The Agreement about the new tax law is official and the dollar loses its strength

The Dollar put in a mixed performance, ending mostly lower as US House Republicans approved tax legislation.

The Agreement about the new tax law is official and the dollar loses its strength

Dollar loses strength

The Dollar put in a mixed performance, ending mostly lower as US House Republicans approved tax legislation. Traders and investors sold stocks and the Dollar in light volume trading with the much-anticipated tax cut bill fully priced in. Upbeat US Housing data failed to lift the Greenback.

 

Global yields rose. The yield on the Ten year US bond was up 7 basis points to 2.46%. Germany’s Ten year Bund yield climbed to 0.37% from 0.30%, the highest in over two weeks.

 

Outlook: The price action in the past few days in the currencies has resulted in divergence in the currencies. The Euro climbed, Sterling was little-changed as was the Aussie. The Dollar rose against the Yen.

Events and data are light today with New Zealand releasing it’s Current Account and Trade data. Bank of England Governor Mark Carney speaks before a  Treasury Select Committee in London.

 

Trading View:

The Dollar Index (USD/DXY) slipped further to support levels in spite of a rise in US yields and upbeat US housing data. In normal markets, this would see a strong broad-based Dollar gain. Not at this time of the year. Further ahead though, these fundamentals will reassert themselves.

The yield on the US Ten Year Treasury closed at 2.46%, which is high since late October. A break higher could see us back to 2.6%, which is the high this year.

The Dollar Index (USD/DXY) closed at 93.436, down 0.27% (93.705 yesterday). Immediate support lies at 93.40 and then 93.20, which is strong. Immediate resistance can be found at 93.70/80 and then 94.00.

 

EUR/USD  closed up 0.5% at 1.1847(1.1782 yesterday). The 7 basis point rise in the Ten Year German Bund yields to 0.37% matched that of the US Ten year yield. EUR/USD has immediate resistance at 1.1850 (near it’s overnight high) and then 1.1870/80. Immediate support lies at 1.1825 and then 1.1805. While the seven basis point rise in Germany’s ten-year bond yield no doubt supported the Euro, keep an eye on the US Ten year note. And market positioning still has Euro long bets are multi-year highs. Likely range 1.1800-1.1860. Sell rallies.

 

EUR/USD

 

USD/JPY – rose 0.32% to end at 112.95 (112.58 yesterday). USD/JPY is particularly sensitive to the US Ten year yield. The Dollar’s rally, however, was muted due to lower than usual trading volumes. Stocks eased and this limited the topside of USD/JPY.  For today immediate resistance for USD/JPY lies at 113.10/15 (overnight high was 113.077). The 113.15 level is strong and should hold. Immediate support can be found at 112.70 and 112.50. The BOJ is not expected to change it’s policy on rates at their meeting tomorrow. Speculative short JPY bets are at multi-year highs. Likely range today 112.60-113.10. Prefer to sell rallies in USD/JPY and EUR/JPY.

 

USD/JPY

 

GBP/USD  closed little-changed at 1.3385 (1.3384 yesterday). GBP/USD rose to 1.3402 after holding the support level of 1.3330. Traders continue to doubt the ability of the UK government to secure a deal to leave the EU. Brexit will continue to drive the Pound which after up moves looks poised to break lower. GBP/USD will have to hold the 1.3300-1.3330 level. For today immediate resistance lies at 1.3400-10. Immediate support lies at 1.3360 and then 1.3330. BOE Governor Mark Carney speaks, later on, today on the UK’s November Financial Stability Report in London. Likely range today 1.3340-1.3410.

 

GBP/USD

 

AUD/USD – finished flat at 0.7665 (0.7665 yesterday). AUD/USD rose to 0.7684 yesterday after the RBA released it’s December meeting minutes. The Australian central bank expressed increased confidence that the Australian economy will strengthen. Which potentially lays the ground for its first rate hike since 2010 later next year. The RBA cited that wage growth had stabilized in Q3. The RBA’s December meeting was before the release of the strong Q3 GDP, November Jobs report and Fed rate hike. AUD/USD failed to break up through 0.77 cents and looks pretty stuck in a wider 0.7620-0.7700 range. Immediate resistance lies at 0.7690/00. Immediate support can be found at 0.7640 and then 0.7620. Likely range today 0.7640-0.7690. Just trade the range shag.

 

AUD/USD

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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.

 

HIGH RISK WARNING:

Trading Foreign Exchange (Forex) and Contracts for Differences (CFD’s) is highly speculative, carries a high level of risk and may not be suitable for all investors. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin.

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