USDollar Weekly Review 21 – 25 Nov

Summary
According to statistics at ibtimes.co.uk a total of 48.7 million Americans travel 50km or more over Thanksgiving to be with their friends and family, with about 88% of Americans consuming over 46 million Turkeys. Probably a good day to be a chicken or a cow though I think Pumpkins probably have it the toughest of the lot. The trading week ended in the two day holiday, which started in 1621 though has only been celebrated on the last Thursday of the month since President Abraham Lincoln’s 1863 Emancipation Proclamation, and while we observed lighter trading volume over the two days one thing worth observing is there was not a lot of profit taking – none that has yet changed the overall trend of the market on the USDollar.

Fed minutes were released last week and mirror everything Yellen has said in her Testimony. The job market is almost at full employment and inflation is moving towards to Fed’s target though I think the Fed are still a little concerned about oil. A December rate hike remains data dependent though the Fed have said that a rate hike is likely very soon and that failing to raise soon could result in having to tighten faster which would go against their goal of a gradual path of accommodation. Data points on the housing market released last week remain bullish on existing home sales and bearish on new home sales while the trade balance came in lower than forecast. We want to pay attention to the OPEC meeting next week. Remember, no OPEC agreement means no change to supply which means the path of least resistance for oil is down. A low oil price is an inflation killer and inflation is important to the FOMC.

EURUSD
Keep an eye on the yield of the 10Y T-Note vs. the 10Y Bund. A wider spread would result in further bearishness on this pair. Pay attention to the outcome of the second Le Republican primary taking place this weekend in France. The Italian Referendum is taking place on the 4 December, due to the uncertainty of the outcome we could see hesitation for investors to purchase Euros. Draghi is scheduled to speak next week.

COT shows no change to bulls, a continued decrease in bears and net-non commercial positions as bearish. If the pair moves up and there is no increase in bulls this is the result of profit taking which means bears are likely to get in at
resistance.

GBPUSD
The big news for the week was the Autumn budget statement, as discussed in last week’s article we were looking for an indication of fiscal stimulus which Hammond delivered last week. This could mean a shift from monetary policy to fiscal policy which would help the economy and could result in Pound strength. The Pound did strengthen after the release of the news. Brexit is still a concern for investors. The High Court starts the appeal at the start of December though we will only hear something in the New Year. May still plans on invoking article 50 in March 2017 with an exit in March 2019.

COT shows no change to bulls, a continued decrease in bears and net-non commercial positions as bearish. If the pair moves up and there is no increase in bulls this is the result of profit taking which means bears are likely to get in at
resistance.

AUDUSD
No change to the Aussie story and the recent cause of Aussie weakness against the USDollar. Keep an eye on Chinese data in the coming week. Also keep your ear to the ground for any further news on the relationship between China and America re: Trump rhetoric regarding China’s currency manipulation and possible tariffs the Trump Administration would be looking to impose on China and the yield differential between Aussie and American interest rates.

COT shows a decrease in long and short positions with net-non commercial positions being bullish though no change to net-non commercial positions since 1 Nov indicating that recent moves are the result of profit taking and that neither bulls or bears have re-entered the market.

NZDUSD
Kiwi continues to outperform the Aussie and the New Zealand economy is forecast to stay stronger for longer. When dairy does well Kiwi does well. New Zealand is also seeing a reduction in New Zealanders moving overseas which is helping the local economy. It is still too early to tell what the impacts of the recent quake will be on growth and the economy. Keep an eye on the dairy auction, positive data will help strengthen Kiwi further – perhaps a trade you want to take against Yen and not USDollar.

COT shows a decrease in long and short positions against the USDollar with net-non commercial positions being bullish though no a slight down tick from the previous week.

USDCAD
Keep a close eye on the OPEC meeting next week. No agreement to cut will result in a drop in the oil price and a weak Canadian Dollar.

COT shows no real change to long or short positions with net-non commercial positions being bearish.

USDJPY
As mentioned in previous reports, Investors in the Nikkei are long Japanese stocks due to the rise in the 10Y yield because they are pricing in better earnings out of Japanese companies as a result of a weaker Yen on the back of higher interest rates in America. Positive inflation data for November was released on Friday and while we saw some profit taking on USDJPY the pair traded sideways for most of the day.
COT indicates a decrease in long positions, increase in short positions and net-non-commercial positions moving towards the waterline. A cross of this waterline to the downside indicates a bearish market on Yen which means a bull market on USDJPY.

Dxy Daily

Dxy came off resistance trend line drawn from Mar '15, Apr '15 and Jan '16 highs. Support eyed at MR1 with further support at MM3. H4 indicates that we are still in a bullish trend and currently at support with price at the H4 21.

10Y T-Note Daily

Price is currently at support with resistance eyed at MS3 or a little higher up at the role reversal trend line drawn off Sep '14, Jun '15 and Dec '15 lows.

Nikkei Daily

Price came off WR2 on Friday with price closing at the 4H 21. On the daily chart we have near-term resistance eyed at MR3 which coincides with the resistance trend line from Nov '15 and Dec '15 highs. Support eyed at MR1 which coincides with the role reversal trend line support drawn from Jul '16, Sep '16 and Oct '16 highs.

EURUSD Daily

Price closed just below 1.06 with support eyed at 1.05 and the next resistance eyed at 1.08/ 1.085. Price broke above the 4H 21 on Friday though failed to close above the bearish trend line

GBPUSD Daily

Market is moving sideways inside a wedge drawn from Sep '16 and Nov '16 highs and Octr '16 and Nov '16 lows, Resistance eyed at 1.25 which coincides with trend line resistance and support at MPP and 1.23. Awaiting a break of the wedge to the upside or downside to confirm direction of price. Should price break to the upside keep an eye on 1.26 and, should price move higher, 1.28 which marks the bottom of the post Brexit range.

AUDUSD Daily

Price closed below 0.7450 on Friday, which is resistance. Further resistance eyed at 0.75 / 38.2% fib and 0.76 / 61.8% fib. Fib drawn off Nov '16 high and Nov '16 low. Support eyed at 0.74 and 0.73

NZDUSD Daily

Price has failed to close below 0.70 which coincides with trend line support drawn from Aug '16 and Oct '16 lows. Price closed below 0.7050 on Friday with higher resistance eyed at 0.71, 0.7150 and 0.72. The 0.72 level coincides with the previous support trend line drawn off Jan '16, May '16 and Oct '16 lows, which has not been tested as resistance yet. Support below 0.70 eyed at MM1 and MS2.

USDCAD Daily

Price currently ranging between 1.355 and 1.34 as forecast last week. Looking for a break above 1.355 or a break below 1.3400 to confirm direction on this pair.

USDJPY Daily

Price closed at 113 on Friday. With role reversal resistance at 116 and role reversal support at 111. Due to the nature of the trend since the election, pay close attention to price action at all psych levels. Price is still above the 21 on H4 so while price moved sideways on Friday due to Thanksgiving, the trend is still bullish