The euro gained on Wednesday, reaching close to a three-week high against the dollar ahead of a European Central Bank policy decision, while the greenback lost momentum from the recent drop in U.S. bond yields.
The euro has been the main focus for traders this week after Italian Prime Minister Matteo Renzi said he would resign after a suffering a defeat in a referendum on constitutional reforms.
Moody's changed its outlook on the country's bond rating to negative from stable, underscoring the financial risks that heavily indebted Italy faces, saying prospects for much-needed economic reform had diminished after Italians rejected Renzi's proposals.
After initially dropping on the referendum news, the euro rallied strongly on Monday and has since held below three-week highs against the dollar as investors wait on the ECB.
The ECB is expected to announce a six-month extension to its quantitative easing program on Thursday, while keeping the size of asset purchases unchanged at 80 billion euros, according to a majority of economists polled by Reuters.
There was limited market reaction to Chinese trade data, which showed that China's November dollar-denominated exports unexpectedly rose by 0.1 percent from a year earlier while imports expanded 6.7 percent. Earlier in Japan, third quarter GDP rose 0.3%, weaker than the 0.6% gain seen quarter-on-quarter and at a 1.3% pace year-on-year, well below the 2.4% increase expected adding some pressure on the currency.
Today, besides the ECB announcing its latest monetary policy decision, a press conference by President Mario Draghi will follow, while later in the day, Canada is to produce reports building permits and new house price inflation and the U.S. is to release the weekly report on jobless claims.
The euro gained against the dollar this week, reaching close to Monday's peak of $1.0797, its highest level since Nov. 15. ECB Head Mario Draghi is expected to lay out his plans for quantitative easing after March 2017 at a news conference on Thursday.
Emphasizing abundant risk, including from forthcoming elections in Europe, ECB President Mario Draghi is expected to argue that premature tapering, or slowly ending bond-buying could abort a still timid recovery. At least a six-month extension of the program is now expected, while bond purchases will likely remain unchanged at 80 billion euro.
The European Central Bank policy meeting is due to set the tone for the currency markets this week, while next week, the FOMC policy statement will start to come into effect.
Pivot: 1.075Support: 1.07 1.068 1.063Resistance: 1.075 1.078 1.0795Scenario 1: short positions below 1.0750 with targets at 1.0700 & 1.0680 in extension.Scenario 2: above 1.0750 look for further upside with 1.0780 & 1.0795 as targets.Comment: as long as 1.0750 is resistance, look for choppy price action with a bearish bias.
Gold
Gold prices continue to receive pressure by recent strength in the dollar and in equity markets, while expectations for a U.S. rate hike this month weighs significantly on dollar denominated commodities.
Prices posted a slight recovery on Tuesday and Wednesday, however, gains could be limited due to an almost certain interest rate increase by the Fed next week.
Gold prices gained slightly in Asia on Thursday after upbeat trade data from China supported demand hopes, with the precious metal trading the Asian session within a tight range between $1172 and $1178 per ounce.
For today, The European Central Bank policy meeting is due to set the tone for gold traders.
Pivot: 1171Support: 1171.5 1165 1160.5Resistance: 1185 1188 1195Scenario 1: long positions above 1171.00 with targets at 1185.00 & 1188.00 in extension.Scenario 2: below 1171.00 look for further downside with 1165.00 & 1160.50 as targets.Comment: the RSI broke above a bearish trend line.
WTI Oil
Crude oil prices posted a slight rise early on Wednesday, however, prices reversed to hit intraday lows after the disappointment of a large build at the key U.S. delivery point as well as larger-than-expected increases in both gasoline and distillate stockpiles.
The U.S. Energy Information Administration said in its weekly report that crude oil inventories fell by 2.389 million barrels in the week ended December 2, much more than the drop of 1.032 million barrels expected.
However, supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, rose by 3.783 million barrels last week, the EIA said.
Total U.S. crude oil inventories stood at 485.8 million barrels as of last week, according to press release, which the EIA considered to be “at (the) upper limit of the average range for this time of year”.
Investors are turning their attention towards a meeting of OPEC and non-OPEC members in Vienna on Dec.
10 to finalize the details of the agreement to cut production in order to help support prices.
Pivot: 51.6Support: 49.65 48.8 48Resistance: 51.6 52.4 53.1Scenario 1: short positions below 51.60 with targets at 49.65 & 48.80 in extension.Scenario 2: above 51.60 look for further upside with 52.40 & 53.10 as targets.Comment: technically the RSI is below its neutrality area at 50.
US 500
The main U.S. indices, all increased on Wednesday, as gains in the Telecoms, Consumer Goods and Technology sectors led shares higher.
At the close in NYSE, the Dow Jones Industrial Average rose 1.55% to hit a new all-time high, while the S&P 500 index gained 1.32%, and the NASDAQ Composite index gained 1.14%.
Some of the best performers of the session were Nike Inc (NYSE:NKE) which rose 3.03% and Visa Inc (NYSE:V) which gained by 2.85%.
One of the worst performers of the session was Pfizer Inc (NYSE:PFE) which fell 1.24%.
The European Central Bank policy meeting is due to set the tone for the markets this week, while next week, the FOMC policy statement will start to come into effect.
Pivot: 2200 Support: 2200 2189 2179 Resistance: 2214 2225 2245 Scenario 1: long positions above 2200.00 with targets at 2214.00 & 2225.00 in extension. Scenario 2: below 2200.00 look for further downside with 2189.00 & 2179.00 as targets. Comment: the next resistances are at 2214.00 and then at 2225.00.