The Fed did as expected yesterday and raised rates by 0.25%. The dollar got a bid and rallied against most of the pairs. All of them seem to be at pretty critical levels and we will see how the dust settles today
Dean's Daily FX Update – 15 December 2016
In the Zone
- We cover all the pairs in the video this morning.
Noteworthy News
- Primary dealers in the US are unanimous that the market will only see 2 rate hikes next year while the dot path is pricing in 3 rate hikes. Could this be the start of the theme for 2017, this is important to monitor as this could dictate the USD move next year.
Recap
The worst kept secret of the year was revealed last night – the Fed raised interest rates by 25bp for the first time in 2016 last night. I was a little cautious as I was concerned that just like last year the majority of the move may have been priced in, the USD roared last night so the hike clearly wasn’t priced in after all.
My feeling though is that the dot path revealed that there may as many as three or more rate hikes next year and this was the catalyst for a further USD run, the market was largely only pricing in two hikes in 2017. Fed Chair Yellen endorsed the dot path and perhaps the market started pricing in more hikes than what was expected.
My interpretation thus far is that there is nothing surprising in the press conference and I don’t believe that she was as hawkish as what the market is suggesting. There is a possibility that there were a couple of late comers to the dollar run, this has left the market in a precarious position and all pairs are sitting at major support and resistance levels, waiting for some direction which may come in the London session. We have covered all the pairs in some detail in the video this morning so I have just included some interesting things to watch in certain pairs.
The triple bottom that was forming at 1.0515 in the EURUSD has been broken and 1.0500 remains as the last frontier in terms of support. The swing low back in 2003 was 1.0495 and this is where price is currently trading, a break lower from here could trigger stops all the way down to 1.0460. This is a vaunted level as a break below here and we really go into uncharted territory, the last two weeks for me has highlighted the diverging paths the Fed and ECB are taking, and so I am ultimately bearish on this pair leading into 2017. I am of the opinion that this could go a lot lower and for the near future I will sit on the side-lines in this pair.
In the space of 5 weeks the USDJPY has retraced more than the 61.8% of a hard earned move that took 16 months to achieve. The USDJPY has been flirting with major resistance levels and the scary thing is that it looks vulnerable to another move upwards, if you are a Yen trader please heed caution as this pair seems to be trading 100 pips at a time.
Both the AUDUSD and the NZDUSD are sitting at key levels and I have differing views on both, whilst I think that the NZD will give way to a move lower I am of the opinion that the AUD will put up more a fight.
Looking at the markets right now, it definitely seems as though the London session is bracing to continue the USD momentum, the dust may take a little longer to settle after last night. I am tempted to use both the 200 daily MA as well as Fibonacci off the Daily chart to seek possible entry levels, but with the possibility of liquidity drying up next week ahead of the festive period, I will resist temptation and resume trading in January.
Important Economic Data out today
- 10:30 CHF Libor Rate
- 10:30 CHF SNB Press Conference
- 10:35 CHF SNB Monetary Policy Assessment
- 14:00 GBP MPC Official Bank Rate
- 14:00 GBP Monetary Policy Summary
- 15:30 CAD Manufacturing Sales
- 15:30 USD CPI
- 15:30 USD Philly Fed Manufacturing Index
- 15:30 USD Unemployment Claims
- 18:30 CAD BOC Governor Poloz Speaks
Daily Ranges 15/12/2016
Majors
EURUSD
Resistance 1.0605 – 1.0620
Support 1.0490 – 1.0510
GBPUSD
Resistance 1.2600 – 1.2615
Support 1.2535 – 1.2515
AUDUSD
Resistance 0.7450 – 0.7475
Support 0.7420 – 0.7395
NZDUSD
Resistance 0.7150 – 0.7165
Support 0.7100 – 0.7085
USDCAD
Resistance 1.3280 – 1.3315
Support 1.3219 – 1.3200
USDJPY
Resistance 117.40 – 117.80
Support 116.45 – 116.20
USDCHF
Resistance 1.0220 – 1.0240
Support 1.0160 – 1.0140
Rand
USDZAR
Resistance 13.9500 – 14.0500
Support 13.7800 – 13.7050
EURZAR
Resistance 14.6730 – 14.7217
Support 14.5370 – 14.4810
GBPZAR
Resistance 17.5280 – 17.6110
Support 17.3138 – 17.2345
Minors
AUDCAD
Resistance 0.9868 – 0.9875
Support 0.9810 – 0.9800
AUDJPY
Resistance 87.20 – 87.52
Support 86.41 – 86.24
EURCHF
Resistance 1.0770 – 1.0792
Support 1.0730 – 1.0720
EURGBP
Resistance 0.8410 – 0.8430
Support 0.8350 – 0.8340
EURJPY
Resistance 123.42 – 123.91
Support 122.40 – 122.16
GBPJPY
Resistance 147.09 – 147.60
Support 146.02 – 145.67
GBPCAD
Resistance 1.6715 – 1.6740
Support 1.6600 – 1.6568
GBPCHF
Resistance 1.2845 – 1.2878
Support 1.2780 – 1.2760
CADCHF
Resistance 0.7700 – 0.7715
Support 0.7660 – 0.7645
Indices
DE30
Resistance 11303 – 11350
Support 11050 – 10970
UK100
Resistance 6970 – 6990
Support 6869 – 6830
US500
Resistance 2260 – 2275
Support 2230 – 2200
US30
Resistance 19800 – 19900
Support 19500 – 19400
SA40
Resistance 44500 – 44600
Support 43800 – 43200
Commodities
BRENT
Resistance 54.35 – 54.70
Support 52.80 – 52.30
XAUUSD
Resistance 1154.00 – 1156.99
Support 1142.14 – 1135.00
XAGUSD
Resistance 16.99 – 17.07
Support 16.74 – 16.63
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