Despite stronger data from the US and more tapering talk the greenback has only strengthened against the Yen. Stocks are flat overnight as were commodities in a lacklustre session. With the Fed’s FOMC next week and Christmas the week following we may see some hesitation and continued lacklustre sessions. I personally do not see the Fed slowing the QE next week. They have said that they are targeting unemployment and inflation, whilst jobs has improved, inflation has not. I think AGSP2 and then AGSP3 will not slow down the QE until their targets are met. I believe this is being reflected in the price of bonds and currencies where neither have really moved on Friday’s Non-Farm payrolls.
DATA HIGHLIGHTS TODAY – AU NAB business confidence. Chinese Industrial Production. UK Manufacturing Production. EU Draghi Speaks.
AUDUSD – Chinese data has been strong but our local releases less so. This will see the Aussie struggle to get back above resistance of 93 in the short term. What will see it higher is a US announcement that printing continues unabated. That said, we have good buying in the last two sessions and a HHHL in current bar with divergence in the momentum. So am looking to take this a little higher from here.
EURUSD – Continues to rally back to the 61.8 fib at 1.3830 in strong action driven by good data from the German powerhouse.
GBPUSD – A swing low off the support level, providing the test proof that it should hold now. Great data coming from the Poms, even if not so great batting or bowling. Carney is also positive about his adopted economy, although has said the recovery needs to be sustained before it can handle any rate rises. This doesn’t mean he won’t slow/stop the Asset Purchase Program.
NZDUSD – Is hard to read this one. On one hand we are in a range of effectively 82 to 84. On another we are in a descending range, or channel and have just tagged the upper side of that channel which started in mid-October. Fundamentally they are doing OK with a resurgence in dairy products, in particular to the export market of China, however it is still a rather small market. My motto is if it is not easy to see then walk away. Or another way is; if in doubt, stay out.
USDCAD – Several days of selling pressure but price has gone nowhere yet. The Loonie can do this, trade sideways for several sessions before having an aggressive move. With the sellers being more dominant at this point you would be better to be talking the short side of the trade.
USDJPY – Didn’t get back to my buy zone and I am not sure it will now. This article suggests we will be stuck between 100 and 105 for some time. It kinda makes sense but we do not have to shock the market to make it move in a direction.
GOLD – Still floating above support with little direction as we get a day of selling followed by buying before selling comes back in.
David Long / Proprietary Manager