The U.S. Dollar traded higher all day as speculators increased bets that the Fed would issue a more hawkish monetary policy statement tomorrow. Last night the main trend turned up on the weekly chart leading to a firm opening this morning.
The EUR USD stopped just short of piercing 1.4500. Overnight, sellers hit the Euro hard following the release of the German ZEW Economic Expectation Index report. Better than expected U.S. economic data and concerns over Euro Zone bank exposure to Greece, Portugal and Spain debt helped accelerate the decline.
The GBP USD was under pressure all day but remained inside of a retracement zone at 1.6292 to 1.6154. Overnight news that the U.K. November CPI increased to 1.9% was largely ignored by traders since the pre-report guess was for an increase of 1.8%. This currency is not likely to move until it breaks out of its short-term trading range.
Today’s better than expected U.S. Industrial Output report put downside pressure on the Japanese Yen as it sent a signal to traders that the Fed was coming closer to hiking its benchmark interest rate. Traders have become more confident that the Fed will hike rates sooner than expected while the Bank of Japan is expected to keep interest rates unchanged at 0.10% on December 17th. The increase in the spread between the two interest rates helped trigger a reversal in the carry-trade. Investors bought Dollars to payback loans while simultaneously borrowing Yen.
Weaker Gold and the stronger Dollar helped trigger an overnight rally in the USD CHF. The up move accelerated throughout the day following the release of the better than expected U.S. Industrial Output report. This currency is now at its highest level since October. Swiss traders are pricing in possible banking issues with Euro Zone banks.
The Canadian Dollar traded weaker on Tuesday but remained inside the two month range. Stronger gold helped this market turn around after early downside pressure. Firmer crude oil could help limit losses.
The AUD USD was under pressure most of the day following the release of bearish comments in the Reserve Bank of Australia minutes. The RBA minutes showed that arguments for a third rate increase were “finely balanced.” This change in member attitude had the effect of “materially shifting the stance of policy to a less accommodative setting.” In other words, it’s time to take a pause in rate hikes. The odds of a rate hike in February dropped from 80 percent to 66 percent.
The NZD USD finished the session down but off its low. This market hasn’t been able to attract any buyers since the spike to the upside last week after the release of the hawkish statement by the Reserve Bank of New Zealand. It’s beginning to look like last week’s two day rally was enough for investors to adjust their dovish positions. The chart indicates plenty of room to the downside.
Contact Us:
Local: 312-896-3930
Toll Free: 800-971-2440
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from B.I.G. Forex, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as “spread” or “straddle” trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.
