This week was all about the FOMC on Wednesday, while a 25bp hike was always on the cards, the market was waiting for some clarity around 2017. The majority of the market was expecting two further hikes in 2017 and this is what the USD had priced in since the US election result in early November. Coupled with a 25bp hike on Wednesday, the dot path indicated that we could see as many as three hikes which was endorsed by Fed Chair Yellen.
The market took this as a bullish sign and the dollar went on another run, as it started pricing in an “extra” hike. Having gone through the statement, I am still not as bullish as the market and I take an endorsement from Yellen with a pinch of salt – there seems to be a mismatch between her words and her actions. After the major run post the announcement, the USD took all pairs to the extremes of their weekly ranges, price looks as though it has found some support and resistance yesterday and I am pondering if we will see a retracement against the USD leading into Christmas weekend.
The key level in the EURUSD this week was always going to be 1.0520 which was a triple bottom stretching back to April 2015. The Fed was the catalyst for major support levels broken and we traded at a low of 1.0365 yesterday. We did find some support late last night, but we find ourselves in unchartered territory as price has no historical support levels to lean against. We closed the week at 1.0450, prior to this week the low for the EUR was at 1.0465 and as we head into next week that will be the key resistance level to watch, if the pair fails to close above this level the sellers will take this pair a lot lower.
The GBP is fighting valiantly to trade above the 100 day MA which is currently at 1.2750, it has not traded above this MA since Brexit, although it failed for the second consecutive week the fight is encouraging. The FOMC led cable lower to trade at a 1.2375 low but we did bounce to close the week at 1.2480, I would look for cable to find a foothold and have another attempt above 1.2700 next week.
I have taken a step back from the USDJPY, it just started to feel like I was chasing an opportunity here and that is not the kind of trade I am looking for. Price did get as high as 118.50 this week on two occasions, this seems to represent an area where swing traders are comfortable going short in the USDJPY. Price closed at 117.80 and next week we have a clearly defined resistance area at 118.50, I expect that sellers will lean against that area next week and perhaps attempt to trade lower.
The USDCAD opened the week with a gap on Sunday night after non-OPEC production cuts drove oil higher. Despite big event risks this week, the loonie respected some major support and resistance levels, prior to the FOMC decision the pair found some support at the 200 day MA around 1.3080. Price action closed at 1.3330 which is above our 100 day MA, which in itself is a bullish signal. I will watch to see how we start the week on Sunday night as a move below 1.3250 would get the bulls very uncomfortable.
We correctly highlighted the NZDUSD as the pair to stay out of, the kiwi was under some pressure and ended the week 2.50% weaker against the USD. The technical picture was crystal clear on Wednesday, a break below 0.7180 spelled trouble for the NZD. The pair traded to a low of 0.6930 and closed the week at 0.6950, it is finely poised for next week – below 0.6915 will leave it reeling. Price is also at the 50% Fib off the weekly chart so next week could be very telling.
While not quite as weak as the kiwi, the AUDUSD also felt the heat this week as it broke through major technical levels in the form of a 50% fib and support at 0.7330. Stops were triggered and the price fell to a low at 0.7266 which is where we found some significant support all the way to 0.7310.
Liquidity may be a little light next week as many trader take a break ahead of the festive season, I generally don’t trade in these 2 weeks but I suspect we may see a possible retracement against the USD as traders look to book some profit.
Have a great weekend.
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