The dollar rose against most major currencies on Tuesday, on rising expectations of the first rate hike in a year by the Federal Reserve next week. In the U.S., data showed that the trade deficit widened to a four month high of $42.6 billion in October from a revised $36.2 billion in September, as imports rose to the highest level in 14 months.
Another report showed that labor productivity rebounded in the third quarter, with the fastest rate of growth in two years. Factory orders rose 2.7%, more than the 2.6% gain seen month-on-month for October.
The euro retreated from a 3-week high on Tuesday while market volatility stayed close to it’s highest since June’s Brexit vote, ahead of this week's European Central Bank meeting on its quantitative easing program.
In Australia a busy data day with the AIG construction index for November at 46.6, a tick up from 45.9 and third quarter GDP down 0.5% well below the 0.3% gain seen quarter-on-quarter and at a 1.8% on a yearly basis, compared to a rise of 2.5% expected.
The GDP fall, is the biggest since 2008, and is likely one of the biggest forecasting misses by the Reserve Bank of Australia. In addition, the USD/JPY posted a small increase of 0.15% after news that Japan's SoftBank was poised to invest $50 billion in the U.S., creating upwards of 50,000 jobs, in the coming year.
For today, the U.K. is to release industry data on house price inflation, as well as official figures on manufacturing and industrial production.
The Bank of Canada is to announce its benchmark interest rate and release its latest policy statement. The European Central Bank policy meeting is due to set the tone for the currency markets this week, after some sharp moves caused after last month's U.S. election and after the Italian referendum fallout.
EUR/USDThe euro fell from a three week high on Tuesday, with volatility reaching its highest since the Brexit, ahead of this week’s ECB meeting and next week’s FOMC meeting on monetary policy.
ECB Head Mario Draghi is expected to lay out his plans for quantitative easing after March 2017 at a news conference on Thursday.
At least a six-month extension of the program is now expected but some analysts speculate that the bank might also announce some tapering of the monthly bond-buying amounts as part of that move.
Any such change in the direction of the ECB's policymaking would broadly be seen as a euro positive after almost two years of money-printing.
The European Central Bank policy meeting is due to set the tone for the currency markets this week, after some sharp moves caused after last month's U.S. election and after the Italian referendum fallout.
Pivot: 1.075Support: 1.0685 1.063 1.059Resistance: 1.075 1.078 1.08Scenario 1: short positions below 1.0750 with targets at 1.0685 & 1.0630 in extension.Scenario 2: above 1.0750 look for further upside with 1.0780 & 1.0800 as targetsComment: the RSI is mixed to bearish.
Gold prices fell by more than 1% on Monday, as strength in equity markets hit safe haven demand for the precious metal and as expectations for a U.S. rate hike this month continued to weigh.
Prices dropped to levels approximately 12% from November highs as risk-appetite has grown globally in the wake of Donald Trump's surprise U.S. presidential win. Investors are also keeping a sharp eye on demand for gold in India and China as weaker currencies may show some spark for demand in the two largest buyers globally.
A final factor weakening demand is Germany's Commerzbank AG (DE:CBKG) report of pricing pressure coming from steady outflows from exchange-traded funds that purchase gold. Gold traders’ attention is now shifted towards the European Central Bank policy meeting on Thursday for clues on the central banks plans for the current QE program.
Pivot: 1165Support: 1165.5 1160 1157Resistance: 1176.12 1181.5 1188Scenario 1: long positions above 1165.00 with targets at 1176.12 & 1181.50 in extension.Scenario 2: below 1165.00 look for further downside with 1160.50 & 1157.00 as targets.Comment: even though a continuation of the consolidation cannot be ruled out, its extent should be limited.
Oil prices ended a four-day rise, on renewed doubts over how the Organization of Petroleum Exporting Countries would adhere to an agreement to curb output, with both Russia and OPEC producing at record amounts. U.S. crude rallied 14% last week, the largest weekly percentage gain since early 2011, and Brent rose nearly 15% for the week, after OPEC agreed on its first production cut since 2008. In addition, U.S. inventories reported by the American Petroleum Institute (API) showed a drop, however, solid builds in gasoline and distillate inventories were also reported.
The API data will be followed Wednesday by more closely-watched official figures from the U.S. Department of Energy. OPEC is expected to hold a meeting with non-OPEC members in Vienna on December 10, to finalize the details of the oil output cut agreement.
Pivot: 52.5Support: 49.93 48.82 48Resistance: 52.5 53.1 53.9Scenario 1: short positions below 52.50 with targets at 49.93 & 48.82 in extension.Scenario 2: above 52.50 look for further upside with 53.10 & 53.90 as targets.Comment: the RSI broke below a rising trend line.
The main U.S. indices, all increased on Tuesday with the Dow Jones Industrial Average rising by 0.18% as gains in the share prices of Goldman Sachs Group (NYSE:GS) and Verizon Communications (NYSE:VZ) supported the index. The NASDAQ ended the day with an increase of 0.45% as three hundred and thirty NASDAQ-traded companies hit 52-week highs.
The S&P 500 closed with an increase of 0.34% as Autodesk Inc (NASDAQ:ADSK). and film distributor Netflix Inc (NASDAQ:NFLX). led the way with solid gains for the day.
According to analysts, markets continue to perform as if gross domestic product is higher than it really is, based on optimism over expected forthcoming increased government spending, tax cuts, deregulatory measures, and job enhancing policies by President Donald Trump. Investors are now focusing on monetary policy meetings both by the ECB and by the Fed in the next week.
Pivot: 2195 Support: 2195 2179 2169 Resistance: 2225 2232 2245 Scenario 1: long positions above 2195.00 with targets at 2225.00 & 2232.00 in extension. Scenario 2: below 2195.00 look for further downside with 2179.00 & 2169.00 as targets. Comment: the RSI is bullish and calls for further advance.