20 Dic 2018

FOREX Newsletter

FOREX Newsletter

December 20, 2018

 

Pulse of the Market

·      U.S central bank hiked interest rates by 25 basis points and forecast fewer rate increases next year

·      The focus for Yen traders will be on the Bank of Japan’s rates decision later in the day

·      Italy had struck a deal with the European Commission over its contested 2019 budget

·      Sterling is trading off its lows ahead of the UK central bank’s final policy meeting of the year

 

The Dollar rallied after a Federal Reserve rate hike but yesterday’s gains were unexpected for a few reasons. First, most investors were looking for Fed Chair Powell to be dovish and when he lined his comments with optimism, the dollar rose. Secondly, the dollar rallied despite the fact that 10-year Treasury yields dropped to an 8 month low. Rate hike expectations also declined with the market now pricing in a greater chance of a rate cut than a rate hike in 2020. All of this combined with downgraded GDP and inflation forecasts should have driven the greenback lower but instead, the dollar rallied because the tweaks to the policy statement weren’t dovish enough. Investors had braced for the worst – from no rate hike to dissents and a change in the risk assessment. And while there were subtle tweaks in the statement and lowered growth and inflation forecast, these changes were not as significant as the market had hoped. The same was true of Fed Chair Powell’s comments – he made it clear that nothing is predetermined and everything is data dependent but he also said the sharp decline in US equities and the tightening of financial market conditions has not fundamentally altered their outlook. The Fed still plans to raise interest rates next year and most policymakers expect the economy to grow.  Next up is the Bank of England. Sterling is trading off its lows ahead of the UK central bank’s final policy meeting of the year. Unlike the Fed, there will be no changes to interest rates. The last time the BoE met, they sent GBP/USD soaring above 1.30 on the talk of rate hikes. According to the summary of the report that month the MPC said “Were the economy to continue to develop broadly in line with the November Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate.” To add to that Governor Carney said a Brexit deal could release pent up investment demand but a no-deal Brexit could also lead to a major supply shock that could drive up inflation and interest rates. Fast forward 7 weeks and the UK is no closer to a Brexit deal.

 

 

Time(GMT)   Economic Release IMP Actual Forecast Prior
  BOJ Rate Decision (DEC 20) High     -0.10%
00:30 Australia Employment Change (NOV) High   20.0k 32.8k
00:30 Australia Unemployment Rate (NOV) High   5.0% 5.0%
06:00 Japan Machine Tool Orders (YoY) (NOV) Low     -16.8%
09:30 U.K Retail Sales Ex Auto Fuel (YoY) (NOV) Medium   2.3% 2.7%
12:00 Bank of England Bank Rate (DEC 20) High   0.75% 0.75%
12:00 BOE Asset Purchase Target (DEC) High   435b 435b
13:30 U.S Philadelphia Fed Business Outlook (DEC) Medium   15.5 12.9
13:30 U.S Initial Jobless Claims (DEC 15) Medium   219k 206k
13:30 U.S Continuing Claims (DEC 8) Medium   1665k 1661k
15:00 U.S Leading Index (NOV) Medium   0.1% 0.1%
21:00 New Zealand ANZ Consumer Confidence (MoM) (DEC) Low     2.8%
23:30 Japan National Consumer Price Index (YoY) (NOV) High   0.8% 1.4%

Euro

The single currency notched up its biggest daily rise against the Dollar and the Pound in more than a week yesterday as diminishing political worries in Italy and strong trade data contrasted with growing concerns about Britain’s plans to avoid a “no-deal” Brexit. Trade data this week showed European exports rose by more than 11 percent in October. Overall, the EUR/USD traded with a low of 1.1360 and a high of 1.1438 before closing the day around 1.1375 in the New York session.

 

Yen

The Japanese Yen rally continues to climb this week. Earlier in the day, the pair dropped to its lowest level since late October. On the release front, Japan’s trade deficit widened for a fourth straight week, ballooning to 0.49 trillion yen, much higher than the previous month’s deficit of 0.30 trillion. The estimate stood at 0.31 trillion yen. Overall, the USD/JPY traded with a low of 112.06 and a high of 112.64 before closing the day around 112.46 in the U.S session.

 

British Pound

The British Pound declined against its major counterparts earlier in the session after a data showed that UK consumer price inflation slowed to its lowest level in twenty months in November amid lower oil prices. But Sterling manage to reverse its losses and closed the session higher against the U.S Dollar. Overall, the GBP/USD traded with a low of 1.2605 and a high of 1.2677 before closing the day at 1.2609 in the New York session.

 

Canadian Dollar

The Canadian Dollar edged higher as oil prices and stocks rose, but the currency pared gains after domestic inflation data supported bets for the BOC to stay sidelined over the coming months. Lower gas prices pulled Canada’s annual inflation rate in November down to 1.7 per cent, the first time in 10 months it has been below the 2.0 per cent target. Overall, USD/CAD traded with a low of 1.3411 and a high of 1.3504 before closing the day at 1.3480 in the New York session.

 

Australian Dollar

The Australian Dollar remained under pressure, losing ground against most of the major crosses yesterday despite continued U.S Dollar weakness. There was little reaction to a speech from Chinese President Xi Jinping that failed to outline any specific measures to help support the Chinese economy. Instead, short-covering ahead of Fed interest rate decision was the likely catalyst. Overall, AUD/USD traded with a low of 0.7168 and a high of 0.7199 before closing the day at 0.7170 in the New York session.

 

Euro-Yen

EUR/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is issuing a bullish stance. The Relative Strength Index is above 46 and lies below the neutral zone. In general, the pair has gained 0.11%.

 

Sterling-Yen

Currently, GBP/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish tone and MACD is indicating a bearish stance. The Relative Strength Index is above 35 reading and lies below the neutral zone. On the whole, the pair has lost 0.27%.

 

Aussie-Yen

Currently, the cross is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 38 reading and lies below the neutral region. In general, the pair has lost 1.03%.

 

Euro-Sterling

This cross is currently trading above 14, 50 and below 100 days moving average. Fast stochastic is indicating a bearish tone and MACD is issuing a bullish signal. The Relative Strength Index is above 64 and lies above the neutral region. On the whole, the pair has gained 0.36%.

 

Sterling-Swiss

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish stance and MACD is indicating a bearish tone. The Relative Strength Index is above 40 and lies below the neutral region. In general, the pair has lost 0.02%.

 

Appendix

  

FOREX Closing Prices for December 19, 2018
Currency Open High Low Close Net Chg
EUR/USD 1.13635 1.14387 1.13602 1.13753 0.0016
USD/JPY 112.501 112.646 112.069 112.46 -0.0480
GBP/USD 1.26421 1.26775 1.26051 1.26091 -0.0029
USD/CHF 0.9922 0.99545 0.99046 0.99436 0.0018
USD/CAD 1.34651 1.35042 1.34118 1.34803 0.0018
EUR/JPY 127.853 128.36 127.529 127.944 0.1360
GBP/JPY 142.235 142.512 141.557 141.819 -0.3780
CHF/JPY 113.348 113.397 112.84 113.064 -0.2540
AUD/JPY 80.729 80.98 79.536 79.917 -0.8340
EUR/GBP 0.89877 0.90397 0.8978 0.90197 0.0033
EUR/CHF 1.12778 1.13426 1.12753 1.13131 0.0036
GBP/CHF 1.25421 1.25751 1.25192 1.25421 -0.0003

  

 

Daily Pivot Points
  Trading Range  
Contract S3 S2 S1 Pivot R1 R2 R3
EUR/USD 1.1266 1.1313 1.1344 1.1391 1.1423 1.1470 1.1501
USD/JPY 111.56 111.81 112.14 112.39 112.71 112.97 113.29
GBP/USD 1.2511 1.2558 1.2584 1.2631 1.2656 1.2703 1.2728
USD/CHF 0.9864 0.9884 0.9914 0.9934 0.9964 0.9984 1.0014
USD/CAD 1.3334 1.3373 1.3427 1.3465 1.3519 1.3558 1.3611
EUR/JPY 126.70 127.11 127.53 127.94 128.36 128.78 129.19
GBP/JPY 140.46 141.01 141.41 141.96 142.37 142.92 143.32
CHF/JPY 112.25 112.54 112.80 113.10 113.36 113.66 113.92
AUD/JPY 77.86 78.70 79.31 80.14 80.75 81.59 82.20
EUR/GBP 0.8924 0.8951 0.8985 0.9012 0.9047 0.9074 0.9109
EUR/CHF 1.1211 1.1243 1.1278 1.1310 1.1345 1.1378 1.1413
GBP/CHF 1.2460 1.2490 1.2516 1.2545 1.2572 1.2601 1.2628

 

Sources:  News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)

 

Disclaimer

This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.

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