10 Dec 2018

FOREX Newsletter

FOREX Newsletter

December 10, 2018

 

Pulse of the Market

·      The primary theme for the Dollar right now is risk aversion, which can be positive and negative

·      This week’s U.S inflation and retail sales report will be just as important as NFP

·      Keep an eye on US-China headlines as they will also influence risk appetite

·      Canada’s economy is on fire with a record breaking 94.1K jobs created in the month of November

The last month of the year kicked off with a bang but not in the way that many of us would have hoped. Equity markets sold off across the globe and in the world of currencies, the U.S and Australian Dollars were the worst performers. A convergence of negative news pressed both currencies lower but most of the concerns centered on China, which is why AUD fell the hardest. The week started with optimism after President Trump and President Xi reached a trade truce but things went south quickly when the U.S arrested Huawei’s CFO. Stocks crashed and President Trump tried to stem the slide by saying he had no knowledge of the arrest and that trade talks with China are going very well. Investors are skeptical and in a headline driven trading environment they are taking everything at face value. As we muddle through the conflicting headlines, what is clear is that uncertainty will remain in the weeks ahead as investors wait to see if the Huawei arrest really affects US-China trade talks. There’s also a big Brexit vote this week and the ECB meeting. Between these events and a continued focus on China, December will remain a jittery month for currencies. The primary theme in the FX market right now is risk aversion, which can be both positive and negative for the U.S Dollar. When markets sell off globally, money usually flows into the U.S Dollar and the Japanese Yen. With stocks poised for further losses, demand for the yen has been and should remain strong. However demand for the U.S Dollar depends on what is happening in the other currency’s home country. The latest US jobs report is proof that despite the pickup in manufacturing and service sector activity the momentum in the US economy is slowing. Only 155K jobs were created in November versus a forecast for a 198K increase. Payroll growth in October was also revised slightly lower but the concern is wages. Not only did average hourly earnings growth fall short of expectations, rising only 0.2% compared to a forecast of 0.3% but the prior month’s reading was also revised lower to 0.1%. This means that companies are hiring fewer workers, paying them less than expected and allowing them to bill fewer houses.

 

Time(GMT)   Economic Release IMP Actual Forecast Prior
  China New Yuan Loans CNY (NOV) High     697.0b
00:30 Australia Home Loans (MoM) (OCT) Medium     -1.0%
04:30 Japan Bankruptcies (YoY) (NOV) Medium     -0.4%
06:45 Switzerland Unemployment Rate (NOV) Medium     2.4%
07:00 German Trade Balance (OCT) Medium     18.4b
09:30 U.K Trade Balance (OCT) Medium     -£27m
09:30 U.K Industrial Production (YoY) (OCT) Medium     0.0%
09:30 U.K Manufacturing Production (YoY) (OCT) Medium     0.5%
09:30 U.K Gross Domestic Product (MoM) (OCT) Medium     0.0%
13:15 Canada Housing Starts (NOV) Medium     205.9k
13:30 Canada Building Permits (MoM) (OCT) Medium     0.4%
15:00 U.S JOLTS Job Openings (OCT) Low     7009

 

Euro

The single currency gained in Friday’s trading session. Workers in the euro area are seeing the strongest pay gains in a decade, a rare piece of positive economic news for the European Central Bank as it heads toward scaling back extraordinary stimulus. Compensation per employee in the euro area grew an annual 2.5 percent in the third quarter. Overall, the EUR/USD traded with a low of 1.1359 and a high of 1.1422 before closing the day around 1.1404 in the New York session.

 

Yen

The Japanese Yen pair settled almost unchanged on Friday and marginally down for the week. The fundamental background suggests that the pair could break lower this week, as equities are set to remain under pressure, while the benchmark US 10-year Treasury yield fell from 3.02% to 2.85% last week. Overall, the USD/JPY traded with a low of 112.53 and a high of 112.90 before closing the day around 112.65 in the U.S session.

 

British Pound

The British Pound ended the week marginally below the previous week’s close, after UK political uncertainty dragged Sterling lower. In the coming week GBP/USD is forecast to continue its trend lower. The main data release for the U.S Dollar is inflation data out on Wednesday because of its impact on interest rates, a primary driver of currencies. Overall, the GBP/USD traded with a low of 1.2709 and a high of 1.2791 before closing the day at 1.2740 in the New York session.

 

Canadian Dollar

The Canadian Dollar strengthened on Friday after domestic data showing a record increase in jobs caught the foreign exchange market by surprise, pressuring investors who had been short the loonie. The Canadian economy added 94,100 jobs in November on higher full-time hiring, and the unemployment rate dipped to a new all-time low of 5.6 per cent.  Overall, USD/CAD traded with a low of 1.3251 and a high of 1.3398 before closing the day at 1.3317 in the New York session.

 

Australian Dollar

The Australian Dollar has fallen during most of the week but has found support at the crucial 0.72 level. The fact that it has broken above a major downtrend line and held above there is a bullish sign. I think this is due to the US and the Chinese calling a bit of a “cease-fire” in the trade war. Overall, AUD/USD traded with a low of 0.7196 and a high of 0.7240 before closing the day at 0.7197 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 48 and lies below the neutral zone. In general, the pair has gained 0.27%.

 

Sterling-Yen

Currently, GBP/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 40 reading and lies below the neutral zone. On the whole, the pair has lost 0.33%.

   

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 indicating a bullish stance. The Relative Strength Index is above 42 reading and lies below the neutral region. In general, the pair has gained 0.49%.

  

Euro-Sterling

This cross is currently trading above 14, 50 and below 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 62 and lies above the neutral region. On the whole, the pair has gained 0.60%.

 

 Sterling-Swiss

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 32 and lies below the neutral region. In general, the pair has lost 0.65%.

 

Appendix

  

FOREX Closing Prices for December 07, 2018
Currency Open High Low Close Net Chg
EUR/USD 1.13743 1.14222 1.1359 1.14043 0.0028
USD/JPY 112.648 112.909 112.535 112.655 0.0000
GBP/USD 1.27803 1.2791 1.27092 1.27403 -0.0040
USD/CHF 0.99233 0.99414 0.9888 0.98935 -0.0033
USD/CAD 1.33785 1.33983 1.32514 1.33175 -0.0063
EUR/JPY 128.178 128.65 128.114 128.49 0.3400
GBP/JPY 144.008 144.198 143.21 143.544 -0.4780
CHF/JPY 113.473 113.874 113.38 113.835 0.3780
AUD/JPY 81.5 81.655 81.066 81.089 -0.4030
EUR/GBP 0.8895 0.89659 0.88934 0.89494 0.0054
EUR/CHF 1.12921 1.13077 1.12816 1.12843 -0.0009
GBP/CHF 1.26893 1.26987 1.25919 1.26059 -0.0083

 

  

Daily Pivot Points
  Trading Range  
Contract S3 S2 S1 Pivot R1 R2 R3
EUR/USD 1.1305 1.1332 1.1368 1.1395 1.1431 1.1458 1.1495
USD/JPY 112.12 112.33 112.49 112.70 112.86 113.07 113.24
GBP/USD 1.2621 1.2665 1.2703 1.2747 1.2784 1.2829 1.2866
USD/CHF 0.9820 0.9854 0.9874 0.9908 0.9927 0.9961 0.9981
USD/CAD 1.3100 1.3176 1.3247 1.3322 1.3393 1.3469 1.3540
EUR/JPY 127.65 127.88 128.19 128.42 128.72 128.95 129.26
GBP/JPY 142.12 142.66 143.10 143.65 144.09 144.64 145.08
CHF/JPY 113.02 113.20 113.52 113.70 114.01 114.19 114.51
AUD/JPY 80.30 80.68 80.89 81.27 81.47 81.86 82.06
EUR/GBP 0.8834 0.8864 0.8907 0.8936 0.8979 0.9009 0.9052
EUR/CHF 1.1249 1.1265 1.1275 1.1291 1.1301 1.1317 1.1327
GBP/CHF 1.2459 1.2525 1.2566 1.2632 1.2672 1.2739 1.2779

 

 

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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