EURUSD rises on the Feds give and take statement, then comes back off (based on forexlive article)
CE Inflation projections are lower to 1% -1.6% from 1.6% – 1.9% but
the Core PCE they only lowered by 0.1% to 1.5%-1.8% from 1.6% -1.9%.
As Adam points out there is a lot of hedging going on.
Technically, the EURUSD has found support at the 200 hour MA on the
first dip after the initial rise. That level is currently at the 1.2404
level. The 1 minute chart above shows the up and down volatility and the
bounce off that level. If the market is to turn, it needs to get
below this level.
On the topside the 100 hour MA at the 1.2450 area saw price action
remain above that MA for a total of 12 minutes. The move back below, has
shown the disappointment. We will see if Yellen can now push the pair
one way or the other. .
AUD/USD dropped further to as low as 0.8106 so far and met mentioned
target of 100% projection of 0.9401 to 0.8642 from 0.8910 at 0.8151.
Intraday bias remains on the downside and deeper fall should be seen to
0.7945/8066 key support zone. On the upside, above 0.8235 minor
resistance will turn bias neutral and bring consolidations first. But
break of 0.8539 is needed to confirm near term reversal. Otherwise,
outlook will stay bearish in case of recovery.
In the bigger picture, recent development in AUD/USD suggests that
it's building downside momentum and the fall from 1.1079 is accelerating
again. Focus is now on 0.8066 key support level, 61.8% retracement of
0.6008 to 1.1079 at 0.7945. Decisive break there will carry long term
bearish implication and pave the way to long term fibonacci level at
0.7182 and below. On the upside, break of 0.9504 is needed to confirm
medium term reversal. Otherwise, we won't turn bullish even in case of
EUR/USD Technical Analysis: Prices Retreat Below 1.24 Mark (based on dailyfx article)
The Euro turned sharply lower against the US Dollar,
with sellers reclaiming a foothold below the 1.24 figure. A daily close
below the intersection of falling wedge top resistance-turned-support
and the 38.2% Fibonacci expansion at 1.2324 exposes the 50% level at
1.2249. Alternatively, a turn above the 23.6% Fib at 1.2418 opens the
door for a challenge of the December 16 high at 1.2569.
Risk/reward considerations argue against entering short with prices in close proximity to support. On the other hand, the absence of a defined bullish reversal signal suggests taking up the long side is premature. We will remain flat for now, waiting for a more actionable opportunity to present itself.
EUR/USD - Euro Sinks As Yellen Hints At Rate Hike In Mid-2015 (adapted from seekingalpha article)
EUR/USD is steady on Thursday, following the euro’s sharp losses
following the Federal Reserve statement on Wednesday. In the European
session, the pair is trading slightly above the 1.23 line. On the
release front, German Ifo Business Climate rose to 105.5 points. Later
in the day, the US will release Unemployment Claims and the Philly Fed
The shaky euro took another tumble on
Wednesday, courtesy of the Federal Reserve. Previous Fed policy
statements have usually stated that the Fed would maintain low rates for
a “considerable time”, but the December statement changed terminology,
saying the Fed would be “patient” before raising rates. In a
follow-press conference, Federal Reserve chair Janet Yellen was less
ambiguous, saying that the Fed was unlikely to raise rates for the “next
couple of meetings”. The markets took this to mean that a rate hike is
in the works, but not before April. The news sent the euro sprawling, as
the currency lost about 170 points on Wednesday.
There was good
news out of Germany, the locomotive of the Eurozone. Ifo Business
Climate, a key indicator, improved to 105.5 points, up from 104.4 a
month earlier. The strong reading was very close to the forecast of
105.4 points. We’ll get a look at consumer confidence on Friday, with
the release of GfK German Consumer Climate. The markets are expecting a
strong reading of 8.9 points.
Meanwhile, Eurozone inflation
remains at low levels, and there were no surprises as Eurozone CPI
dipped to 0.3% in November, down from 0.4% a month earlier. Persistent
efforts from the ECB have not improved matters, and the danger of
deflation has risen with the crash in oil prices. Germany has not been
immune to weak inflation, with German Final CPI coming in at a flat 0.0%
AUD/USD Exhaustion Trade- Shorts at Risk Above 8064 (based on dailyfx article)
USD/CAD to Face Fresh December Highs on Dismal Canada CPI (based on dailyfx article)
Trading the News: Canada Consumer Price Index (CPI)
A slowdown in Canada’s Consumer Price Index (CPI) may spur fresh monthly
highs in USD/CAD especially as the Bank of Canada (BoC) remains
reluctant to further normalize monetary policy.
Why Is This Event Important:
However, another uptick in the core rate of inflation may heighten the
appeal of the loonie as sticky price growth undermines the BoC’s scope
to retain the current policy, and Governor Stephen Poloz may sound
increasingly hawkish in 2015 as the central bank head highlights the
broadening recovery in the Canadian economy.Lower input costs paired with the slowdown in the housing market may
trigger a sharp slowdown in price growth, and a dismal CPI print may
heighten the bearish sentiment surrounding the Canadian dollar as it
drags on interest rate expectations.However, the pickup in economic activity along with the expansion in
private sector consumption may produce a stronger-than-expected
inflation report, and sticky price pressures may generate a near-term
pullback in USD/CAD as it fuels bets for a BoC rate hike.
How To Trade This Event Risk
Bearish CAD Trade: Headline & Core Inflation Miss Market Forecast
Consumer Price Index, November 2014 (official report)
The Consumer Price Index (CPI) rose 2.0% in the 12 months to November, following a 2.4% increase in October.
The slower year-over-year rise in the CPI was mainly attributable to gasoline prices, which fell 5.9% in the 12 months to November, after rising 0.6% in October.
On a monthly basis, the gasoline price index declined 7.5% in
November, marking its fifth consecutive monthly decrease. In November,
gasoline prices were at their lowest level since February 2011.
Gasoline prices fell in all provinces on a year-over-year basis in
November. Prince Edward Island recorded the largest decline, while
British Columbia posted the smallest.
Euro Struggles Ahead of Greek Election- USD/CAD Carves Lower Highs (based on dailyfx article)
US Dollar Fundamentals (based on dailyfx article)
Fundamental Forecast for US Dollar: Bullish
The US Dollar finished at fresh multi-year highs
versus the Euro and near key peaks versus other currencies, boosted by a
sharp improvement in US interest rate expectations on a
highly-anticipated Fed interest rate decision.
less volatility in the holiday-shortened week ahead, but traders should
be wary of any surprises from revisions to the Q3 US Gross Domestic Product report, US Durable Goods Orders data, and two Home Sales
releases. Although admittedly unlikely, any surprises in the third
revision to Q3 GDP figures could have a marked effect on US interest
rates and the Dollar itself.
The US Dollar jumped alongside short-term yields on
this past week’s highly-anticipated US Federal Open Market Committee
interest rate decision. Fed officials initially disappointed those who
expected a more hawkish shift in policy in the first FOMC
meeting since the end of Quantitative Easing in October. Yet short-term
treasury yields and implied US interest rates rose sharply as Fed Chair
Janet Yellen essentially said that rate hikes could come after as few
as two meetings.
The US Dollar continues to track changes in the US
2-year Treasury Yield—a strong proxy for Fed interest rate
expectations—with great accuracy. A sharp reversal leaves the 2-year UST
yield at more than twice the low it set through October 15—the exact
day of the US Dollar low as seen through the Dow Jones FXCM Dollar Index
(ticker: USDOLLAR). Since that date, the Greenback has surged a
remarkable 11 percent versus the interest-rate sensitive Japanese Yen, 7 percent versus the Australian Dollar, and 5 percent versus the Euro.
US Dollar traders will almost certainly track
changes in yields and interest rate expectations, and a key question is
whether domestic economic data can continue to impress and send rates
and the USD
to further peaks. Dollar momentum seems stretched, and economic data
can only surpass expectations for so long. Yet the US Dollar remains in
an uptrend until it isn’t, and we’ll need to see concrete signs of a
turn to call for a meaningful turnaround.
Traders should otherwise keep an eye on developments in the Russian financial crisis and broader Emerging Markets. Many were surprised to see the US S&P 500 track the USD/Ruble exchange rate on a virtual tick-for-tick basis, but the truth is that further destabilization in Russia threatens contagion and carries direct implications for global financial markets.