive after the Bank of Canada left interest rates unchanged but remained “cautious” regarding future moves. Australia’s third-quarter GDP growth missed consensus and led the Aussie to its lowest close this month.
Private sector jobs in the US showed solid employment growth in November which auger well for tomorrow’s Payroll numbers.
Wall Street stocks managed to stem the global equity sell-off, ending little-changed. The Dow slipped 0.16% while the S&P 500 was up 0.08%.
Global Bond yields declined as the US faces another annual drama to avoid a government shutdown before Saturday. The yield on the US Ten year note decreased four basis points to 2.32%. Japanese Ten-year yields were unchanged (0.04%). Germany’s Ten Year Bund yield dropped to 0.29% from 0.32%. The yield on the Australia’s Ten-year bond fell a whopping 10 basis points to 2.50%.
USD/DXY – grinds higher to close at 93.584 (93.383 yesterday).
USD/JPY – lower to 112.27 from 112.63 on widening ten-year yield differentials and a bit of risk aversion
AUD/USD – slides to 0.7562 from 0.7606 yesterday on the Q3 GDP miss and stronger USD
EUR/USD – extends losses to 1.1795 (1.1815 yesterday)
GBP/USD – falls to 1.3372 (1.3435 yesterday) – pessimism grows on Brexit expectations
USD/CAD – soars to 1.2798 (1.2698 yesterday) on BOC’s cautious outlook on interest rates.
Outlook: Apart from the Yen, the Dollar’s gains yesterday were pretty broad-based. Emerging Market assets and currencies fell. The drama on the US government shut-down due to its debt extension is played out yearly every December. While this adds to the volatility, it won’t change the Greenback’s bid tone.
Yesterday’s solid US private sector jobs number have seen some forecaster’s lift their Employment Change to +220,000 from +190,000 at the start of this week. Wages are expected to gain 0.3% from October’s 0.0%.
Trading View: Up and up, up and up… it’s in your blood, as the lyrics from Coldplay’s 2015 tune goes… So it is with the US Dollar. In what is the beginning of typical December markets, expect more Dollar gains as its Rivals slip by the wayside.
Only a big miss in tomorrow’s Payrolls numbers could change this. Which is always a possibility, particularly when the consensus is too much one way. Trading levels are crucial, particularly when markets turn volatile. As they often do in December.
Market positioning is a huge factor as well. Every week the CFTC/Reuters report is released late Monday. Traders will do well to keep a vigilant watch on this.
EUR/USD – extends it’s fall, mainly on broad-based Dollar strength. The Euro did not trade above 1.1880 and only managed a high of 1.1848. EUR/USD broke through 1.1800 and traded down to a low of 1.1780. That remains immediate support. A break of 1.1780 should see 1.1750 strong support. Immediate resistance lies at 1.1830 and then 1.1850. The Euro broke through its up-trend which began in November. It is now in a downtrend. The speculative community is still long of Euro. Likely range today 1.1785-1.1825. Look to sell rallies.
USD/JPY – bucked the trend and fell to a low of 111.994 from yesterday’s 112.63 opening. The Dollar then rallied to 112.27 at the New York close. USD/JPY is particularly sensitive to the differential between the US and Japanese Ten year yields. Yesterday this differential narrowed. The Nikkei (Japanese Stock Market) also impacts the currency. Yesterday the Nikkei slumped 2% in Asia. Investors always buy Yen when stocks are doing poorly. USD/JPY has immediate resistance at 112.40 and then 112.70. Immediate support lies at 112.00 and then 111.70. Wall Street stocks managed to stem the equity slump which should see a light USD/JPY rally. Look to sell USD/JPY and CROSS/JPY rallies. Today’s likely range 111.90-112.40.
AUD/USD – on the slippery slope once again. The miss on Q3 GDP all but undid the slightly positive tone of the RBA on Tuesday. The Aussie looks and feels soft this morning. And the speculative community is still carrying long Aussie bets… AUD/USD has immediate resistance at 0.7585 and then 0.7600. Immediate support at 0.7550 is strong. The overnight low was 0.75586. Likely range today 0.7550-0.7600. While the Aussie is still a sell on rallies, the 0.7550 level is strong and has held well. Respect that level until we have a clean break.
GBP/USD – Sterling extended its fall as pessimism grows for a “good” deal on Brexit. The UK Economist magazine used the title. “Lower Brexpectations” which is an apt description. This has affected the Pound. GBP/USD dropped to an overnight low of 1.33578 before settling at 1.3375 at the NY close. GBP/USD has immediate support at 1.3360 and then at 1.3330. Immediate resistance can be found at 1.3400 and 1.3420. Like the Euro, Sterling has most likely resumed its downtrend, Unlike the Euro, the speculative Sterling community is pretty square. Likely range 1.3350-1.3400. Look to sell rallies.
The Dollar once again keeps its bid status. The Dollar Index (USD/DXY) traded through 93.50 to close at 93.58. The next resistance level lies at 94.00. That said we would need a pretty good Jobs number tomorrow to keep the bid alive and kicking. It makes me a tad wary whenever markets get too carried away one way or another. Particularly in December.
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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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