Dollar has resumed its long-term upward trend

24 November, 2016

All the focus was on the UK Autumn Statement this afternoon as Chancellor Phillip Hammond took centre stage. However, the biggest moves occurred in the dollar rather than the pound or UK stocks. The greenback surged to new highs against a basket of foreign currencies, causing the USD/JPY to push above 112, EURUSD tumbled below 1.0550 and dollar-denominated gold took an absolute hammering as it skidded below $1200 to drop to a low so far of about $1881.

It looks like the dollar has resumed its long-term upward trend after a pause at the start of this week. The Federal Reserve looks set to raise interest rates in December before tightening its belt further in 2017. The FOMC’s last meeting minutes, due for release in about an hour from now, could shed some more light into this view. Incoming economic data generally supports a rate rise, with durable goods orders being among today’s forecasting-beating data. Meanwhile all the other major central banks are expected to remain dovish for the foreseeable future, not least the European Central Bank and the Bank of Japan. Consequently, the dollar could extend its rally significantly further against the euro and yen.

In fact, the EUR/USD is again looking very weak after the recent sell-off has paused for breath at the start of the week. But the US will be celebrating Thanksgiving on Thursday so it remains to be seen if the EUR/USD will sharply extend its declines further this week. Some may argue that a rate rise in December is basically priced in by now. However, it is what happens after December and if investors believe that the Fed will still be more hawkish then than the ECB, then we could actually see the EUR/USD drift further lower. I still think parity represents a fair value for the EUR/USD given the diverging paths of interest rates in the Eurozone and the US.  But it is not about what I think is fair value, it is about the markets. Indeed, we could even fall below parity, or who knows start a major up leg here. The point I am trying to make is no one knows what will happen next.

But that doesn’t prevent us from predicting what might happen. On balance, the EUR/USD still looks heavy and a breakdown appears more likely. After all, the weekly bullish trend line has been taken out now. Traders now need to watch price action closely around 1.0525 and 1.0460, levels where the EUR/USD had bounced back from in the past. In fact, the current low of today is at around 1.0525, so clearly some traders have used that level as a point of reference. But if support at 1.0525 gives way later on today or tomorrow then at least a revisit of the 2015 low at 1.0460 should be expected.

If eventually the 1.0460 level also gives way then there are not many prior reference points to watch until the next psychologically-important level of 1.00 (parity). There is however a Fibonacci cluster zone around 1.0175-1.0225 where we may see some profit-taking. That’s assuming we will get there in the first place. Indeed, for all we know, the EUR/USD could easily bottom out and stage a sharp rally. If it starts to climb back above the broken support at 1.0570 then the sellers will need to proceed a little more carefully. And if 1.0660, this week’s high, breaks, then that could see price stage a short-squeeze rally towards the next point of reference at 1.0850, the last low prior to the recent breakdown.

Source link  
Gold surges to major $1250 resistance as uncertainty prevails

Gold surged Thursday on a breakout of its previous consolidation to hit and slightly exceed major technical resistance at $1250, a level not seen since early November...

Gold remains vulnerable amid hawkish Fed, strong dollar, equity highs

Gold has climbed sharply since the beginning of the year as the US dollar has pulled back from its late-2016 highs and the US Federal Reserve has exercised characteristic restraint in raising interest rates further after the last rate hike in December...

Gold well-supported on safe-haven flows, lagging dollar

Increasing political and economic uncertainties under the new Trump Administration, coupled with a sliding US dollar since the beginning of the year, have led to a sharp rise in gold prices for more than a month...

Gold pressured as dollar and equities remain supported

As the US dollar found some new life on Thursday and US equity markets hovered right around their new all-time highs, gold extended its recent pullback well below the $1200 handle. Since late December, the price of gold had been in a sharp relief rally from its 10-month lows around $1125 support...

Crude oil maintains bullish trend

Oil prices were initially weaker at the start of the new week, but they have now recovered to trade almost flat at the time of this writing. At the weekend, the OPEC and some producers outside of the group met to discuss the progress of their oil production deal...

Trump press conference fails to deter equity bulls

President-Elect Donald Trump spoke on Wednesday morning at his first formal press conference since the November elections, and the markets were all ears. Trump covered a lot of ground with multiple topics that included...

Gold ripe for potential relief rally

The charts tell a clear story of the unrelenting plunge in gold prices since early November. This steep dive has been the result of several related factors, all of which have the potential to extend well into the new year. These largely Trump-driven factors include...

Could EUR/USD finally break 1.05 on this FOMC day?

The market is demanding a rate rise and the Fed better deliver it today, for if it doesn’t the bank’s credibly will be severely damaged. There is really no excuse not to do so. Economic data has been improving, financial markets are calm...

Mixed Jobs Report Keeps High Fed Expectations Intact

As we noted the day before Friday’s US jobs report, only a significantly worse-than-expected reading for November would have likely made the Federal Reserve’s next interest rate decision more difficult...

In the past 24 hours Bitcoin has gained 0.4% and reached $6487.5741168. Open your trading account with the best cryptocurrency brokers on special terms today.

In the past 7 days the EUR/USD pair has gained 0.6352% and is now at $1.1587. Start trading and making money on Forex today.

In the past 7 days Ethereum has gained 3.0% and is now at $205.655270455. Have the most popular cryptocurrencies compared online 24/7.

Top Brokers offering Forex Market Analysis

Forex Currencies Forecasts

Top 10 Forex Brokers 2018

# Broker Review
6FIBO GroupFIBO Group84%