The dollar erased gains against the other major currencies on Monday, as sentiment on the greenback became fragile ahead of the Federal Reserve's highly anticipated policy meeting this week on 15 and 16 of December.
Also Monday, China’s yuan opened at fresh four and a half year lows after the People’s Bank of China set its yuan midpoint rate at the lowest level since 2011. The move came after the PBOC indicated Friday that it may ease its loose peg to the dollar and allow the yuan track a broad basket of currencies of China’s trading partners. Such a move would reduce China’s demand for dollars.
Today the U.K. is to report on consumer price inflation; the ZEW Institute is to report on German economic sentiment; Canada is to publish data on manufacturing sales; the U.S. is to release reports on inflation and manufacturing activity in the New York region; and later in the day, Bank of Canada Governor Stephen Poloz is to speak at an event in Ottawa.
But investors’ focus is all on Wednesday, when the Federal Reserve is to announce its latest interest rate decision and hold a post-policy meeting press conference.
The euro inched up in narrow trading on Monday, as investors remained cautious ahead of a likely interest rate hike by the Federal Reserve later this week.
The currency pair wavered between 1.0946 and 1.1049 in Monday's session, before closing up 0.12% on the day. It gained some support also from Monday’s data which showed that euro zone industrial production rose 0.6% in October, beating expectations for a 0.3% gain, after a 0.3% fall the previous month.
Now all eyes are on the FOMC meeting, along with the rate hike decision, the Fed will also release its quarterly economic projection for the next several years. The projection includes forecasts for U.S. GDP, civilian unemployment and the PCE Price Index, as well as estimates on the timing of its next change in the Federal Funds Rate.
Pivot: 1.098Support: 1.098 1.0945 1.0925Resistance: 1.1075 1.1115 1.115Scenario 1: long positions above 1.098 with targets @ 1.1075 & 1.1115 in extension.Scenario 2: below 1.098 look for further downside with 1.0945 & 1.0925 as targets.Comment: the RSI is bullish and calls for further upside.
Gold
On Monday gold fell sharply amid a relatively flat dollar, as investors continued to brace for a likely interest rate hike by the Federal Reserve at its two day meeting starting today.
Investors have had ample time to price in a rate hike after a host of major policymakers, including Fed chair Janet Yellen, began to send strong signals last month that the U.S. central bank could raise short-term interest rates for the first time in nearly a decade. The Federal Open Market Committee opted to leave rates at near-zero levels earlier this fall amid severe global economic struggles, but will likely reverse course on Wednesday as the headwinds restraining economic growth continue to fade.
Pivot: 1072Support: 1058 1052 1045Resistance: 1072 1077.5 1081.5Scenario 1: short positions below 1072 with targets @ 1058 & 1052 in extension.Scenario 2: above 1072 look for further upside with 1077.5 & 1081.5 as targets.Comment: as long as 1072 is resistance, likely decline to 1058.
WTI Oil
WTI rallied in afternoon trading, closing under $37 a barrel on Monday, amid heavy profit taking, after briefly dropping below $35 a barrel earlier in morning's session to fall to fresh multi year lows.
Investors continued to digest bearish forecasts from last week, as energy market worldwide remained oversaturated by a glut of excess supply.
Elsewhere, U.S. president Barack Obama said at the Pentagon on Monday that the nation's strategy against the Islamic State is moving forward with a "great sense of urgency", as he continues to ward off criticism for not taking a more aggressive stance against ISIS forces in the Middle East. Energy traders are sensitive to any news of heightened geopolitical instability in the region.
Today investors will be focusing their attention on the API weekly report on U.S. oil supplies.
Pivot: 35.17Support: 35.17 34.52 33.95Resistance: 36.9 37.54 38.2Scenario 1: long positions above 35.17 with targets @ 36.9 & 37.54 in extension.Scenario 2: below 35.17 look for further downside with 34.52 & 33.95 as targets.Comment: the RSI is bullish and calls for further upside.
U.S. stocks recovered from early losses on Monday to close higher, helped by firmer oil prices, as investors awaited an expected Federal Reserve interest rate hike later in the week.
The S&P 500 benchmark index rallied in the afternoon, after falling earlier in the session in a volatile trading day.
While investors widely expect the Fed to announce its first rate hike in nearly a decade on Wednesday, they are also waiting for commentary from policymakers about what will happen next.
Traders see an 83% chance that the Fed will lift rates by 25 basis points, according to the CME Group's (O:CME) Fed Watch program.
Yesterday the Dow Jones industrial average rose 0.6%, the S&P 500 gained 0.48% and the Nasdaq Composite added 0.38%.
Pivot: 2081 Support: 1953 1911 1867 Resistance: 2081 2116 2135 Scenario 1: short positions below 2081 with targets @ 1953 & 1911 in extension. Scenario 2: above 2081 look for further upside with 2116 & 2135 as targets. Comment: the RSI broke below a rising trend line.