The dollar is stabilizing ahead FOMC meeting on Wednesday
After another choppy session following the US Payrolls release, the Dollar Index (USD/DXY) ended with mild gains. Jobs created in November beat consensus while Hourly Wage data disappointed.
Over the weekend, Chinese CPI and PPI data were a touch lower than forecast.
Wall Street rose, leading equities higher. The DOW gained 0.49% while the S&P 500 was up 0.44%.
The yield on the US Ten Year Note climbed to 2.38% from 2.37%. Japan’s Ten Year JGB yield was flat. The yield on the German Ten Year Bund closed up one basis point.
Commodities were mostly up with Gold and Silver up smalls. Brent Crude Oil prices rose 1.9% to US$ 63.15 (US$ 62.05 Friday).
It’s all about the Federal Reserve’s policy meeting this week. The FOMC is expected to raise rates 0.25% in their meeting on Wednesday. The Payrolls numbers were better than expected but average hourly wages numbers disappointed.
Markets will now focus on the interest rate trajectory for 2018. Which will be a major discussion point for a new Fed chairman coming in.
And if the FOMC fails to give the market what it wants, the Dollar could suffer a downside setback.
There are no big events or data releases today.
The Dollar Index (USD/DXY) gained 0.16% at Friday’s close and had it’s the best week for this year. This was mainly due to the drop in the Pound and Japanese Yen. The British Pound fell following a Brexit agreement to push forward in negotiations still seen as challenging.
USD/JPY was lifted by the rise in the US Ten year yield.
A lack of catalyst saw the Euro finish flat in choppy trading. The Australian Dollar managed to hold on to 0.75 cents and looks to consolidate that level.
With no major data or events released today, the technical levels and market positioning will impact.
USD/DXY – traded to an overnight high of 94.087. Immediate and strong resistance lies at 94.20 and a break of this could see 94.50 and eventually 95.00. There is immediate support found at 94.00 and 93.80. A break down through 93.80 could mean we are forming a trading range between 92.80 and 94.20.
EUR/USD – traded to a low of 1.1730 and held that level well. Trading was choppy and the Euro recovered to close flat at 1.1775, also near the highs of the day. There was no real catalyst for the EUR/USD. If the Euro holds that 1.1730 level, we could see a grind higher that could take us back to 1.1860. Immediate support lies at 1.1730/40. The Euro has immediate resistance right here at 1.1780 and then 1.1820. Likely range today 1.1730-1.1800. The Euro is still a sell on any rally.
AUD/USD – managed to hold 0.75 cents yet again. With the US Dollar finding it tough to gain fresh ground, the Aussie consolidated in a relatively narrow 0.75014 to 0.75336 range. Commodities stabilised and this aided the Australian Dollar. The Australian Dollar has immediate resistance at 0.7535/40 and then 0.7560. Immediate support lies at the 0.7500 which remains strong, for now. This is indicative of some institutional buying which if holds could see 0.7560. The next set of prime economic data for the Aussie is Thursday’s Australian Employment report. Meantime, look to sell any rallies to 0.7560.
GBP/USD – Brexit negotiations are keeping Sterling in a wider 1.3350-1.3520 range in typical volatile Sterling trade. While the EU and UK have agreed to move forward to the next stage of negotiations, markets see these talks as challenging to say the least. Speculative Sterling positioning remains close to square. Expect more volatility for the British Pound with the downside looking vulnerable. Immediate resistance can be found at 1.3420 and then 1.3450. Immediate support lies at 1.3380 and then 1.3350. Likely range today 1.3370-1.3450. Look to sell rallies.
USD/JPY – The Dollar rose against the Yen as Ten Year bond yields were up one basis point while their Japanese counterpart was flat. USD/JPY has immediate resistance at 113.70/80 and then 114.00. Immediate support lies at 113.30 and then 112.90. While the Dollar keeps it’s bid against the Yen, a large number of short JPY bets (still a multi-year high) will keep the USD/JPY topside limited. Likely range today 113.30-113.80. Prefer to sell rallies to 114.00
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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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