It may not seem like it – but over the course of the week the USD actually sold off a little bit, a large part of that was on the back of its performance on Friday. The market eagerly awaited the NFP data on Friday, in my opinion it really did not make a difference as I believe that a December rate hike is a certainty. Although the average hourly earnings was a little weaker, the rest of the data was pretty solid.
The market must have been looking for something a little bit more, the greenback reacted by selling off which seemed a little bit strange considering the overwhelming strength in the USD of late. The GBP enjoyed yet another day in the sunshine and the CAD, on the back of rising oil prices, was also a big winner. I have been looking for a correction in the dollar for the past 3 weeks and my concern is that other than the two above mentioned currencies – this pullback was not very deep.
The EURUSD managed to close above 1.0620 which is where we have the 100 Hour Moving Average, as we discussed last week this a bullish sign. My concern though is that despite the weakness in the greenback, this pair was unable to extend its gains and 1.0685 remains a very strong resistance level for now. I purposely stayed out of this pair this week, we have an Italian referendum over the weekend and this could lead to a gap open on Sunday.
The GBPUSD continued its march higher, we had a close above 1.2675 which is where the pair was trading prior to the flash crash. I am wondering if the catalyst is coming from selling in the EURGBP which is forcing cable to go bid. I said that a close above these levels will get me interested in this pair again, and am certainly keeping a keen eye on developments. Sterling closed at 1.2730 and it could have an attempt at 1.2800 next week. The 100 day Moving Average is trading at 1.2800 and the last time GBPUSD traded above the 100 day MA was the day before Brexit – hence the reason I have this pair in my sight.
The USDJPY is running out of momentum and we continually attempt to trade lower, as discussed on Wednesday though we have found some strong support at 113.38. The good news is that we have some strong sellers at 114.60, this pair has traded higher by 1,300 pips in 3 weeks and so I would be interested in selling if price got back to resistance. To see a nice deep correction 113.00 needs to be broken and so I will be monitoring both these price points come Sunday.
The USDCAD finally found a little love from the rising oil prices, it is still concerning for me that the CAD was not able to strengthen more than it did considering oil was up by 10% on the week. Even amazingly strong data was unable to allow the CAD to get away and I fear that we could see the USD start to take back some of those gains next week. The same could be said of both the AUDUSD and NZDUSD, both these commodity pairs seem to be forming a range and I will watch early next week to see if these ranges are formed heading in to the Fed.
South Africa has avoided been downgraded to junk status which is a miracle in itself, the message from the rating agencies has been clear though – the government need to pull themselves together. Reading the papers on the weekend does not fill me with joy though, I think that there could be one more political storm brewing in the teacup. The ZAR has traded lower of the course of the month and considering the carnage the USD has caused to all other pairs – the ZAR has not done too badly. I would hate for all that hard work get undone by political scandals.
I look forward to next week, it precedes both the FOMC and then after the festive period. In other words next weeks may be the last week for some meaningful moves before liquidity starts drying up.
Happy Weekend!!!
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