EUR/USD inter-markets: dead-cat bounce on sight?
EUR/USD is trading on a firmer note at the beginning of the week, managing to stage a rebound from last week’s fresh 2016 lows in the proximity of 1.0560. The up move has found echo on the renewed selling bias around the buck, as market participants seem to have entered some profit-taking mode after the US Dollar Index clinched highs near 101.50 on Friday, levels last seen in March 2003.The current bullish attempt seems to have run out of legs in the mid-1.0600s for the time being, while the broader bearish view on spot stays unchanged. In fact, bets on the Fed tightening its monetary policy in December plus perspective of higher inflation expectations under a Trump presidency remain USD-supportive. CME Group’s FedWatch tool now sees the probability of a rate hike next month at above 95%, while speculative positioning in EUR hints at further downside on the cards for the single currency.US yields are trading on a mixed fashion so far today, although the broader scenario keeps pointing to further advances, fuelling extra gains for USD. Adding to the EUR complex, uncertainty regarding the outcome of the Italian referendum on December 4 could start to weigh on investors’ sentiment as it is not priced in by markets, opening at the same time another bearish front in case of a ‘NO’ win.Regarding FX, the initial up barrier aligns at today’s tops at 1.0650, coincident with Friday’s bull run. If surpassed, the next relevant resistance area remains in the 1.0820/50 band, where sit October/March lows. On the downside, a break below Friday’s 2016 lows near 1.0560 would open the door to the significant support band at 1.0540/20, December/April 2015 lows.
GBP/USD recovery gains momentum; reclaims 1.2400 handle
The GBP/USD pair's recovery from session low has gained further traction in the past couple of hours, lifting the pair back above 1.2400 handle. Spot caught fresh bids after UK PM Theresa May, speaking at the CBI, assured that the government would try for arrangements, which would be the best for UK businesses in the longer-term. Meanwhile, a broad based profit-taking slide in the greenback further contributed to the pair's recovery momentum from session lows. Further upside, however, might be restricted as the overall US Dollar Index remains within a well-established post-US presidential election up-trend on increasing prospects of an eventual Fed rate-hike action at its meeting in December. Hence, investors this week will remain focused on FOMC meeting minutes along with the UK Treasury’s Autumn Forecast Statement, both scheduled on Wednesday. From current levels, the ongoing recovery momentum could get extended towards 1.2435 (Friday's high) above which a fresh bout of short-covering could lift the pair beyond 1.2450 resistance and aim towards reclaiming 1.2500 psychological mark. On the downside, sustained weakness back below 1.2350 immediate support might now drag the pair through session low support near 1.2315-10 region, towards its next major support near 1.2280-75 region.
USD/CAD off session lows, still weaker below 1.3500 mark
The USD/CAD pair has managed to bounce off nearly 35-40-pips from session low but remained well below 1.3500 psychological mark.Currently trading around 1.3475 region, a broad based US Dollar retracement triggered the initial leg of downslide to session through level of 1.3435. Adding to this, buoyant sentiment surrounding crude oil prices was also seen benefiting the commodity-linked currency - Loonie. The pair, however, found some renewed buying interest at lower levels as increasing prospects of an imminent Fed rate-hike action at the central bank's December meeting continues to underpin the greenback and limited any further downslide for the time being. In absence of any major market moving releases, USD price dynamics and the prevalent sentiment around commodities would be key determinants of the pair's move on Monday ahead of this week's key event risks - Canadian monthly retail sales data on Tuesday and Wednesday's FOMC meeting minutes, which would help investors to determine the next leg of directional move for the major. Immediate upside resistance remains near 1.3500 psychological mark above which the pair seems to aim back towards 1.3555-60 horizontal resistance before attempting a move towards 1.3600 handle. On the downside, 1.3450-45 area remains immediate support to defend, which if broken is likely to drag the pair back towards 1.3400 round figure mark.
USD/CHF attempting a move back above 1.0100 handle
Having posted a session low at 1.0078 level, the USD/CHF pair managed to recover all of its early losses and has now turned neutral.Currently hovering just below 1.0100 region, increasing December Fed rate-hike expectations continues to underpin the greenback. Hence, Monday's initial downslide could be categorized as a minor corrective-move within a well-established up-trend led by Donald Trump's victory in the US presidential election. Meanwhile, improving investor risk-appetite, as depicted by a sharp rebound in the European equity markets, is further denting the safe-haven appeal of the Swiss Franc and contributing to the pair's recovery from session through. Broader market sentiment around the greenback, as measured by the overall US Dollar Index, remains an important determinant for the pair's movement in the near-term. Hence, market participants will remain focused on this week's FOMC meeting minutes on Wednesday for further insight over the Fed's near-term monetary policy outlook and eventually provide fresh impetus for the next leg of directional move for the major. Momentum back above 1.0100 handle is likely to lift the pair back towards Friday's swing high resistance near 1.0123 above which a fresh leg of up-move could further boost it towards 1.0200 mark ahead of yearly highs resistance near 1.0250 region. On the downside, sustained weakness below 1.0070 immediate support could get extended towards 1.0020-15 horizontal support before the pair eventually breaks below parity mark to test its next major support near 0.9960-50 region.
EUR/GBP turns lower, drops below 0.8600
EUR/GBP turned lower and retraced completely intraday gains in a matter of minutes, as the pound picked up momentum across the board. The British currency received a boost and dragged EUR/GBP from a peak of 0.8637 to a session low of 0.8573 in recent dealings. There were no clear catalysts behind the move other than position adjustments. At time of writing, EUR/GBP is trading at 0.8575, virtually unchanged on the day.In the absence of first-tier data, investors attention turns to UK Autumn Statement on Wednesday, where UK Chancellor Philip Hammond will outline plans for fiscal spending alongside latest forecasts for growth and public finances.In terms of technical levels, next supports are seen at 0.8525 (Nov 18 low), 0.8485 (Sep 19 low) and 0.8416 (Sep 13 low). On the other hand, resistances could be faced at 0.8630/37 (100-day SMA/Nov 21 high), 0.8706 (Nov 15 high) and 0.8782 (50-day SMA).
USD/JPY corrective slide extends further below 111.00 level
The greenback remained on the back-foot, with the USD/JPY pair extending its retracement from the multi-month high touched earlier. Currently trading near session low, around 110.60 region, the overall US Dollar Index witnesses a profit taking slide after reaching its highest level since March 2013 and has been the sole contributor of the pair's corrective slide from the highest level since late May. Growing speculations about aggressive fiscal spending by Trump administration has been driving inflation expectations and Treasury bond yields higher. Adding to this, market expectations that the Fed would eventually move towards raising interest rates, is further contributing to the bullish sentiment surrounding the greenback. Traders on Monday, however, seemed inclined to take some profits off the table following the pair's relentless rally of nearly 1000-pips from post-US presidential election swing low near 101.20 region and near-term overbought conditions. This week's key event risks for the pair's well-established near-term up-trend includes the release of monthly durable goods orders and FOMC meeting minutes, both due on Wednesday and would help investors determine the next leg of movement for the pair. Omkar Godbole, Editor and Analyst at FXStreet, notes, "The RSI is overbought on the daily and 4-hour chart. Meanwhile, the hourly RSI is diverging from the bullish price action. We also see two consecutive grave doji candles on the hourly chart. Furthermore, the daily MACD shows the bullish momentum has stalled. Hence, a correction to 5-DMA level of 110.00 appears likely. Moreover, such a move would confirm a bearish price-RSI divergence on the 4-hr chart." He further adds, "On the higher side, only a daily close above 111.45 (May high) would signal continuation of the Trump rally."
Gold under a Trump presidency could rise to USD1,550/oz by 2017 end - HSBC
Research Team at HSBC, suggests that the Trump presidency, the course of Brexit, and elections and other political events in the Eurozone will help shape gold prices in 2017. “Protectionism: Mr. Trump is strongly identified as a populist and ran on populist polices. Historically gold is buoyed by populist polices, as they typically inject a degree of uncertainty and risk into financial markets. We believe Mr Trump’s policies will be no different, particularly as they impact gold. A main plank of Mr. Trump’s brand of populism is protectionism, notably the imposition of high tariffs.During periods of expanding trade, countries most actively involved in trade enjoy outside economic growth. Additionally, geopolitical risks typically fall, economic policies tend to be better coordinated and economic disputes between nations, such as trade and currency wars, are reduced. This in turn reduces the need to own a safe haven asset, like gold. Periods of low growth or contractions in world trade, such as occurred during the financial crisis, typically also see economic dislocation, a rise in economic disputes and policy misalignment, all of which can lead to trade and currency wars.The risks of a destabilising global trade war have risen with Trump being elected. In his pre-election rhetoric, Trump spoke of “currency manipulation” by China and suggested he would put a 45% tariff on imports from China. Other countries were also singled out. The investment demand for gold is likely to rise in such an environment, even if Mr Trump does not fully carry out his threats. The possibility of significant RMB weakness as a result of Mr Trump’s policies could trigger a broader and deeper risk-off move in global markets altogether. Gold is typically in demand during risk-off periods.”“Geopolitics: With Mr Trump openly questioning decades old military and political alliances and the European ideal under attack first by Brexit followed by a rise in anti-European sentiment in important European nations, it appears likely that investors will move increasingly into gold.Gold prices dropped notably in the wake of Mr Trump’s election, as equities and the USD rallied. The logic behind this appears to be a reflation trade. The spending on the military and infrastructure coupled with tax cuts have spurred equities and the USD higher and lifted bond yields. We believe the gold decline will be temporary and that as global risks increase and uncertainty increases globally gold will be utilized increasingly as a safe haven and flight to quality asset. A key that gold has over paper assets, notably currencies, is that it is immune from intervention. For 2017, gold could rise further to USD1,550/oz by year end with an average of USD1,410/oz.”
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. We assume no liability for any loss arising from any investment made based on the information provided in this communication.