EURUSD finds support near 1.0720, Fedspeak, Draghi eyed
The shared currency remains entrenched in the red territory on Monday, with EUR/USD now looking to regain the 1.0780/85 band.Spot keeps the bearish tone intact today, now losing ground for the sixth consecutive session after being rejected from last week’s tops in the mid-1.1100s.The solid upside in the buck remains the exclusive driver behind the pair’s downside as of late, with expectations of a Fed’s rate hike in December and speculations of extra stimulus in the US economy following Trump’s win still on the rise.Later in the session, President M.Draghi is due to speak amidst empty docket in the euro area. Across the pond, speeches by Dallas Fed R.Kaplan (2017 voter, neutral), Richmond Fed J.Lacker (2018 voter, hawkish) and San Francisco Fed J.Williams (2018 voter, neutral) will leave all the attention on the buck. The pair is now retreating 0.66% at 1.0786 and a breakdown of 1.0709 (2016 low Jan.5) would target 1.0538 (low Dec.3 2015) en route to 1.0519 (low Apr.13 2015). On the upside, the immediate hurdle aligns at 1.0826 (high Nov.14) followed by 1.0848 (low Oct.25) and finally 1.0952 (20-day sma).
GBP/USD could target 1.2770 UOB
In view of strategists at UOB Group, Cable remains poised for a test of the 1.2770 area in the near term.“The 1.2625 target indicated last Friday was surpassed as GBP surged to a high of 1.2673. The subsequent sharp pullback from the high appears to have scope to extend lower to 1.2520 but a sustained move below this level is not expected”. “As highlighted last Friday, a daily closing above 1.2550 would shift the neutral outlook for GBP to bullish. The upmove has been rather rapid and appears to be overextended especially from a shorter-term perspective. That said, as long 1.2400 is not taken out, there appears to be room for further extension to 1.2770”.
EUR/JPY strong resistance lies at 119.88 - Commerzbank
In view of Karen Jones, Head of FICC Technical Analysis at Commerzbank, the next relevant resistance in the cross is located around 119.90. “EUR/JPY last week tried to erode the 116.37 September high, but has not really cleared this level. A rise and daily close above the 116.37 September high is needed to imply that the cross has based short term. Key resistance remains the 2014-2016 downtrend at 119.88. (not shown on this chart). Initial support lies 114.55, the 55 day ma and while above here the market will remain immediately bid”. “Failure here will see attention revert to the bottom of the converging range, which is the 5 month uptrend at 113.24. Below here lies the 21st September low at 112.08 and the 78.6% retracement at 111.26”.
NZD/USD off-monthly lows, but capped by 0.7100
The NZD/USD pair extends its struggle to regain 0.71 handle in the mid-European session, although remains supported near 200-DMA support located at 0.7081.Currently, the NZD/USD pair drops -0.33% to 0.7096, unable to chew the offers placed at 0.71 barrier. The Kiwi keeps its range-trade intact within 20-pips, as the bears fail to benefit from a broadly stronger US dollar and weaker-than expected Chinese economic releases.Meanwhile, reports of two earthquakes struck in New Zealand and the consequent floods-warnings issued today, also keep the sentiment around the NZD somewhat undermined.Markets now await the US economic releases due later this week, including Tuesday’s retail sales data for fresh incentives on the major. While the NZ retail sales report has been delayed on the account of the natural calamity, however, Fonterra’s fortnightly dairy auction results will be closely eyed in the NA session tomorrow.To the upside, the next resistance is located at 0.7119 (daily pivot), above which it could extend gains to 0.7164 (5-DMA) and from there to 0.7200 (round figure). To the downside immediate support might be located at 0.7081/76 (200-DMA/ daily low) and from there to at 0.7050 (psychological levels), below which 0.7032 (Oct low) would be tested.
US Dollar through 100.00, 2016 fresh tops
The greenback tracked by the US Dollar Index met further upside pressure on Monday, now advancing to fresh YTD peaks above the critical 100.00 handle.The index is extending its upside momentum for the second week in a row so far today, including a test, albeit brief, of fresh yearly peaks just above the psychological 100.00 handle.Rising US yields in combination with expectations of a rate hike by the Federal Reserve in December and growing optimism following D.Trump’s victory on Wednesday keep sustaining the rally in the buck, which now faces 2015 tops in the mid-100.00s.According to CME Group’s FedWatch tool, the probability of a rate hike by the Federal Reserve at the December meeting is now above 81%, based by Fed Funds futures prices.Looking ahead, Dallas Fed R.Kaplan (2017 voter, neutral), Richmond Fed J.Lacker (2018 voter, hawkish) and San Francisco Fed J.Williams (2018 voter, neutral) are all due to speak throughout the day and keep the focus on the buck. The index is up 0.88% at 99.93 and a break above of 100.04 (high Nov.14) would target 100.60 (high Dec.3 2015). On the other hand, the next support aligns at 99.20 (low Nov.14) followed by 98.29 (20-day sma) en route to 96.94 (low Nov.4).
US elections resulted in dollar reset Goldman Sachs
Research Team at Goldman Sachs, suggests that the USD strength in recent days can extend and see the US election as something of a “reset.”“As early signs of a Trump victory made their way into the markets during the night from Nov. 8 - 9, the Dollar fell in line with this pattern, but reversed sharply as President-elect Trump began giving his acceptance speech, which projected a conciliatory and inclusive message. This set off a rally in risk, which has morphed into markets trading a positive growth shock to the US: Dollar up, inﬂation breakevens up and SPX up.”Amid substantial uncertainty, our US team has kept is growth forecast unchanged. There is upside risk from the ﬁscal stimulus, while there is downside risk from an escalation in protectionism.”“But in either case, inﬂation is likely to be higher than before, which is what has probably helped drive inﬂation breakevens up. As a result, market pricing for Fed hikes has risen sharply, with tightening priced through Sep. 2019 now 86 bps, almost a full hike more than at points before the election. Our point here is not that risks don’t exist. Of course they do. Instead, it is that the policy mix has shifted in the direction of more inﬂation, which means that – given how dovish market pricing has been – there is room for the Dollar to catch up with where it should have been quite some time ago. Our US team forecasts three hikes next year in addition to the one now likely in December. This is more than double what is priced and underpins our forecast for the Dollar to rise around 7 percent on a trade-weighted basis over that horizon.”“There are three additional issues of note. First, the Dollar is driven by two-year rate differentials, so the December meeting is clearly important. Our US team has emphasized ﬁnancial conditions, which are moving in favor of a hike. Second, the inﬂation story is really something unique to the US, but if we look at trade-weighted inﬂation breakevens, US inﬂation has yet to break meaningfully above that elsewhere.” “The inﬂation picture in Europe and Japan is difﬁcult, so the market is not yet pricing this correctly. This translates in our minds into more Dollar upside. Finally, there is China. The prospect of more Dollar strength may obviously see the $/CNY ﬁx move higher. But our best guess is that moves will be at the modest end of the spectrum, given that failure to do so could antagonize the incoming US administration. It might be time for the CFETS basket to go up a little bit, which would set things off on a good foot in Washington come January.”
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