The dollar regains its strength and Gold continues to decline to the 1280 level
The Dollar settled higher, finishing with broad based gains against its Rivals. Rumors that John Taylor, who impressed President Trump, was the favorite to get the Federal Reserve’s top job lifted the Greenback. Taylor is known for his hawkish interpretation on monetary policy. Sterling skidded anew after the BOE warned that time was running out for a Brexit transitional deal.
The Dollar Index (USD/DXY) settled up 0.25%.
UK Annual CPI rose 3.0% the same as analyst’s expectations of 3.0%.
UK PPI Input was lower at 0.4% from forecast 1.2%
UK House Prices missed with a print of 5.0% against a forecast of 4.5%.
Germany’s ZEW Economic Sentiment dropped to 17.6 against a forecast of 20.1
US Import Prices rose to 0.7% from the previous 0.6% and a forecast of 0.6%
US Capacity Utilisation for September was at 76% against a forecast of 76%
US Industrial Production printed at 0.3%, the same as the 0.3% analysts had forecast
Wall Street stocks lifted on earnings that beat expectations. The DOW made a fresh record high, ending up 0.18%
The yieldonthe Ten year US Treasury was flat at 2.30%. The Two year US yield rose 2 basis points to 1.55%
USD/DXY – closed at 93.51, up from yesterday’s 93.307
EUR/USD – slips to 1.1768 (1.1792 yesterday)
GBP/USD – down to 1.3178 from 1.3247 yesterday.
USD/JPY – flat, finish at 112.22 (112.20 yesterday)
AUD/USD – little-changed, closes at 0.7847 from 0.7848 yesterday. Gold, silver and copper all closed lower.
Outlook: The chances for a more hawkish Federal Reserve head has seen short term US yields rise. The two year yield closed up at 1.55% (1.53% yesterday) which is the highest since 2008. Bets for a December rate hike rose to 92%. The Dollar Index (USD/DXY), currently at 93.30 looks poised to retest 93.80/94.00 resistance level. Earlier this week we saw that short speculative US bets remained at ultra year highs. A much bigger squeeze on these shorts may be brewing. Markets will keep their focus on the upcoming key events this week.
Events and economic data for today:
ECB President Mario Draghi is due to deliver a speech at the opening of the ECB Conference in Frankfurt: (GMT 8.10 am, Oct 18/Local Time 7.10 pm, Oct 18)
UK September Average Earnings Index, Claimant Count Change (the number of people claiming unemployment benefits) Unemployment Rate: (GMT 8.30 am, Oct 18/Local Time 7.30 pm, Oct 18): forecast for Average Earnings Index: 2.1% from 2.1%; forecast for Claimant Count Change: 1,000 from the previous -2,800; forecast for Unemployment Rate: 4.3% from 4.3%
FOMC members Dudley (New York) and Kaplan (Dallas) due to speak at a panel discussion in New York, entitled: “Dallas and New York as Centres of Growth” (GMT 12 pm, Oct 18/ Local Time1pm, Oct 18)
US Building Permits and Housing Starts: (GMT 12.30 pm, Oct 18/Local Time 11.30 pm, Oct 18): forecast for September Building Permits: 1.25 M from 1.27 M; forecast for Housing Starts: 1.175 M from 1.18 M
Canadian Manufacturing Sales (GMT 12.30 pm, Oct 18/Local Time 12.30 pm, Oct 18) forecast: 0.1% from -2.6%
Trading View: The Dollar should hold its gains as we approach the key events this week. Mario Draghi kicks off with the opening remarks at the ECB conference. FOMC members Dudley and Kaplan are involved in a panel discussion in New York. The political uncertainty in Europe (mainly Spain) and the UK (Brexit) will continue to weigh on the Euro and Sterling. The Dollar also rose against the Emerging Market currencies.
EUR/USD – managed to rally off its lows of 1.17361 to settle at 1.1768 at close in New York. Yesterday Spain cut its growth forecast to 2.3% from 2.6% citing the Catalonia unrest for the cut. Catalonia contributes a fifth of Spain’s growth output. Further unrest will undermine Spanish growth, and the Euro zone overall. EUR/USD has immediate resistance at 1.1800 (overnight high). Immediate support lies at 1.1735 and then at 1.1705. The strong support level comes in at 1.1670/80. With the speculators holding long Euro bets at multi-year highs, it’s still a sell on rallies. Likely range today 1.1730-1.1790.
GBP/USD – Sterling skidded further in spite of a 3.0% rise in inflation which is above the Bank of England’s 2.0% target. Mark Carney in his speech said that he saw inflation peak just above 3% before year end. The BOE also warned that time was running out for a Brexit transitional deal which weighed on the Pound. We highlighted that speculators were running long of Sterling for only the third time this year, and since October 2015. GBP/USD has immediate resistance at 1.3210 and then at 1.3250. Immediate support lies at 1.3155/60 (overnight low was 1.3155). Likely range today 1.3160-1.3210. Sell rallies
AUD/USD – The Aussie closed virtually flat at 0.7847 (0.7849 yesterday). Most metals were lower. Copper ended down 1.2% to record it’s the first decline in more than a week. Tomorrow sees the release of Australian Employment data. AUD/USD has immediate resistance at 0.7860 (overnight high 0.7861). Immediate support can be found at 0.7820 (overnight low of .7818). Likely range today 0.7820-0.7860. Look to sell rallies.
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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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