FX: Profit Taking Sweeps Markets

A delayed ‘buy the rumor, sell the fact’ hit the markets Thursday with traders locking profits from the FED QE4 Rally overnight. We saw large USD buying against Gold and Dollar gains against all the FX majors. Weekly Jobless Claims were very strong at 343k but the profit taking had already begun and US Retail Sales missed forecasts. Looking ahead, December PMI Manufacturing forecast at 52 vs. 52.8 previously. November Industrial Output forecast at 0.3% vs. -0.4%. November CPI forecast at -0.2% vs. 0.1%.

The Euro (EUR)
The EUR/USD failed at 1.3100 and kept to a tight range just underneath the level. Traders are growing more bullish now that it looks like the ‘irreversibility’ on the Eurozone is in place. The EU Summit saw the leaders sign off on the recent moves to integrate the EU further. The Sterling (GBP) pulled back with the rest of the market as profit taking dominated most of Thursday. The outlook is still strong although the BOE has traditionally jawboned more than most central banks. Looking ahead, Flash December Manufacturing PMI forecast at 46.6 vs. 46.2. December Inflation final -0.1% vs. 0.3% previously.

The Japanese Yen (JPY)
Yen selling accelerated overnight with USD/JPY and EUR/JPY surging higher. USD/JPY is approaching Y84 and EUR/JPY key resistance at Y110-111. The Japanese elections are held this weekend with a BOJ meeting next week to be the first time the new leaders can make an impact. 90% of economists believe new measures will be announced. Australian Dollar (AUD) hit 1.0510 at the height of the profit taking but the market has since resumed its uptrend and we are back at 1.0450 at the end of Asian trade Friday. AUD/JPY is approaching Y88 which has been a major stumbling block in recent years. Looking ahead, Japanese Elections this weekend.

Oil And Gold (XAU)
Gold is range trading under $1700 with sellers still on control for now. OIL/USD bounced off $86 to rally to $87 before settling at $86.50.

Pairs To watch

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