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How the major currencies performed this week

  
Analysis, Forex

USD/JPY was entirely unchanged

USD/JPY was entirely unchanged
USD/JPY closed last week at 109.44 and closed today at 109.44. The week before was essentially flat as well.
However elsewhere there were some decent-sized moves in a week that’s normally a dud but has included some big moves for the second year in a row.
On Friday it was the euro that led the way, stealing the top spot from the pound with a late-day rally. The US dollar was the laggard.

Hedge fund CEO Jeffrey Gundlach says next big move for the US dollar is down

  
Analysis, Forex
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Gundlach is the founder of DoubleLine Capital, some remarks (via Twitter):

  • “One of the reasons I think the dollar has stayed strong this year has been the yield starvation that exists in the world.”
  • “Investors have been forced out of need and yield starvation to buy U.S. assets naked; meaning, they’re taking the dollar risk. And in spite of all that money coming into the U.S. dollar and not being hedged, the dollar has barely budged this year. “
  • “To me, that reinforces my forecast that the dollar’s next big move will be to the downside.”
And:
  • “Dollar cycles, as I’ve said repeatedly in the past, tend to go on for multiple years and be quite persistent. And they are highly correlated with the fed funds rate, particularly the fed funds rate versus what is going on in other central banks.” 
us dollar fed funds chart

EURUSD rotates to a new day high

  
Analysis, Forex

Back above the 50% midpoint

The EURUSD has rotated back higher and in the process has moved above the 50% midpoint at 1.10895. The 100 bar MA on the 4-hour comes in at 1.1096 and is the next target. On Friday, the price fell below that level and moved down to test its 200 hour MA on the 4-hour AND the 100 day MA as well (the price bounced off the 200 bar MA).
Back above the 50% midpoint
So today – going forward – the price trades between those MA levels. They are risk and bias defining levels to eye.  Breaks above or below will tilt the bias more in the direction of the break.
Keep in mind that there is little to go on this week and that there are a lot of traders who have mailed it in for the year. So the charts – and trading – can get choppy.  If you have shopping to do, do it. If you have to trade, these levels would be the ones to eye (and hope for follow through).

Top foreign-exchange forecaster on H1 2020 – bull market for the USD not over

  
Analysis, Forex

Jane Foley, head of FX strategy at Rabobank, is the highest rankled forex predictor in Bloomberg’s quarterly poll (July-September)

For the first half of next year:
  • “If I had to pick out one theme, it would still be the dollar” 
  • “There’s a possibility the dollar holds stronger than what the market is expecting for the first few months of 2020 and then it weakens, but not as much as the market is anticipating.”
Via Bloomberg, but curiously, found it here at yahoo)
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yeah, it may be too early to write off the US dollar.

EUR/USD and the importance of 1.12

  
Analysis, Forex

A technical analysis note via Bank of America / Merrill Lynch on the euro against the US dollar

Commentary on the weekly chart.
A technical analysis note via Bank of America / Merrill Lynch on the euro against the US dollar
  • The downtrend in EUR/USD since the head and shoulders top pattern formed in 2018 remains the path of least resistance. 
  • So too does the bearish channel and resistance lines that have guided it lower. 
  • While price remains within this bearish channel we think the bottom of the channel and/or gap from the April 2017 French Election can be tested/filled. It is also possible the full head and shoulders target of 1.0596 is reached 
More:
  • A rally a weekly close through resistances at about 1.12 would be viewed as a trend changing technical break out for a rally to the 200wk SMA at 1.1358 and 1.1520 (38.2% retracement of 2018s decline)

CFTC Commitments of Traders report: GBP shorts trimmed but not as much as you might think

  
Analysis, Forex
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Forex futures positioning data for the week ended Tuesday, December 10:

Forex futures positioning data for the week ended Tuesday, December 10:
  • EUR short 68K vs 69K short last week. Shorts trimmed by 1K
  • GBP short 23K vs 30K short last week. Shorts trimmed by 7K
  • JPY short 44K vs 48K short last week. Shorts trimmed by 4k
  • CHF short 21K vs 22K short last week. Shorts trimmed by 1K
  • AUD short 37k vs 36K short last week. Shorts increased by 1K
  • NZD short 25K vs 27K short last week. Shorts trimmed by 2K
  • CAD long 21k vs 21K long last week.  No change
The big shifts recently have been paring GBP and NZD shorts. Those trends both continued this week but at a slower pace than you might have expected given the rallies in both. Next week’s data will capture the UK election and that should be instructive.

Euphoria fades as phase on trade deal details revealed

  
Analysis, Forex

Some details still murky

USD/JPY is at the lows of North American trade and back to flat on the day.
Some details still murky
It appears as though China has balked at putting a specific number on US agricultural and manufacturing purchases, something the US had previously demanded. The problem for China is that putting a specific number on buying US agricultural goods would violate WTO rules. It also risks forcing them to buy US agriculture even if US prices are higher than elsewhere.
That might have caused some last-minute changes to the deal and a smaller tariff reduction. Yesterday’s reports said a 50% reduction on $360B of tariffed goods. Now it’s a 50% reduction on just $112B in goods.
I think risk assets still probably creep higher from here because it’s the time of year when stocks tend to benefit from a Santa Claus rally with tax-loss selling done. The UK election also removes a big uncertainty.

Cable climbs to highest level since June 2018 as exit poll forecasts big win for the Conservatives

  
Analysis, Forex
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GBP/USD climbs above 1.34 and is perhaps looking at the 1.35 level now

GBP/USD W1 13-12
The pound has surged ahead with a jump of nearly 300 pips on the headline earlier and is now possibly looking towards the 1.3500 level against the dollar next.
Looking at the chart, price is running into some resistance from the 61.8 retracement level @ 1.3453 though so perhaps that may help to limit gains for now.
Going into the exit poll, my bias was that an overwhelming majority should see cable run up the March highs of 1.3381 and the 1.3400 level. I reckon perhaps we could see price action consolidate around these levels amid some retracements over the next hour.
But if anything, keep an eye on resistance at 1.3453 and the key psychological level – 1.3500.
The exit poll has had a prescient track record in recent years but do be reminded that this year the election may be one of the tightest ones yet. As such, we’ll see how the actual results compare and if there is more potential for further moves in the coming hours.
Just remember, it is not over until the fat lady sings (actual results declared).

Cable trades to fresh seven-month highs to start the week

  
Analysis, Forex

The pound stays underpinned ahead of the UK election this week

GBP/USD D1 09-12 Early bids have helped push the pound to a high of 1.3181, closing in on the May high of 1.3185 as we get into what will be a crucial week for the pound.
It is all about the election now and so far the polls are still suggestive of Boris Johnson coming out on top with traders holding out some hope for a majority outcome as well.
As for cable, looking at the weekly chart:
GBP/USD W1 09-12 We can see that buyers are looking poised for a key upside break after closing last week above the 100 and 200-week moving averages. This week, the 50.0 retracement level @ 1.3168 will be a key level to watch out for but it all depends on the election outcome.
If we do see yet another hung parliament result, expect the pound to undo its good work since October as we go back to the drawing board in this whole Brexit debacle.
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