The dollar pushed lower against the other major currencies in quiet trade on Wednesday, as recovering oil prices lent strength to commodity-linked currencies, although expectations for a U.S. rate hike this month continued to support the greenback.
The dollar remained broadly supported after Friday's strong U.S. employment data fueled further expectations that the Federal Reserve will hike interest rates for the first time since 2006 at its upcoming meeting on December 15-16.
Trade in the euro remained subdued after last Thursday’s rally, when the latest round of European Central Bank easing measures fell short of market expectations.
Today the SNB is to announce its benchmark interest rate and publish its monetary policy assessment. The announcement is to be followed by a press conference. The U.K. is to release data on the trade balance. Later, the BoE is to announce its benchmark interest rate and publish the minutes of its monetary policy meeting. While the U.S. is to round up the day with its weekly report on initial jobless claims.
The euro surged by more than 1.2% on Wednesday, cracking 1.10 for the first time in more than a month, as currency traders prepared for a likely rate hike by the Federal Reserve when the U.S. central bank meets in the middle of next week.
Yesterday EUR/USD settled at its highest closing level since Halloween, but it is expected to retreat again next week, if the Federal Open Market Committee approves a long-awaited rate hike at its two day meeting ending on December 16. In September, all but four members of the FOMC judged that it would be appropriate to begin raising the target range for the Federal Funds Rate before the end of the year.
Now investors are looking ahead to today U.S. weekly report on initial jobless claims and to Friday’s U.S. data on retail sales and inflation, for fresh indications on the strength of the economy.
Pivot: 1.0945Support: 1.0945 1.09 1.086Resistance: 1.104 1.109 1.115Scenario 1: long positions above 1.0945 with targets @ 1.104 & 1.109 in extension.Scenario 2: below 1.0945 look for further downside with 1.09 & 1.086 as targets.Comment: the RSI lacks downward momentum.
Gold
On Wednesday gold inched up amid a sharply weaker dollar, as investors continued to prepare for next week's critical Federal Reserve meeting. But after reaching near one-month highs in the U.S. morning session, gold fell back again amid a wave of profit taking, before turning positive just before the close of trading. The precious metal still remains near six-year lows from last week.
A rate hike is viewed as bearish for gold, which is not attached to interest rates and struggles to compete with high-yield bearing assets.
The precious metal is also reacting to China data, so now investors’ focus will be on Saturday, when the Asian nation is due to publish reports on industrial production, retail sales and fixed asset investment for November.
Pivot: 1068Support: 1068 1064 1058Resistance: 1085.5 1089 1093Scenario 1: long positions above 1068 with targets @ 1085.5 & 1089 in extension.Scenario 2: below 1068 look for further downside with 1064 & 1058 as targets.Comment: a support base at 1068 has formed and has allowed for a temporary stabilisation.
WTI Oil
WTI surged as much as 3% on Wednesday, before paring the gains amid heavy profit taking, as investors reacted to first the supply draw in U.S. crude inventories in nearly three months.
U.S. crude futures jumped by more than $1.25 a barrel on Wednesday morning, after the Energy Information Administration said in its Weekly Petroleum Status Report that commercial crude inventories fell by 3.6 million barrels for the week ending on December 4. At 485.9 million barrels, U.S. crude stockpiles still remain near the highest levels in at least 80 years. The draw halted an 11-week streak of supply increases, as crude inventories nationwide approached near capacity.
In recent months, the world's largest oil cartel has exceeded the ceiling by as much as 2 million bpd, in an apparent effort to squeeze out higher-priced shale producers from the U.S.
Elsewhere, reports surfaced on Wednesday that Russia president Vladimir Putin has contemplated using nuclear weapons as part of his nation's strategy to defeat fighters from the Islamic State.
Energy prices and investors are sensitive to any reports of increased geopolitical instability in the Middle East, where more than 30% of the world's total crude output is pumped each year.
Pivot: 38.6Support: 36.6 35.9 35Resistance: 38.6 39.2 39.8Scenario 1: short positions below 38.6 with targets @ 36.6 & 35.9 in extension.Scenario 2: above 38.6 look for further upside with 39.2 & 39.8 as targets.Comment: as long as 38.6 is resistance, likely decline to 36.6.
Dow Jones
U.S. stocks fell broadly for the third straight session on Wednesday, as a romp in technology stocks and a continued decline in the energy sector offset gains from a proposed mega deal between EI du Pont de Nemours Company and Dow Chemical Company (N:DOW), two stalwarts in the chemical industry.
The Dow Jones Industrial Average experienced a swing of nearly 275 points on Wednesday, closing down 0.43%, after gaining nearly 200 points in the morning session.
Investors reacted to a report from the Wall Street Journal that a merger between DuPont (N:DD) and Dow, estimated between $120 and $160 billion, could be completed as early as Thursday. The deal would create the second largest chemical company ever, and result in $3 billion in cost savings for the combined company. Following the merger, the new company could subsequently be split into three divisions consisting of agricultural, material services and specialty product segments.
Now investors are looking ahead to today U.S. weekly report on initial jobless claims and to Friday’s U.S. data on retail sales and inflation, for fresh indications on the strength of the economy.
Pivot: 16930 Support: 16930 16000 15370 Resistance: 17980 18350 18650 Scenario 1: long positions above 16930 with targets @ 17980 & 18350 in extension. Scenario 2: below 16930 look for further downside with 16000 & 15370 as targets. Comment: the RSI is supported by a rising trend line. The rising 50-day simple moving average acts as a support.