EUR/USD challenges 1.0500 ahead of Trump’s presser
The European currency stays under pressure on Wednesday, with EUR/USD coming down to threat the 1.0500 key support ahead of the opening bell in Wall St. Spot shed over a cent since recent weekly tops above the key barrier at 1.0600 the figure, although sellers have so far failed to break below the 1.0500 support on a sustainable fashion. Later in the session, the pair will remain under scrutiny via the buck’s price action in light of the press conference by president-elect Donald Trump, with the main focus on the potential fiscal stimulus, deregulating issues and growth measures. On that regard, FX Strategists at TD Securities noted “…If Trump focuses on the growth agenda (tax reform and deregulation) while steering away from talk of a border tax, conflicts of interest and foreign affairs, risk markets are likely to react positively…”. Further releases on the US docket will see the weekly report on crude oil inventories by the EIA. The pair is now retreating 0.45% at 1.0508 and a breakdown of 1.0495 (low Jan.11) would target 1.0474 (20-day sma) en route to 1.0387 (low Jan.4). On the flip side, the immediate hurdle aligns at 1.0627 (high Jan.10) followed by 1.0654 (spike Dec.30) and finally 1.0658 (55-day sma).
GBP/USD remains depressed near 1.2100 ahead of Carney
The Sterling keeps the bearish fashion intact on Wednesday, sending GBP/USD to the area of daily lows near 1.2100 the figure.Spot has slipped back to the area of 3-month lows in sub-1.2100 levels earlier today following mixed results from the UK docket, where Industrial and Manufacturing Production have both beaten consensus in the month of November, although the trade deficit and Construction Output have come in on the soft side.The current weakness around the pair has been also intensified following a pick up in the demand for the greenback ahead of the press conference by US president-elect Donald Trump, due later in the European evening.In addition, GBP will remain in centre stage as BoE’s M.Carney will speak before the Treasury Select Committee Hearings ahead of the NIESR GDP Estimate for the fourth quarter. As of writing the pair is retreating 0.48% at 1.2117 and a break below 1.2098 (low Jan.10) would open the door to 1.2081 (low Oct.28) and then 1.1450 (GBP ‘flash crash’ Oct.7). On the upside, the initial hurdle lines up at 1.2302 (20-day sma) followed by 1.2414 (55-day sma) and finally 1.2431 (high Jan.6).
USD/JPY: Breaking the mould? - Rabobank
In view of the Jane Foley, Senior FX Strategist at Rabobank, a better outlook for global growth has negative implications for safe haven currencies such as the JPY.“That said, one clear caveat is that 2017 also threatens to bring plenty of political pitfalls which could prevent the JPY from given up too much ground.”“From Kuroda’s viewpoint, signs that the global economy is showing signs of finally being able to shake off the effects of the great recession should be of benefit to the Japanese economy. Not only should Japan’s economy be “able to move further forward, supported by the tailwind”, but the additional policy measures announced by the BoJ in recent years should be a disincentive for safe haven JPY inflow.”“On several measures of Purchasing Power Parity the JPY is one of the most undervalued currencies within the G10. Indeed, in 2015 the value of Japan’s effective exchange rate hit its lowest levels since 1973 (BoJ measure) and has since been trading only modestly higher. This can be viewed as a success for the policies of the BoJ.”“Despite the fairly upbeat tone struck by Kurodo in his December speech, the clear difficulties for the BoJ in reaching its inflation objectives suggest there is little chance of the BoJ stepping back from its aggressive asset purchases programme any time soon. It was anticipation of widening interest rate differential between the US and Japan that drove USD/JPY higher in the weeks after the US election. However, the last few weeks have brought signs of fatigue in this rally. CFTC data for the first week in January showed speculators modestly reduced their short JPY positions after nine consecutive weeks of building them higher. More generally the USD has lost its upside momentum as the market awaits validation of the reflationary expectations that have been built into the price since November.”“The recent gains in the USD combined with the recent movements in US interest rates across the curve suggest that there has been noticeable tightening in US monetary conditions in recent months. This supports our view that the Fed is likely only to hike its Fed funds rate once more this year. On anticipation of fading optimistic regarding the pace of US rate hikes, we expect the USD to end the year at softer levels then it started vs. a basket of G10 currencies including the JPY. That said, we expect that the current pull back in the USD could be short-lived and another wave of reflationary optimism may yet be associated with the inauguration of Trump. For this reason we see scope for USD/JPY to head back towards the 120 area around Q2 before ending the year closer to 115.00.”“On any significant deterioration in risk appetite during the course of 2017, the chances that USD/JPY will lurch back towards the 110 area can be expected to rise.”
USD/CAD testing high at 1.3250 level, near-term trading range intact
The USD/CAD pair traded with mild positive bias on Wednesday and is now flirting with session peak near 100-day SMA, albeit remained within near-term trading range.Currently trading around 1.3250 region, the pair gained some traction during early NA session amid resurgent US Dollar buying interest ahead of President-elect Donald Trump's first formal press conference, later during the day.However, looking at the broader picture, the pair has been confined within 100-pips broader trading range around 100-day SMA and remained unaffected by the recent price action in oil market, which tends to drive demand for the commodity-linked currency – Loonie. In fact, WTI crude oil has declined by over 5% in the week so far but has failed to provide any impetus but any movement has proved lackluster. In absence of any major economic releases, investors would take clues from the scheduled Donald Trump’s press conference and be able to determine the directional bias for the pair over the medium-term.A follow through buying interest above 100-day SMA resistance near 1.3255-60 region, now seems to boost the pair immediately towards 1.3300 handle, en-route 1.3335-40 resistance area. Alternatively, sustained break below 1.3200 handle should now drag the pair below 1.3175 support towards testing its next support near 1.3130 area ahead of the very important 200-day SMA support near 1.3100 round figure mark.
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