Daily Market Analysis: 23 November 2016
Overview
US Dollar
The British pound was the worst performing main currency against the US dollar yesterday since it closed the day 0.5% lower than the greenback. Meanwhile, the Australian dollar came out as the biggest winner of the day closing 0.5% higher against the USD. Although the greenback anticipated less volatility the last two days, it is still rising against most of the G7.
The Aussie was boosted by the hawkish comments of the Reserve Bank of Australia Assistant Governor Christopher Kent, who stated that in his view there are reasonable aspects of improvement in the mining states. On the other hand, the British pound plummeted due to the Brexit talks and EU’s reminder about the timeline for Brexit, which is 2 years after Theresa May triggers Article 50 by March 2017.
During yesterday’s US session, the monthly Canadian Core Retail Sales for September were released at 0% change while a 0.5% growth was expected. The loonie fell by around 80 pips after the announcement and it is currently trading lower compared to its yesterday’s performance. Later, the US Existing Sales were published at 5.6M beating the expectations of 5.43M and September’s 5.49M figure, with the latter having been revised upwards from 5.47M to 5.49M. October’s Existing Home Sales was a 6-year high and thus it helped the greenback to rise and end the day higher against most of the major currencies, as it surged right after the announcement.
Economic Calendar
Today’s highlight is the release of the FOMC minutes of its last meeting of November, scheduled for 19:00 GMT. Earlier, Chairwoman Janet Yellen stated the strengthening probability of the rate hike, as the economic data continues to rise, which indicates a stronger US economy. Last month’s employment data and Retail Sales are supportive of a stronger US Economy. Moreover, according to the media, the likelihood for the rate hike is as high as 95%.
However, a lot has changed since the US election as the market participants are looking for the application of fiscal stimulus after the inauguration of the President-elect Donald Trump. The predictions and expectations of the analysts have changed after the election result and so have the targets of the Fed. We would expect minimal volatility today during the releases of the FOMC meeting minutes.
Later, at 13:50 GMT the US Core Durable Goods Orders of October are expected to be released at 1.5% against the negative figure of -0.3% of the previous month. Moreover, the New Home Sales are going to be published at 15:30 GMT and they are expected to remain stable at 593K. Those two economic releases are positive for the US economy and thus supportive of the big likelihood of the rate hike in December.
Technical View
The main currency performs a consolidation pattern ranging from 1.056 to 1.066 on the short-term. The pattern seems like an ascending triangle formation which is usually a trend continuation pattern. The price is still trading below SMA100 and at the time of writing it tests the critical level of the cross of SMA100 and SMA50. The potential cross of those two lines would trigger a sell alarm. We would expect a continuation of the price pattern up to the upper band at around the price level of 1.065 and then a further downwards move down to 1.06.
The indicators of MACD, ADX and RSI are on neutral levels confirming the current trading range while the volatility has dried. The valid support levels are near 1.06, 1.058 and 1.056 while the valid resistance levels are near 1.065, 1.067 and 1.071. Upon the downward penetration of the ascending triangle, the next downward target is the record low level of 1.057.
