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What’s driving the USD right now?

  
Analysis, Forex
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What’s driving the USD right now?

What's driving the USD right now?

The FOMC decided to pause their recent easing cycle, but they also said that rate hikes were not going to be considered for some time, signalling a broadly more dovish bias to US monetary policy.The expectations for the rest of 2019 is that the Fed will remain on hold and that the holding position for the medium term will be for rates to remain as they are.

USD being driven by it’s safe haven status

The main driver then, at the moment, is coming from the USD’s status as a safe haven currency. The flip flopping of the US-China trade dispute, which is subject to regular and rapid change, has been moving the USD around on safe haven moves:

  • Positive developments in the US/China trade tariffs weighs on the USD
  • Negative developments in the US/China trade tariffs supports the USD

Cable races towards 1.29 handle on Farage election remarks

  
Analysis, Forex

Cable rises to a session high of 1.2898

Cable H1 11-11

Nigel Farage just gave Johnson a helping hand in the election as he stands down candidates for his Brexit Party to potentially avoid a hung parliament.
While he continues to criticise Johnson’s deal in general, he says that he welcomes the overall plan to not extend the transition period and argues that “this is more like the Brexit we voted for” – in a bit of a boost to the Tories’ election prospects.
Cable has raced higher from 1.2830 to just under 1.2900 and is settling around 1.2870-80 levels currently.
It’s not a formal pact between the two but in essence what Farage is getting at here is that he doesn’t need clear changes to the withdrawal agreement but only certain promises surrounding the political declaration.
The U-turn from his election strategy announced two weeks ago will be a boost to the Tories come 12 December with a majority parliament now possibly achievable.
For cable, keep an eye on the 200-hour MA (blue line) @ 1.2880 now. If buyers can hold a break above that and the 1.2900 level, the momentum could stay more bullish in the coming weeks if the Tories continue to do well in the voting intention polls.

EURUSD tests 38.2% and swing area

  
Analysis, Forex

Up and down day for the EURUSD

The EURUSD has moved up and down today. The low extended to 1.1054 in the Asian session. Shot higher in the early European session but stalled just ahead of the high from yesterday at 1.10923 level (the high reached 1.1091 and reversed lower).
Up and down day for the EURUSD
The subsequent run back to the downside has taken the price back below the 38.2% retracement of the move up from the October 1 low. That retracement level comes in at 1.10642. Also near that area is swing highs from October 11 at 1.1062, swing lows from October 16/17 at 1.1065. Earlier lows from this week also came in near that level at 1.1063-65. There is a lot of congestion at that 38.2% retracement area.
Admittedly, today the price has been above and below that area. So there is a battle going on, and traders may be reluctant to push too much to the downside.  As a result traders will be paying close attention to the next momentum move.   If the pair starts to trade more comfortably below the 1.1062 area, we should see increased downward momentum, with traders eyeing the session lows and then the 200 bar moving average on the 4 hour chart at 1.10447.
Conversely, if the sellers can’t make the push below (and stay below) this cluster of support, the ups and downs could continue, with a move back above the 1.1073 being a relief for the dip buyers (and should attract buying from intraday sellers on the disappointment).

Buy EUR/USD on a break of 1.12; sell if trade talks break down – SocGen

  
Analysis, Forex
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What’s the trade in the euro

Societe Generale Research discusses EUR/USD outlook and stays sidelined in the near-term.
 
“EUR/USD remains firmly in the bottom half of the last 5 years’ range, but the trade-weighted euro is only about 1% lower than it was 5 years ago, when the ECB was ramping up its policies to weaken the currency and hadn’t yet unveiled January 29015’s bazooka. The EUR/CNY rate (the bilateral rate with the biggest single share in the basket) is higher than it was 5 years ago. That higher EUR/CNY rate significantly limits the potential upside for EUR/USD, unless we see USD/CNY fall back. The last week hasn’t seen the euro able to break through its 200-day average, or any other technical/psychological barrier, but the fall back in USD/CNY does provide support on the downside for the euro,” SocGen notes.
 “However, if a US/Chinese trade deal results in a narrower trading range for USD/CNY, it will also limit the possible range for EUR/USD going forwards. In the meantime, EUR/USD is a buy if it can break 1.12, and a sell if the US/Chinese trade talks break down,” SocGen adds.

China’s onshore Yuan strengthens past 7.0074 for first time since August 05

  
Analysis, Forex

Yuan strengthens on risk tone

The 7.00 level had been muted a few months ago as the PBOC’s possible intervention level. The return to it and close below the 7.00 handle will be a sign of reassurance that risk is on and the ‘Phase 1″ trade deal is restoring calm to financial markets. Longer term, we will have to see. For now, the market is increasingly reassured and with equities picking uo across the world that in itself will lift sentiment.
Yuan strengthens on risk tone

Chinese yuan rises to the highest levels since mid-August

  
Analysis, Forex
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USD/CNH falls below the 100-day moving average

USD/CNH falls below the 100-day moving average
Here’s your chart of the day.
USD/CNH is down 0.2% today and the decline has taken out both the Sept low, the Oct low and the 100-day moving average.
Notably, it’s the first time below the 100-dma since the broke on gap when Trump tweeted to restart the trade war. The next big hurdle is 7.000 but we’re on the way.
Take it as a great sign for global growth and risk trades.

An Update :USD ,EURO ,YEN ,GBP ,CAD ,INR ,AUD ,PESO ,Chinese Yuan ,WTI ,BRENT -Anirudh Sethi

  
Analysis, Forex
The move against the US dollar was led by those currencies that one often associates with robust risk appetites, namely the Antipodean and Scandinavian currencies.  They all appreciated by more than 1%.  The dollar fell against most emerging market currencies, though the South African rand (-2.3%), the Chilean peso (-1.7%), and the Mexican peso (-0.3) were notable exceptions.  The dollar fell 0.4% against the Chinese yuan.  It was the fourth consecutive weekly decline.  Ahead of the weekend, the PBOC leaned against further yuan appreciation.
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Net US dollar long futures bets are the narrowest since June 2018

  
Analysis, Forex
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CFTC positioning shows bets on the dollar have dropped

The Federal Reserves mid-cycle adjustment has chased out US dollar longs.
The week ahead will be an interesting one because the CFTC data is from Tuesday’s close. That was before Powell had the chance to commit to keep rates here or lower for a long time:
“I think we would need to see a really significant move up in inflation that’s persistent before we would even consider raising rates to address inflation concerns.”
The USD yield differential is still in place but it’s not as compelling as it once was, especially with the election now just a year away and all the related uncertainty.
Here’s the chart showing the drop in net USD longs, from Bloomberg:
US banknote art
Is this really the end of the long-term dollar bull market? You would have to believe that better global growth is coming in 2020. But with the trade war on hiatus and a potential positive finish to Brexit, is that so unthinkable?

The dollar moves higher after better GDP data

  
Analysis, Forex

GDP comes in at 1.9% for the 3Q in the advanced report

The dollar has moved higher after the better than expected US GDP for the 3Q. The growth came in at 1.9% annualized. The NY Fed GDPNow estimate was spot on this quarter at 1.9%. The Atlanta Fed model estimated growth at 1.7%.  The Bloomberg GDP estimates of economists came in at 1.6%.
  • The EURUSD has moved to a new session low and approaches the 100 hour moving average at 1.10999 (call it 1.1100).  A move below would be more bearish.
  • The USDJPY is out of its 9 pip trading range for the day (yes 9 pip).  The price moved from 108.81 to a high of 108.938.   Its 200 day moving average comes in at 109.027 today.  Yesterday, the price moved above that moving average line but only briefly before backing off. A move above is needed to increase the bullish bias for the pair.
  • The USDCHF has moved up to test its 100 hour moving average at 0.99372. A move above would be more bullish for that pair.
  • The USDCAD has cracked back above its 200 hour moving average 1.3085 and trades near its high for the day at 1.3095. The high price from yesterday reached 1.3100 and backed off. The Bank of Canada is expected to keep rates unchanged at 10 AM ET.
  • The AUDUSD has moved lower and trades at 0.6855 (the high for the day was up near 0.6875. The pair is approaching its 100 day moving average at 0.6847. The 200 hour moving average is not far away at 0.6846.  Below that the pair’s 100 hour moving average comes in at 0.68371.
  • The highs in the NZDUSD tested it’s falling 100 hour moving average (currently at 0.63588). The data sent the pair lower and away from the at MA line and is testing the days lows at 0.6344.  The low from yesterday reached 0.6338 and the low for the week reached 0.6333.
Overall the dollar is higher against all the major currency pairs. US stocks initial reaction was a modest rise. The Dow is up about 30 points.  The Nasdaq is up about 15 points.
US yields have moved a little higher, but just barely higher.

Cable climbs to four-day high

  
Analysis, Forex

The pound breaks yesterday’s high

GBPUSD 1 hour
Cable is up 14 pips to 1.2877 in a rally to the best levels since October 24. The latest leg higher hasn’t been driven by any fresh headline that I’m seeing.
It’s increasingly clear that the UK is going to the polls and with Conservatives leading by 12 points, it’s fair to expect a strong Conservative majority that can pass the latest Withdrawal deal and will then be in a solid spot to stimulate the economy and negotiate the future relationship smoothly.
It all sounds very tidy but this is the UK and nothing has been easy in the past 5 years. How will the market react when there is invariably a bump (probably temporary) in Labour’s polling numbers?
That’s the risk. And a hung parliament would be an absolute nightmare.
So the likelihood is a positive outcome but the tail risks are high. But with the pound trading below 1.29 that’s a positive risk-reward so long as you’re willing to ride the rollercoaster through Dec 9 or Dec 12 or whatever day they finally decide on.
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