The dollar hit its highest levels in nine months against a basket of the other major currencies on Friday, boosted by expectations that the administration of U.S. President-elect Donald Trump will spur growth and inflation.
For the week the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 2.02%, the largest weekly gain since November 2015. The dollar was boosted by hopes that increased fiscal spending and tax cuts under a Trump administration will bolster economic growth and inflation.
Expectations for higher U.S. interest rates also remained intact amid optimism that a pick-up in growth will allow the Federal Reserve to tighten borrowing costs. Investors currently price an 81.1% chance of a rate hike at the Fed's December meeting; according to federal funds futures tracked by the Fed Rate Monitor Tool.
In the week ahead, investors will be looking to congressional testimony by Fed Chair Janet Yellen on Thursday for fresh indications on whether interest rates will rise next month. Japan is to release preliminary figures on third quarter growth on Monday and the U.S., the U.K. and Canada are all to release what will be closely watched inflation data later in the week. Today European Central Bank President Mario Draghi is to speak at an event in Rome, while New Zealand is to publish figures on retail sales.
Mexico's beleaguered peso weakened further on Friday, hitting a fresh record low over 21 pesos per dollar in a volatile session, with Donald Trump's shock U.S. election win continuing to weigh and some forecasting further declines.
The peso has become a lightning rod for market anxiety due to fears about the future of Mexican-U.S. trade relations. Trump has vowed to build a border wall between Mexico and the United States, and threatened to rip up the North American Free Trade Agreement.
The peso was down 3.15% to trade at 21.24 pesos per dollar on Friday. The dollar has gained nearly 13% against the peso this month. So far, Mexican authorities have declined to intervene to stem the peso's losses, a move most analysts had expected, choosing instead to wait until next week's central bank meeting.
Pivot: 19.45Support: 19.45 19 18.54Resistance: 20.79 21.58 22Scenario 1: long positions above 19.4500 with targets at 20.7900 & 21.5800 in extension.Scenario 2: below 19.4500 look for further downside with 19.0000 & 18.5400 as targets.Comment: the RSI is bullish and calls for further upside.
Gold
Gold prices fell to five month lows on Friday as risk appetite recovered following Donald Trump’s victory in the U.S. presidential election, sapping investor demand for safe haven assets.
Market sentiment was boosted by optimism that increased fiscal spending and tax cuts under a Trump administration will spur economic growth and inflation. Gold prices were also pressured lower by the stronger U.S. dollar and ongoing expectations for a Federal Reserve interest rate increase in December.
In the week ahead, metal traders will be looking to congressional testimony by Fed Chair Janet Yellen on Thursday for fresh indications on whether interest rates will rise next month.
Pivot: 1251Support: 1200 1184 1160Resistance: 1251 1270 1292Scenario 1: short positions below 1251.00 with targets at 1200.00 & 1184.00 in extension.Scenario 2: above 1251.00 look for further upside with 1270.00 & 1292.00 as targets.Comment: technically the RSI is below its neutrality area at 50.
WTI Oil
Oil futures tumbled to multi-week lows on Friday, after OPEC reported that its crude production rose to its highest level on record and pointed to a larger surplus next year, despite an agreement to potentially cut output.
In its monthly market report published Friday, OPEC said that output from its own 14 members increased by 240,000 barrels per day to 33.64 million in October, with Nigeria, Libya and Iraq blamed for the increase.
With demand for OPEC crude in 2017 expected to average 32.69 million bpd, the report indicates there will now be an average surplus of 950,000 bpd if OPEC keeps output steady. Last month's report pointed to an 800,000-bpd surplus.
The bearish report came one day after the International Energy Agency warned that the market risks running another surplus in 2017 without an output cut from OPEC.
In the week ahead, energy traders will eye fresh weekly information on U.S. stockpiles of crude and refined products on Tuesday and Wednesday to gauge the strength of demand in the world’s largest oil consumer.
Pivot: 44.23Support: 43 42.4 42Resistance: 44.23 45 45.65Scenario 1: short positions below 44.23 with targets at 43.00 & 42.40 in extension.Scenario 2: above 44.23 look for further upside with 45.00 & 45.65 as targets.Comment: technically the RSI is below its neutrality area at 50.
US 500
The U.S. banking sector's dramatic rally post Election Day is likely just a taste of bigger gains to come, as investors expect banks to reap huge benefits from rising interest rates and lighter regulation under a Donald Trump presidency. In recent years, bank stocks have been held back by heavy regulation and historically low interest rates which have sapped the earnings potential of their massive cash holdings.
But optimism about the sector's outlook is growing. Interest rates are rising and investors are betting that Trump will follow through on his campaign promise to review the increased number of regulations put on the banking system after it nearly keeled over in the 2008 financial crisis.
The S&P 500 bank subsector rose 10.2 percent in the three days following Trump's victory in the U.S. presidential election. This was the index's best three-day performance since August 2009.
Pivot: 2100 Support: 2100 2054 2029 Resistance: 2200 2216 2230 Scenario 1: long positions above 2100.00 with targets at 2200.00 & 2216.00 in extension. Scenario 2: below 2100.00 look for further downside with 2054.00 & 2029.00 as targets. Comment: the RSI shows upside momentum.