The dollar reached near 14-year highs on Wednesday, even as analysts cautioned the markets that the recent rise is considered excessive and the greenback is vulnerable to a drop despite expectations for pro-growth policies under U.S. President-elect Donald Trump. The dollar remained supported by hopes that increased fiscal spending and tax cuts under a Trump administration will boost economic growth and inflation. Weaker-than-forecast data on U.S. producer prices and industrial production on Wednesday sent Treasury yields near their 10-month highs and put a cap on the dollar. Some analysts claim that despite increased expectations on a Federal Reserve rate hike at its Dec. 13-14 policy meeting, the dollar rally may cause policy-makers to reconsider such a move because of its repercussions on U.S. exports. The euro fell to its weakest level in the last year against the dollar on Wednesday, while on Thursday, the Aussie managed to rise early in the session along with the yen as the dollar gave away some of its recent gains. On Thursday, Fed Chair Janet Yellen will testify before the Congress' Joint Economic Committee where she might raise concerns about the dollar's surge. The U.K. is to publish a report on retail sales, the euro zone is to release revised inflation data and the U.S. is to release a number of reports such as inflation, jobless claims, housing starts and manufacturing activity in the Philadelphia region.
Currently, the EUR/USD is trading close to the 1.07 level, recovering from a drop to the 1.0670 region caused by recent strength seen in both the USD and treasury yields. The dollar weakened mildly after data showed that the U.S. producer price index rose 0.8% in October, disappointed expectations for an increase of 1.2%. The core PPI, which excludes food and energy, fell 0.2% last month, compared to expectations for a 0.2% gain. A separate report showed that U.S. industrial production was flat in October, confounding expectations for a 0.2% increase. Later today, the pair is due to be influenced by a batch of economic reports, with the Eurozone final CPI report due ahead of ECB minutes, US CPI, jobless claims and housing starts and Fed Chair Yellen’s testimony.
Pivot: 1.0755Support: 1.0665 1.0615 1.056Resistance: 1.0755 1.082 1.0865Scenario 1: short positions below 1.0755 with targets at 1.0665 & 1.0615 in extension.Scenario 2: above 1.0755 look for further upside with 1.0820 & 1.0865 as targets.Comment: the RSI is mixed to bearish.
Gold
Gold prices appear to be fluctuating within a tight range between $1220 and $1230 on Wednesday as investors expect the Yellen speech to be the next market catalyst that will determine the direction of the yellow metal following its recent drop of over 6% in the last two months. The yellow metal received some support by the latest data from the U.S. indicating weakness in producer prices and industrial production, however, rising treasury yields along with expectations of a rate hike in December boost the dollar that tends to trade inversely with gold. For today, besides the Yellen speech, the U.S. is to release a number of reports such as inflation, jobless claims, housing starts and manufacturing activity in the Philadelphia region.
Pivot: 1238Support: 1211 1200 1184Resistance: 1238 1251 1270Scenario 1: short positions below 1238.00 with targets at 1211.00 & 1200.00 in extension.Scenario 2: above 1238.00 look for further upside with 1251.00 & 1270.00 as targets.Comment: the RSI lacks momentum.
WTI Oil
Crude oil prices posted a sharp recovery in the last two days, after dropping to four month lows on Monday on renewed hopes that OPEC and Russia are ready to move forward with a deal that will cut production and reduce prices. OPEC countries are ready to reach a "forceful" agreement on cutting oil output, Venezuelan President Nicolas Maduro said on Wednesday, following a meeting with OPEC Secretary-General Mohammed Barkindo in Caracas. Russia has also expressed willingness to support a decision to freeze oil output. However, rising inventories and oil production data make the move even more difficult. The final details on individual output quotas will be decided in OPEC’s next official meeting in Vienna on November 30.
Pivot: 44.95Support: 44.95 44.25 43.6Resistance: 46.45 46.9 47.53Scenario 1: long positions above 44.95 with targets at 46.45 & 46.90 in extension.Scenario 2: below 44.95 look for further downside with 44.25 & 43.60 as targets.Comment: the RSI lacks downward momentum.
US 500
The main U.S. indices were mixed on Wednesday, as gains in the Telecoms, Technology and Consumer Services sectors led shares higher while losses in the Financials, Oil & Gas and Utilities sectors led shares lower. The Dow Jones Industrial Average declined 0.29%, while the S&P 500 index lost 0.16%, and the NASDAQ Composite index climbed 0.36%. The worst performers of the session were JPMorgan Chase & Co (NYSE:JPM), which fell 2.48% and Goldman Sachs Group Inc (NYSE:GS) which declined by 2.39%. Investors expect the Yellen speech to be the next catalyst that will determine the direction of the markets.
Pivot: 2150 Support: 2150 2100 2078 Resistance: 2183 2200 2216 Scenario 1: long positions above 2150.00 with targets at 2183.00 & 2200.00 in extension. Scenario 2: below 2150.00 look for further downside with 2100.00 & 2078.00 as targets. Comment: the RSI is bullish and calls for further upside.