The dollar followed through from the Fed rate decision and most pairs got smashed yesterday. We are in uncharted territory in the EURUSD and it could be foolish to try and pick a bottom in this pair. Liquidity may dry up a little of the course of next week so the moves may be exaggerated.
Dean's Daily FX Update – 16 December 2016
In the Zone
- We cover all the pairs in the video this morning.
Noteworthy News
- Mexico raised its interest rates by 50bp last night, is this an indication that with US interest rates expecting to up next year emerging markets will be raising interest rates in anticipation of rising inflation.
Recap
The market was poised at vital support and resistance, we discussed yesterday that the London session was braced to continue with the USD momentum. Not in my wildest dreams did I imagine that the momentum would continue with such force, the Dollar truly is king at the moment as it makes considerable gains against all major pairs.
I am tempted to think that this is just a hangover and that we should get a correction fairly soon, my internal conflict comes in that there have been some technical breakouts that will keep the USD bid.
You would think that at some point the buyers would come into the EURUSD, but there really does seem to be “murder on the dance floor.” With the US clearly plotting a 2017 with more interest rate hikes, the EU are contemplating life with more QE packages – interest rate policy is clearly poised for some divergence. The entire market is aware of this and this has scared the buyers away, we highlighted the 1.0460 level as a big one, price traded through that level all the way to 1.0415 which makes this the lowest level in 14 years. We are now in unchartered territory with no historical support levels to consider, if we connect recent lows in the form of a trend line the next level comes in at 1.0300. The sellers are clearly in control here, my strategy is to sit this pair out – let somebody else pick the bottom.
The BOE kept rates unchanged today but they did indicate there could be some tightening soon. The break lower at 1.2493 was felt hard with stops been triggered and cable only finding some support again at 1.2380. Support did rally into the close and the level to watch today will be 1.2460, a close above this level into the weekend will be bullish for next week.
Sometimes the smallest of victories can mean so much, and this is what we can take away from the USDJPY. Key resistance at 118.50 held yesterday on more than one occasion – is this pair finally running out of steam? It is difficult to call a top in this pair at the moment but we are seeing some consolidation and I my gut says that traders are starting to pick 118.50 as the top. The sellers need to start looking for small victories at this point, a close below 118.06 will go a long way towards sellers gaining a foothold.
I was afraid for the NZDUSD yesterday morning and my fear was justified as the pair closed below the 200 day MA which is trading at 0.7064. This becomes a vital level at the end of the week, I would expect some support buyers to test that level again, but the Kiwi could be in some serious trouble next week if we close below 0.7064 this evening. I really did think that the Aussie was going to put up a more stubborn fight today – after all just before the FOMC, this pair was testing major resistance at 0.7500. Like most other pairs, there is a good battle at current support level and I believe that 0.7330 is the level to watch, a close below this level and we start next week with a bearish tone.
If we take our cue from the week post the US Election, the last dollar run, we need to be patient. The greenback will have to take a breather at some point and that will present some opportunity, be cautious though as we don’t want to underestimate the strength of the dollar right now. Don’t forget that next week the liquidity may start to dry up as traders prepare for the festive season.
Daily Ranges 16/12/2016
Majors
EURUSD
Resistance 1.0525 – 1.0558
Support 1.0410 – 1.0350
GBPUSD
Resistance 1.2515 – 1.2548
Support 1.2410 – 1.2380
AUDUSD
Resistance 0.7408 – 0.7450
Support 0.7340 – 0.7305
NZDUSD
Resistance 0.7100 – 0.7115
Support 0.7025 – 0.6980
USDCAD
Resistance 1.3360 – 1.3389
Support 1.3263 – 1.3219
USDJPY
Resistance 118.40 – 118.60
Support 117.20 – 117.05
USDCHF
Resistance 1.0321 – 1.0340
Support 1.0250 – 1.0212
Rand
USDZAR
Resistance 14.0800 – 14.1460
Support 13.8740 – 13.8140
EURZAR
Resistance 14.7212 – 14.7717
Support 14.4093 – 14.3280
GBPZAR
Resistance 17.5580 – 17.7050
Support 17.1485 – 17.0239
Minors
AUDCAD
Resistance 0.9868 – 0.9875
Support 0.9785 – 0.9750
AUDJPY
Resistance 86.90 – 87.40
Support 86.10 – 85.64
EURCHF
Resistance 1.0760 – 1.0792
Support 1.0720 – 1.0700
EURGBP
Resistance 0.8399 – 0.8410
Support 0.8356 – 0.8334
EURJPY
Resistance 122.92 – 123.40
Support 122.20 – 122.00
GBPJPY
Resistance 146.46 – 147.00
Support 145.19 – 144.77
GBPCAD
Resistance 1.6687 – 1.6710
Support 1.6522 – 1.6490
GBPCHF
Resistance 1.2845 – 1.2878
Support 1.2740 – 1.2707
CADCHF
Resistance 0.7740 – 0.7770
Support 0.7670 – 0.7645
Indices
DE30
Resistance 11390 – 11430
Support 11090 – 11005
UK100
Resistance 7010 – 7033
Support 6920 – 6900
US500
Resistance 2270 – 2300
Support 2230 – 2200
US30
Resistance 19950 – 20000
Support 19700 – 19500
SA40
Resistance 44500 – 44600
Support 43500 – 43000
Commodities
BRENT
Resistance 54.70 – 54.90
Support 53.00 – 52.50
XAUUSD
Resistance 1144.00 – 1149.11
Support 1122.14 – 1115.00
XAGUSD
Resistance 16.34 – 16.47
Support 15.94 – 15.83
Important Economic Data out today
- 15:30 USD Building Permits
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