Euro and Pound continue to climb and the Dollar continue in weakness and gold touches the 1321 level
The US Dollar found few friends in the marketplace in spite of a strong rally in US Treasury yields. Global yields rose in tandem. The British Pound put in a Sterling performance on higher UK Gilt yields. Singapore’s GDP expanded more than double initial forecasts in 2017 which saw the SGD jump 1% against the USD.
It seems to be a case of “anything you can do, I can do better” for the Dollar’s Rivals. Emerging Markets and the Yen played catch-up as the Dollar’s decline was more broad-based. The Greenback just can’t seem to take a trick and finds few friends in the market.
The Euro, which has led the currency rally against the Dollar pulled back after hitting near early September highs. Technically, failure to break overnight highs could see a corrective pullback in the Single currency. Net Euro long bets increased in the latest CFTC/Reuters report and are currently at multi-year highs.
Trading volumes are not yet back to full capacity with many trading desks still bare. This will improve as the week progresses.
Tonight we see the release of German Jobs and Unemployment data. The US releases ISM Manufacturing data as well as the latest FOMC meeting minutes.
The Dollar Index (USD/DXY) extended its drop to close down 0.43% at 91.843. It broke through the immediate support level of 92.00. USD/DXY traded to an overnight low of 91.75 which is now the immediate support level. Immediate resistance lies at 92.00 and then 92.30. The next level of importance is 91.00. A strong rally in the EUR/USD (basically 60% of the Index) could see this.
EUR/USD – traded to an overnight high of 1.20813 before pulling back to settle at 1.2052 at the close. German and Euro Zone Manufacturing PMI maintained their strong pace of growth at the end of the year, fulfilling expectations. EUR/USD has immediate resistance at 1.2080. The high for this year was 1.2092. Strong resistance lies at 1.2100. The high in January 2015 was 1.2101. Speculators remain long Euro bets which are at multi-year highs. Politics returns when Merkel and her party resume talks with other parties on January 7 (Friday). Immediate support can be found at 1.2020 and then 1.2000. Strong support lies at 1.1970/80. Likely range 1.2000-70. The sentiment is strong in favor of the Single currency. Any weakness in the upcoming data could derail this strength. Look to sell rallies.
GBP/USD – outperformed other Major currencies with a 0.7 % rally against the US Dollar to close at 1.3593 (1.3505 yesterday). GBP/USD traded to an overnight high of 1.3600, a three month high. A weaker than expected rise in UK manufacturing PMI failed to pound Sterling. News that the UK could join the Trans-Pacific Partnership lifted the Pound. The Financial Times reported that Britain held informal talks about joining a flagship Pacific trade group. The overall US Dollar weakness has seen strong bullish sentiment build towards Sterling, which is more likely the case for the Pound’s support. GBP/USD has immediate resistance at 1.3600 and then 1.3630. Strong resistance lies at 1.3650, a break of which could see Sterling as high as 1.3800, before 1.4000. GBP/USD has immediate support at 1.3560 (previous resistance) and then at 1.3530. In the latest CFTC/Reuters report, the last for 2017 speculators trimmed their GBP long bets to +GBP 12,676 contracts (from +GBP 20,388). Likely range 1.3550-1.3600. Prefer to sell rallies.
USD/JPY – slumped to a low of 112.053 from 112.68 yesterday before rallying to close at 112.30. The strong rise the in US ten year yield to 2.46% (from 2.41%) failed to lift USD/JPY. There was no change in the Japanese Ten Year JGB yield (0.04%). It was a simple case of broad-based US Dollar weakness and a massively short JPY speculative community. USD/JPY has immediate support at 112.00. Immediate resistance can be found at 112.60 and then 112.80. Net short JPY bets increased to -JPY 116,086 contracts (from -JPY 114,373) in the latest CFT/Reuters report (week ended Dec 26). Look to sell rallies to 112.50 today with the likely range 112.00/50.
AUD/USD – Rallied to 0.7845 before settling lower to 0.7830 at the close. The Aussie traded to an overnight low of 0.7794. Immediate resistance lies at 0.7845 and then at 0.7870. Immediate support can be found at 0.7810 and then 0.7790. While Gold and Silver prices extended gains due to broad-based US Dollar weakness, Copper prices eased. The industrial metal’s remarkable rise may be coming to an end. And this will impact the Aussie. The speculative community saw a small increase in Aussie short bets to -AUD 13,639 from -AUD 12,660. Prior to that speculators were long of AUD. The net positioning is not large in historical terms. Likely range today 0.7785-0.7845. Look to sell rallies.
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