EUR/USD continues its rise on reduced political uncertainty in Germany
Macroeconomic overview:
- German Ifo institute said its business climate index rose to 117.5 from an upwardly revised reading of 116.8 in October. The reading was higher than market forecast of 116.6. A business expectations reading surged to 111.0 from 109.2.
- The upbeat data was followed by positive political developments after German Chancellor Angela Merkel - whose chances for a fourth term were plunged into doubt a week ago when three-way coalition talks with the pro-business Free Democrats (FDP) and Greens collapsed - was handed a political lifeline by the Social Democrats (SPD).
- That helped ease worries about political instability in the country as Leaders Merkel's conservative party agreed on Sunday to pursue a "grand coalition" with the SPD.
- In contrast, the dollar lacked momentum of its own as persistently low inflation is seen as undermining the case for the Federal Reserve's rate hikes. Investors are looking to the Congressional hearing on Fed Chair nominee Jerome Powell on Tuesday. President Donald Trump's tax reform plan is also in focus. Trump is due to meet Senate Republicans on Tuesday to discuss the party's efforts to pass tax reform legislation.
- The EUR/USD remains one of the outperformers, now trading above 1.1900 and not too far away from this year’s high at 1.2092. We expect the bias to remain to the upside, with EUR/USD gravitating towards 1.20 (or above) as we head towards year-end.
Technical analysis and trading signals:
- The EUR/USD rallied to a new trend high today. Friday’s close above the cloud was bullish but market could be overstretched. We are looking to take profit at 1.1960.
- The medium-term outlook remains bullish. Our next strategy will be to use corrective action as opportunities to join the bull trend.
USD/JPY hit by comments from BoJ
Macroeconomic overview:
- Bank of Japan board member Hitoshi Suzuki said there is room to debate a fine-tuning of the central bank's yield curve control policy. Suzuki also said also that the BOJ could slow its purchases of exchange-traded funds (ETF) or change the way it buys them in the future.
- The remarks by Suzuki are the strongest signal to date that the BOJ could move up its interest rate targets before 2% inflation is achieved, to ease the hit to bank margins from years of ultra-low borrowing costs. Suzuki said the BOJ's negative rate policy is having a "significant" impact on financial institutions' profits.
- The USD/JPY continues to be under selling pressure, now trading at the edge of 111.00. Aside from dollar weakness, the pair was hit overnight by BoJ member Hitoshi Suzuki’s comments. While inflation is nowhere close to the 2% target, the fact of the matter is that it has improved considerably over the course of 2017. For a forward-looking central bank, this ought to be taken into consideration. We maintain the view that next year the odds are for the BoJ to adjust (or drop) its yield-curve management control program and we still think that there is scope for depreciation in USD/JPY from here.
Technical analysis and trading signals:
- The USD/JPY risk is for an eventual breakdown below 111.03, 50% retrace of 107.33 to 114.73 (September to November) rise, which will unmask 110.16, 61.8% of the same gain. Spot remains stuck below the 200-DMA, which is currently at 111.71, the underlying trajectory remains on the downside.
- We remain short at 113.10 for 110.30.
TRADING STRATEGIES SUMMARY:
FOREX - MAJOR PAIRS: 
FOREX - MAJOR CROSSES: 
PRECIOUS METALS: 
How to read these tables?
1. Support/Resistance - three closest important support/resistance levels
2. Position/Trading Idea:
BUY/SELL - It means we are looking to open LONG/SHORT position at the Entry Price. If the order is filled we will set the suggested Target and Stop-loss level.
LONG/SHORT - It means we have already taken this position at the Entry Price and expect the rate to go up/down to the Target level.
3. Stop-Loss/Profit Locked In - Sometimes we move the stop-loss level above (in case of LONG) or below (in case of SHORT) the Entry price. This means that we have locked in profit on this position.
4. Risk Factor - green "*" means high level of confidence (low level of uncertainty), grey "**" means medium level of confidence, red "***" means low level of confidence (high level of uncertainty)
5. Position Size (forex)- position size suggested for a USD 10,000 trading account in mini lots. You can calculate your position size as follows: (your account size in USD / USD 10,000) * (our position size). You should always round the result down. For example, if the result was 2.671, your position size should be 2 mini lots. This would be a great tool for your risk management!
Position size (precious metals) - position size suggested for a USD 10,000 trading account in units. You can calculate your position size as follows: (your account size in USD / USD 10,000) * (our position size).
6. Profit/Loss on recently closed position (forex) - is the amount of pips we have earned/lost on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.
Profit/Loss on recently closed position (precious metals) - is profit/loss we have earned/lost per unit on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.