US Dollar bears in control

25 January, 2018

The USD took another beating today which saw nearly all major pairs and commodities climb sharply as a result. This is not surprising given the recent data which saw US existing home sales m/m fall to 5.57M (5.7M exp) from the previous high of 5.78M, showing that there may be some slowdown in the housing market. US PMI for services was also lagging expectations coming in at 53.3, still showing expansion but at the same time not coming in where analysts had expected. There could be some good news on the horizon though with Trump expected to talk up his infrastructure plan at the state of the union and lay the foundation for further spending in order to bolster the economy. However, there is a danger that it could cause it to overheat as he looks to be bold and put his front foot forward. The real story though is that right now the USD continues to come under fire, and for the market this is causing large volatility.

One of the big movers today for me was gold which sky rocketed up the charts and pushed past the previous 2017 high. It's always ominous when gold starts becoming more and more bullish but at present this is being caused by the weaker USD and resistance at 1349 was absolutely crushed today as gold whooshed past.  The next levels of resistance can be found at 1366 and 1375, with 1375 likely to be a key target level for traders. Anything above this would suddenly get the market a little worried I feel, as gold is always the hedge for recessions and inflation. Support levels in the event the bears catch can be found are at 1349 and 1336, with further potential to dip lower to 1314 if the bears do manage to take hold. All in all though, if the USD weakness continues gold could be swinging higher in no time through no fault of its own.

The New Zealand dollar has got a large shock today on the back of a weaker than expected inflation report. NZ CPI figures for Q4 came in sharply down at 0.1%, expectations were for 0.4%. Pushing the Yearly figure to 1.6%, a large shock for the previously booming economy. This will certainly put pressure on the Reserve Bank of New Zealand to pause when it comes to thinking about pushing rates higher in the economy - despite the high level of employed and wage growth at present.

The NZDUSD on the charts quickly pushed back from resistance at 0.7431 as the news filtered through for the CPI figures. Support levels can be found at 0.7324 and 0.7255 at present, with the market also likely to treat the 20 day moving average as support as well. If the USD does gain momentum then we could see some very serious bearish pressure, at the same time if it does remain weak then potentially the NZD could stay elevated despite the recent economic news, so the market focus will be on USD data after this with a bearish bias. 


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