The USD strengthened on Friday riding a wave of uncertainty, as weaker than expected data from China and the Eurozone were released. Also the possibility of a US government shutdown seems to have scared investors away from stocks, seeking the relative safety of the greenback. Once again, the future Fed rate hike path seems to have played a role in the USD’s strengthening and the market may be positioning itself ahead of the FOMC’s meeting on Wednesday, when the bank is expected to deliver another rate hike. Analysts point out that the wording of the FOMC’s accompanying statement and Fed Chairman Powell’s following press conference, will be of great importance for the direction of the USD. Analysts also point out that the higher US borrowing costs will likely hurt the US growth momentum in the future and force the Fed to pause its monetary tightening path. Volatility could continue for the USD, as the market prepares itself for the much awaited FOMC interest rate decision later this week. EUR/USD tumbled on Friday, as the pair’s price action broke consecutively the 1.1345 (R1) support line (now turned to resistance) and the 1.1305 (S1) support level, before correcting above it. We could see the pair trading in a bearish market, should the USD continue to enjoy the market’s support. Should the bears continue to dominate the pair’s direction, we could see it breaking the 1.1305 (S1) support line and aim for the 1.1265 (S2) support level. Should the bulls take over, we could see the pair breaking the 1.1345 (R1) resistance level, aiming for higher grounds.
GBP weakens, as EU leaders deny Brexit rescue
The pound weakened on Friday as EU leaders seem to be unwilling for any further concessions, in order for the Brexit deal to pass through the UK parliament. The pound weakened on Friday as EU leaders seem to be unwilling for any further concessions, in order for the Brexit deal to pass through the UK parliament. Analysts point out, that the sentiment remains very cautious due to political uncertainty in the UK political scene. The possibility for a second referendum remains on the horizon, however currently, under attack by the UK PM Theresa May as a “Breach of Trust”. Volatility is expected to continue for the pound, as Theresa May is expected to address the UK parliament. Cable dropped on Friday, breaking the 1.2630 (R1) support line (now turned to resistance) and for a short period of time the 1.2555 (S1) support level, before correcting higher. Should the pound remain under pressure, we could see the pair dropping once again. Should the pair be once again under the selling interest of the market, we could see it breaking the 1.2555 (S1) support line and aim for the 1.2485 (S2) support area. Should the pair on the other hand find fresh buying orders along its path, we could see it breaking the 1.2630 (R1) and aim for the 1.2700 (R2) zone.
In today’s other economic highlights:
In a rather slow Monday, we get Eurozone’s final HICP rate for November and in the American session the NY Fed Mfg Index for December.
As for the week ahead:
On Tuesday, Australia’s RBA meeting minutes are to be released and from Germany we get the Ifo Business Climate indicator for December. On Wednesday, we get Japan’s trade balance for November, UK’s Inflation data for November, Canada’s inflation rates for November, New Zealand’s GDP growth rate dor Q3 and the star of the week will be the FOMC’s interest rate decision. On Thursday, Australia’s employment data for November are due out, and we get BoJ’s interest rate decision, UK’s retail sales growth rates for November, BoE’s interest rate decision, CNB’s interest rate decision, and from the US the Philly Fed Mfg Index for December. On Friday, we get Japan’s Inflation data for November and UK’s final GDP growth rate for Q3.
GBP/USD H4
Support: 1.2555 (S1), 1.2485 (S2), 1.2415 (S3)
Resistance: 1.2630 (R1), 1.2700 (R2), 1.2795 (R3)
EUR/USD H4
Support: 1.1305 (S1), 1.1265 (S2), 1.1215 (S3)
Resistance: 1.1345 (R1), 1.1385 (R2), 1.1425 (R3)
