Currencies
EUR/USD – continues to try to move higher, but remains having a hard time at the higher 1.06 level and is unable to stay there for a long time. After the NFP on Friday, we have the Italian referendum on Sunday, which is also likely to cause volatility in the EUR. If Prime Minister Renzi loses the referendum, we might see early elections in Italy, which could result in more political instability and more threats for unity in the Eurozone. Next year we will have elections in several European countries, so it could be a real test, especially after the Brexit. Today we have important data out of Europe though.
USD/JPY – even though the USD lost ground against most currency pairs, it strengthened versus the JPY. Usually we don’t see such large moves, but this month we have seen moves of 100 pips a day with ease. That means that we could be testing the high from last week pretty quickly and see if we can reach the 114 level.
GBP/USD – the USD was losing ground and this was fairly obvious with a steady rise in the GBP. The data out of the UK, although not that important, was still solid. More important will be the BOE Financial Stability Report due shortly. We can see that there is some resistance around the 1.25 level.
USD/CAD – is moving up again, as we saw oil drop, although it was hampered by a weakening USD. Today we have important data out of Canada as well as the OPEC meeting, so we can expect more volatility here as well.
Commodities
Gold – tested the support around the 1181 level again before moving slightly up again. The strong GDP data out of the US caused gold to weaken towards this level, but it corrected up quickly. The strong data only reinforced the expectation that the FED will raise the interest rate in 2 weeks and a NFP that doesn’t disappoint too much will cement this expectation. However, it appears that an interest rate hike has for that most part already been priced in already.
Oil – is seeing quite volatile trading in the last few days as is to be expected with so much hanging in the balance. Oil was moving down slightly during the day, but then in the afternoon Iran announced it would not cut production and possibly would only agree to a freeze, causing oil to accelerate the downwards momentum. In response Saudi Arabia announced that it is willing to walk away from the negotiations without an agreement if Iran and Iraq do not join in a production cut, even if it is small. However, the possibility that Iran agrees to a freeze is still possible obviously, the question is at what levels. Russia also announced that it wouldn’t join the discussions and that it could have discussion once OPEC reached a deal. The official meeting has been postponed, likely in order to give more time for the sides to overcome some of the stumbling blocks. We will know today whether OPEC will reach a deal and whether oil will be headed to the 30 or 50 level. Later today we also have the inventories in the US, so oil is expected to see quite some movement today.