Markets are stable awaiting the FOMC meeting today
The Euro steadied after yesterday’s volatile fall amidst a generally weaker US Dollar. The Australian Dollar rebounded off fresh 5 month lows after the RBA meeting minutes release revealed a dovish bent. Copper and Iron Ore prices were higher. The Canadian Dollar and Mexican Peso soared as NAFTA trade discussions progressed. The Singapore Dollar and South African Rand led Emerging Market currencies higher.
There was little economic data released yesterday. US Existing Home Sales were up to 5.48 million units, higher than the 5.42 million forecast.
Global stocks extended gains led by Wall Street. The S&P 500 was up 0.70% to 2597.00 after trading to its all-time high above 2,600.00
Global yields were little-changed even as the US yield curve continued to flatten. The yield on the US Ten year note was unchanged at 2.36%. Australia’s Ten Year bond yield also finished flat at 2.54%. The yield on Germany’s Ten year Bund was down one basis point to 0.35%
USD/DXY – dips to 93.96 (94.088 yesterday)
EUR/USD – steadies to close at 1.1740 (1.1733 yesterday).
AUD/USD – rebounds to 0.7580 from 0.7546. Copper prices were up 1.0%
USD/JPY – slips to 112.44 (112.70 yesterday)
GBP/USD – virtually flat at 1.3237 from 1.3235 yesterday. The UK Treasury’s Autumn Budget Forecast Statement is released later today.
Outlook: Trading has begun to thin out in this Thanksgiving shortened week with little in the way of economic data. Markets were content to take a breather after some pretty volatile moves recently. We can look forward to more of that today with a quiet calendar here in Asia.
Janet Yellen is due to make a speech shortly at New York University’s Stern School of Business (GMT 11 pm, Nov 21/Local Time 10 am, Nov 22). Traders will be scrutinising her address after she resigned her post as Fed Chair. The FOMC Meeting Minutes from the November meeting will be released later on in the day. (GMT 7 pm, Nov 22/Local Time 6 am/Nov 23) Other data releases later are:
UK Treasury Autumn Budget Forecast Statement (GMT 12.30 pm, Nov 22/Local Time 11.30 pm, Nov 22)
US Headline and Core Durable Goods Orders (m/m), Weekly Unemployment Claims (GMT 1.30 pm, Nov 22/Local Time 12.30 am, Nov 22) forecast for Headline DGO: 0.4% from 2.0%; forecast for Core DGO: 0.5% from 0.7%; forecast for Weekly Unemployment Claims: 241,000 from 249,000.
US Revised University of Michigan Consumer Sentiment Index: (GMT 3 pm, Nov 21/Local Time 2 am, Nov 23) forecast: 98.1 from 97.8
Trading View: There was little to drive the markets yesterday and traders just got tired of pushing the currencies too much one way. In Europe, Germany’s political turmoil has weighed on the Single Currency. While the process will take time to resolve, some do not see it as a threat to the economic performance which is going well. The Dollar Index (USD/DXY) finished just under the 94.00 support level after trading to 94.165 highs overnight. The US Dollar is marking it’s time while a lot of consolidation occurs.
USD/DXY has immediate resistance at the 94.20 and then 94.50/65 (recent highs). There is immediate support at 93.80/90 (last night’s low was 93.878). Strong support can be found at 93.50. We are likely to see a 93.50/94.50 range develop toward the end of the year.
EUR/USD – The support at the 1.1710/20 held well with the rebound limited to 1.17577 overnight. For today, the Euro has immediate resistance at 1.1760 and then 1.1780. Immediate support can be found at 1.1710/20 and then 1.1680. The wider range for the Euro is 1.1570 to 1.1860 and we can expect that to hold. Let’s not forget that the speculative community is still long Euro bets so that will keep the downside pressure alive. We can expect more short-term support today as exhaustion greets Euro sellers. Likely range 1.1720-1.1770.
AUD/USD – was sold down to 0.75312 low after the RBA meeting minutes were released. The RBA suggested in its statement that it saw no rate hikes for some time with wages data and inflation continuing weak. However in his speech later in the day, RBA Governor Philip Lowe said that while there was no case for adjustment in near term policy, the situation could change. And “if the economy continues to improve as expected, it is more likely that the next move in interest rates will be up, rather than down.” Traders chose to focus on this and just got tired of testing the downside. Commodities have also rebounded after exhaustive sales have pushed them down recently. AUD/USD has immediate resistance at 0.7590-0.7600 (overnight high was 0.75903). Immediate support can be found at 0.75 50 and then 0.7530. Expect consolidation with further upside testing. Likely range 0.7540-0.7610. Look to buy dips near 0.7530 for now.
USD/JPY – finished with mild losses to 112.45 at the close (112.70 yesterday). The Dollar traded to an overnight low of 112.17. There is immediate support at 112.10/20. Immediate resistance can be found at 112.70 and then 112.90. The yield on the US Ten year treasury was unchanged at 2.36. Likely range today 112.10-112.70. Prefer to sell rallies.
GBP/USD – had a relatively tight range between 1.3209 and 1.3267, finishing flat at 1.3237. The British Pound was buoyed by expectations that PM May would offer the European Union more than she committed to in September. This would provide a breakthrough in the stalled negotiations. Traders will focus on the UK Treasury’s Budget statement where Finance Minister Philip Hammond will try to balance more spending calls against weaker growth. GBP/USD has immediate resistance at 1.3260/70. Immediate support lies at 1.3210 and 1.3200. Likely range today 1.3215-1.3285.
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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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