Vantage FX Daily Market Update

[Vantage FX]

Image: Kaspersky

Up Periscope!:
With Friday’s US labour report coming in largely within expectations following Thursday’s Draghi induced carnage, the market felt it didn’t need to massively re-rate for a second day in a row. A largely uneventful set of accompanying numbers being the unemployment rate steady at 5.0% and the average hourly earnings at 0.2%, both as expected saw the majors barely blip.

“USD Non-Farm Employment Change (211K v 201K expected and 298K previously)”

With the ECB rate decision inspiring an almost unheard of, 500 pip single day rally in the most liquid Forex pair the EUR/USD, it was going to take one hell of a miss for the pair to keep spilling blood. As it so often is the case, one of the most anticipated NFP releases in our short memories was largely a non-event.

EUR/USD Hourly:

Click on chart to see a larger view.

As you can see, NFP hardly put a dint into the previous day’s daily candle. The ECB decision has flushed some of the weak shorts out of the market which after all the dust settles is actually a healthy thing going forward. Get the shock out of the way and move on.

I’m always wary of articles quoting ‘unnamed sources’ but I wanted to bring up a Reuters article which appeared over the weekend highlighting the opposition that Draghi faced heading into last week’s meeting. It looks as though the pressure that his full bravado style was designed to put on the governing council actually backfired on himself in the end.

“Draghi raised expectations too high, on purpose, and attempted to paint the Governing Council into a corner,” the source said. “This was problematic and he was criticized for this by several governors in private.”

Looking forward (through the periscope if you like) toward the upcoming week, we see top scheduled event risk focused firmly on Fed sensitive data releases including unemployment, retail sales, PPI and consumer sentiment all squeezed together on Thursday and Friday.

I’ll leave you with this quote from the aforementioned Reuters article regarding the ECB’s thinking on the Fed:

“If we had over delivered, the euro could have gone down to parity and it would have been more difficult for (Fed Chair Janet) Yellen to defend an even stronger dollar. Now the Fed will be quite relaxed.”

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Featured on the Forex Calendar Monday:
JPY BOJ Gov Kuroda Speaks

GBP BOE Gov Carney Speaks

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Chart of the Day:
Today’s chart of the day takes a follow up look at last Monday’s GBP/USD chart of the day in which we took a look at a clean bearish channel that price has been creeping down between over the past few months.

“I just can’t find a technical argument that would make me want to buy against the trend at a weak bearish channel bottom.”

Well we certainly found a reason didn’t we! Just a certain Italian named Mario Draghi.

GBP/USD Daily:

Click on chart to see a larger view.

While price is re-testing those previous swing low support levels this time as possible resistance, I am inclined to keep my bearish bias on the pair in tact and stay looking for setups in the direction of the trend.

How to trade NFP aftermath. Read more in the Daily Market Update on the Vantage FX News Centre

 

[Vantage FX]

Image: StreetWise Journal

Oil Seeps Lower:
Oil prices seeped to their lowest level in over 6 years, breaking swing lows as oversupply was confirmed as not being abated any time soon. OPEC meetings ended with no resolution on production cuts and lacked any reference to output ceilings which was the big kicker in sending Oil to new lows.

Other Commodities were also prominent in the overnight news cycle, with major Australian export Iron Ore falling to lows, and now trading with a $30 handle next to its name. Those break-even prices continue to slip further and further away for many of the mid to smaller miners… well anyone not named BHP or Rio Tinto really. When the smaller end of town is forced out of the market, the supply side of the equation will come back into play and could send the Aussie higher.

Certainly a potential storyline to follow if you’re trading the Aussie.

AUD/USD 4 Hourly:

Click on chart to see a larger view.

Of course the Aussie Dollar took a hit on the back of these price headlines and after breaking out of its bearish channel, it is now crunch time for the short term change of trend.

CAD Spurts Higher:
Moving back to the Oil narrative, the commodity currency most affected is of course the Canadian Dollar.

USD/CAD 4 Hourly:

Click on chart to see a larger view.

The CAD fell 1.2%, sending USD/CAD spurting higher to its highest level since 2004.

After coiling into a massive ascending triangle where each higher low soaked up the diminishing sellers, the only way for price to go was up.

Image: Phillips & Company

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Featured on the Forex Calendar Tuesday:
AUD NAB Business Confidence
CNY Trade Balance

EUR Italian Bank Holiday
GBP Manufacturing Production m/m

CAD Building Permits m/m
CAD BOC Gov Poloz Speaks

Italian banks will be closed in observance of Immaculate Conception Day:

“The Feast of the Immaculate Conception celebrates the solemn belief in the Immaculate Conception of the Blessed Virgin Mary. It is universally celebrated on December 8, nine months before the feast of the Nativity of Mary.”

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Chart of the Day:
Lets take a closer look at the Oil chart.

Oil Daily:

Click on chart to see a larger view.

Taking a look at our first daily chart, we can see that oil, after failing to hold onto any sort of sustained break out, has been hugging its major bearish trend line. After last night’s price action, the bulls look to have finally given up on the level and we have now dropped back inside the trend line.

From here, we will be watching whether price re-tests the trend line as resistance again and look to short from there.

Oil Daily 2:

Click on chart to see a larger view.

The second daily chart just shows a simple parallel drawn from the major trend line above, but set to line up with some of the short term bottoms. The fact that this level lines up perfectly with the previous swing bottom at 37.75 gives Oil a nice confluence of support of which could give bulls their last stand.

As Oil Seeps Lower and CAD Spurts Higher, read more in the Daily Market Update on the Vantage FX News Centre.

 

[Vantage FX]

Image: caniodica

Unconventional Policies and the CAD:
While Speaking at the Empire Club of Canada in Toronto, Bank of Canada Governor Poloz delivered the alternate idea that BOC policymakers still have the fire-power to spur growth even with interest rates currently at near zero levels.

As concern for Canada’s economy grows within the global oil glut currently dampening the outlook for commodity-producing nations such as itself, the BOC has available what Poloz called ‘unconventional policies’, opening up the idea that negative rates and fiscal stimulus are at least being considered. While not expected to be implemented in the near term, charging banks for deposits, forward guidance and asset purchases were also all mentioned as possibilities.

Read the full update of framework for unconventional monetary policy measures from the Bank of Canada here.

USD/CAD Daily:

Click on chart to see a larger view.

Taking a look at the daily chart, we can see that price has broken out of what is more or less an ascending triangle pattern. In this pattern, sellers are soaked up with each higher low, essentially until there are none left and this is why you get the exaggerated breakout to the upside.

With yesterday’s oil rout hammering the Canadian Dollar even before this morning’s comments from Poloz, the question becomes has the pair gotten too vertical on token comments that maybe should have been taken more with a pinch of salt?

USD/CAD 4 Hour:

Click on chart to see a larger view.

Our TradingView chart shows one possible play, with a trackable before and after which is great for trading accountability. If you haven’t taken a look at TradingView yet, I cant recommend the site enough!

The Bank of Canada’s Twitter account is close to the best run Central Bank account online and this little infographic with quotes, highlights why markets probably don’t need to get too carried away on the ‘unconventional’ headlines just yet.

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Featured on the Forex Calendar Wednesday:
CNY CPI y/y
CNY PPI y/y

USD Crude Oil Inventories

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Chart of the Day:
If you’ve been following the Vantage FX blog, then you will have seen the AUD/JPY chart of the day that we featured a few weeks ago.

“Zooming out to the daily and we can see that price smashed through the 100 SMA that we were watching last week, and looks like it is reaching for channel resistance. I have re-drawn the horizontal support/resistance line to take in the spikes and we now have a nice confluence of possible resistance from which to take trades from.”

AUD/JPY Daily:

Click on chart to see a larger view.

A clean rejection off channel resistance sees price now testing short term support. Was this bullish move just a counter-trend, flag pattern?

Are you trading the BOC's Unconventional Policies and the CAD? Read more in the Daily Market Update on the Vantage FX News Centre.

 

[Vantage FX]

Image: GitHub

Central Banks in Abundance:

“NZD Official Cash Rate (Cut from 2.75% to 2.50% as expected)”

NZD/USD 15 Minute:

Click on chart to see a larger view.

So with the Kiwi rallying, we again see the phenomenon we seem to now be calling a ‘hawkish rate cut’. With the RBNZ ‘expecting to reach inflation goals at current rate settings’, the market has interpreted Wheeler as not looking to lower rates again any time soon and duly obliged with a rally.

Looking forward, we have the Swiss Libor Rate and SNB Monetary Policy Assessment on the Forex calendar later this evening. With last week’s ECB decision not having any major negative effect on the CHF, markets are not expecting a cut to the ‐0.75% deposit rate which has stood since January of 2015.

I wanted to bring up the Technical Analysis post in which we talked about the Swissy coming back to its Pre-SNB Floor Level.

USD/CHF Daily:

Click on chart to see a larger view.

“The market will always take advantage of the crowds.”

Price gave a juicy fake-out above resistance before the USD squeeze really set in and we now head back to trend line support. Write that statement on the wall above your trading screen and don’t forget it.

Finally we turn briefly to Indices, as we head into today’s FTSE chart of the day, with a quick look at the S&P.

SP500 Daily:

Click on chart to see a larger view.

With stocks too giving away some of their gains ahead of the expected December Fed hike, the SP500 has rejected off short term resistance and carried on its decline from there. I’ve left that major weekly trend line on the chart even though price has chopped through it recently because as we’ve seen before, these major lines can essentially be re-activated at any time.

Stay safe out there!

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On the Calendar Thursday:
NZD Official Cash Rate (Cut from 2.75% to 2.50% as expected)
NZD RBNZ Rate Statement (Less Dovish)
NZD RBNZ Press Conference
NZD RBNZ Gov Wheeler Speaks
AUD Employment Change
AUD Unemployment Rate

CHF Libor Rate
CHF SNB Monetary Policy Assessment
CHF SNB Press Conference
GBP MPC Official Bank Rate Votes
GBP Monetary Policy Summary
GBP Official Bank Rate

USD Unemployment Claims

———-

Chart of the Day:
With the SP500 falling off resistance, across the Atlantic the FTSE100 has seen similar weakness set in but a confluence of support has caught my eye.

FTSE100 Daily:

Click on chart to see a larger view.

The daily chart shows the clean bullish channel that UK stocks have been trading in over the last few months, respecting both the lower and upper bands of the range.

FTSE100 4 Hourly:

Click on chart to see a larger view.

Zooming into the 4 hour chart, we can see the potentially juicy area of support that formed at the daily range bottom.

With releases via Central Banks in Abundance, read more in the Daily Market Update on the Vantage FX News Centre.

 

[Vantage FX]

Image: Kilroy

Australian Employment Data Wrong? What Matters to Traders:
Yesterday’s Employment figures out of Australia were what can only be described as marvellous! …if taken on face value that is. As Peter Martin of the SMH hilariously pointed out, our stubborn Minister for Employment had no problems doing.

“The minister was asked whether she had concerns about the reliability of the figures. She said she did not.”

With the Employment Change printing a whopping +71.4K v the -10.0K expected, on the back of the +58.6K in November, I think it is fair to at least ask the question whether the figures are entirely correct. Add the Unemployment rate falling to 5.8% v an expected rise to 6.0% and you have one amazing set of numbers which surely are too good to be true.

So why the issue you ask? 1/8th of the 26,000 households surveyed each month by the Bureau of Statistics must be rotated from time to time. It is the fact that the newly surveyed households are sometimes very different to the old ones surveyed which is being blamed for the occasional jumpy nature of Australian unemployment data.

But what does that mean for us as traders? To be honest, it really doesn’t matter whether the figures, or the way they’re gathered, are right or wrong for us. The only thing that matters is price, and the perception of where price should actually be.

AUD/USD Daily:

Click on chart to see a larger view.

The market has interpreted the figures as beating expectation, but not by the record amounts being reported and that’s all that matters. It’s a quality narrative and hugely beneficial for your overall view on the Australian Dollar, but if you’re trading just remember to always take that step back and remember what really matters in the trading game. Price.

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On the Calendar Friday:
USD Core Retail Sales m/m
USD PPI m/m
USD Retail Sales m/m
USD Prelim UoM Consumer Sentiment
CNY Industrial Production y/y

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Chart of the Day:
With last night’s other major piece of news being the interest rate decision out of Switzerland, the SNB left rates on hold and maintained the now hollow pledge of intervening when needed to possibly weaken a currency they still see as overvalued. Today’s chart of the day takes a deeper look at the Swissy.

USD/CHF Daily:

Click on chart to see a larger view.

The daily shows a juicy fake-out above resistance, before the USD squeeze and Draghi’s relative inaction sent price on a one way ticket toward major trend line support.

USD/CHF 4 Hourly:

Click on chart to see a larger view.

But it’s the 4 hour chart that I wanted to highlight, starting with the beautiful bounce off the 0.9817 level and look at why it stopped there. First of all we have seen the level tested both on the support and resistance sides, with the major reactions marked on the chart above.

But look at the candle above the arrow. Price didn’t just bounce off the level, price BOOSTED off the level. One of the most important aspects of determining the strength of support/resistance levels is in how hard price has moved off the level in the past. As you can see, buyers previously dominated this level and when price came back to re-test, combined with confluence, this was just too much not to bounce.

Do you see opportunity trading USD/CHF? Is there more than 50 pips in this bounce?

 

[Vantage FX]

Image: Fox Business

FOMC and Trader Expectations:
And here we are, FINALLY the Monday before the December FOMC meeting. The week before Christmas: the traders version. The biggest, most anticipated meeting (really this time) since… well the last time the Fed raised back in June 2006. As widely expected, we are likely to see a 0.25% hike in the short term interest rate, lifting rates off the current near zero levels.

Jon Hilsenrath of the WSJ penned this piece (Hint: Copy and paste the headline into Google and click the Google News link that appears first) over the weekend, warning that Fed officials may be nervous that interest rates will go up, only to come back down again without the benefits of a rate hike cycle taking hold and adversely affected the economy.

“But that’s if all goes as planned. Their big worry is they’ll end up right back at zero.”

With expectations and an overcrowded long USD trade heading into the decision, it is not about the hike itself, but the direction of future interest rate decisions after that. I would normally have said subsequent interest rate ‘hikes’ after that, but maybe I too am getting cold feet. Will persistently low inflation continue to pick up alongside rising rates? Will the jobs numbers continue their upward trajectory? Will Chinese and European woes continue to remain relatively contained away from the US economic bubble?

Questions we’re going to find out answers to the hard way!

EUR/USD 4 Hourly:

Click on chart to see a larger view.

The Draghi induced USD November squeeze has continued into December’s FOMC week and EUR/USD has forged higher into some sort of bullish ascending triangle continuation pattern. Alongside the over expectation narrative, momentum is still extremely strong here and I wouldn’t be surprised to see a rally right up to the decision on Thursday.

Big week ahead!

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On the Calendar Monday:
JPY Tankan Manufacturing Index
JPY Tankan Non-Manufacturing Index

EUR ECB President Draghi Speaks

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Chart of the Day:
With the long USD trade obviously crowded and expectations way too focused on the Fed hiking in December rather than how hard each subsequent hike from them on will be, we have spoken about a USD squeeze being a possibility.

USD/JPY 4 Hourly:

Click on chart to see a larger view.

Compare where we were to where price sits now and we see the channel break out was followed by sideways consolidation. Again, breakouts never happen as clean as the textbook images show (broken record I know, but too important not to continue saying) and consolidation in the direction of the original trend is what we so often see following a break.

In the case of USD/JPY, we see price continued up, in the direction of the original trend, finding resistance at the previous swing high and subsequently dropping hard from there. A squeeze or a healthy pull-back into major news, depending if you were long or short I guess.

Think about Trader Expectations into FOMC. Read more in the Daily Market Update on the Vantage FX News Centre.

 

[Vantage FX]

Image: KevKeaf – DeviantArt

FOMC Lead Up: The Sounds of Silence:
Can you hear that? That is the sound of silence, with quiet market action expected as we lead into Thursday morning’s FOMC decision. All I can say is enjoy the peace while it lasts!

With only 2 and a bit more days left before the Fed finally pushes the button on an interest rate liftoff, any strong directional moves in the US Dollar seem to have already been played out. Barring any market thinning as traders uninterested in a volatility play in the last calendar month of the year take their money to the sidelines, the squeeze has played out and we are going to head into FOMC with value in a move either way pending just how hawkish Yellen sounds.

EUR/USD Daily:

Click on chart to see a larger view.

With all the talk now about the USD selling off on the expected dovish tone accompanying Thursday’s hike, the fact that price isn’t sitting on its lows in any of the majors (highlighted by the EUR/USD daily chart above), sets us up nicely for the possibility of now a hawkish surprise. I personally can’t see the Fed doing anything but coming across as the whitest of doves, dropping the words gradual, data dependent and intermittent wherever they can, but the charts definitely offer opportunity if you like playing the contrarian.

Remember China?:
Searching through the crowded Vantage FX Forex News Centre, I frustratingly can’t find our analysis following the September FOMC decision before my deadline, but if you remember, the reason they didn’t move in September when everyone was expecting them to, was global concerns mostly focused around China. The US data was there even back then but the Fed chose to take a wait and see approach to global conditions.

With emerging market economies back in the headlines, I just wanted to leave this point here. It is something that must be considered when you are drawing up your trading scenarios post FOMC.

“Ninety percent of economists in a recent Reuters poll predicted the federal funds rate would be raised by quarter of a percent point on Dec. 16, taking it to 0.25-0.5 percent.”

“The same poll saw a very gradual pace of subsequent increases, with the rate rising to between 1 and 1.25 percent by the end of next year and to 2.25 percent by end-2017.”

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On the Calendar Tuesday:
AUD Monetary Policy Meeting Minutes

GBP CPI y/y
EUR German ZEW Economic Sentiment

CAD Manufacturing Sales m/m
USD CPI m/m
USD Core CPI m/m

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Chart of the Day:
I’ve read a few headlines and market notes highlighting last night’s bounce in the price of oil and whether this could signal some sort of bottom. Today’s chart of the day takes a look at a few charts and what market sentiment could mean for Commodity traders heading forward.

OIL 4 Hourly:

Click on chart to see a larger view.

First of all we take a look at the 4 hour chart, showing yesterday’s reportedly strong rally off lows. Strong rally off lows? It was ONE 4 hour, counter-trend candle that flew straight into resistance!

Come on guys…

OIL Daily:

Click on chart to see a larger view.

I included the daily chart here to highlight the major bearish trend line that price has tucked back in below, also showing the strong daily rally from a longer time frame view.

With short oil an already very crowded trade, taking a contrarian view does have its merit, but calling lows off these charts isn’t something I’m jumping out of my skin to do. Do you see opportunity buying oil?

Are you trading the FOMC Lead Up? Read more in the Daily Market Update on the Vantage FX News Centre.

 

[Vantage FX]

Image: WSJ

Forget Conventional Economics, You’re a Trader Now:
I don’t want to rain on anyone’s parade, but tomorrow’s FOMC meeting is most probably going to be the least volatile, biggest non-event of all time. I mean lets be honest, markets and traders have been speaking about, and planning for this Christmas present for what, 5 years now?

Futures contracts have priced in a whopping 78% likelihood that Yellen and friends in the Federal Reserve will raise their short term interest rate from near zero levels to 0.25%, while also pricing in a further 2 during 2016 to take the Fed Funds Effective Rate to 0.75 this time next year.

History of course is on the side of the contrarian, with past data suggesting that after the first rate hike in each of the last 3 cycles, the US Dollar has actually fallen rather than rallied like the text books will tell you. With all this relying on an overly dovish tone in the accompanying statement, are traders who follow the herd setting themselves up for a rude shock?

Remember it’s all about trader expectations and whether the fact matches what’s already been priced in, rather than the news itself. If you’re trading around the decision, this needs to be at the forefront of your mind.

Aussie Expectations:
On a side note for traders of the Australian Dollar, Reserve Bank of Australia Governor Glenn Stevens gave his regular year-end interview with The AFR which was published this morning.

It’s well worth a listen and a read if you’re interested, but all answers are fairly high level and obviously meticulously scripted to minimise market impact.

AUD/USD Weekly:

Click on chart to see a larger view.

Be sure to check out our interactive AUD/USD Weekly TradingView chart featuring the key weekly levels embedded on the page here. Remember you can make the chart display full screen as well as ‘make it your own’ where you can scroll through different time-frames and play with lines of your own.

Stay safe out there.

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On the Calendar Wednesday:
EUR French Flash Manufacturing PMI
EUR German Flash Manufacturing PMI
GBP Average Earnings Index 3m/y
GBP Claimant Count Change
USD Building Permits

USD FOMC Economic Projections
USD FOMC Statement
USD Federal Funds Rate
USD FOMC Press Conference

Note: I get the odd question about the days of the week I print here and why they don’t match up with their own calendar. As I write this morning report during the Asian Session morning in Sydney, I try to make the day’s calendar encompass all news until the next report.

I know this can be unclear and confusing at times but in 2016 the Vantage FX Forex News Centre will be receiving a makeover, and with it will come a clearer Forex calendar which incorporates the excellent and clear Forex News Terminal into the morning blog.

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Chart of the Day:
It seems crazy as the Fed is hiking rates, making the free money that has been fuelling the stock market bull run for so long now more expensive, but the SP500 weekly chart is screaming rally.

SP500 Weekly:

Click on chart to see a larger view.

With no doubt a tonne of stops sitting above those clean highs and early shorts from the August fall getting nervous, I just can’t help but expect some sort of a clean out above those highs.

New highs in stocks on a Fed rate hike. Forget about every conventional, what should happen economics lesson you’ve ever learned. You’re a trader now.

Do you see opportunity trading stock market indices?

 

[Vantage FX]

Image: Spaceflight Insider

Fed Hikes Interest Rates; Dovish Hike:

“FOMC hikes interest rates by 25bps to 0.25%-0.50% as expected.”

The US Federal Reserve has this morning raised interest rates for the first time in almost 10 years. With the move was widely expected by economists and market participants alike, all interested eyes were focused on the pace of subsequent rate increases now that a new cycle had begun.

The Federal Open Market Committee (FOMC) unanimously (no more chopping and changing!) voted to set the new Federal Funds Rate target range at 0.25% to 0.5%, up from 0.0% to 0.25%.

Following the expected lift-off, the market had already priced in the first rate hike in the decade, so the focus was going to be on the additional language and the insights given into Fed actions in 2016. Yellen essentially signalled that future interest rate movements will be “gradual” and in line with previous projections.

Key Quotes:

“The committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate.”

“The actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”

“Stronger growth or faster inflation will warrant steeper pace of hikes”

That last little nugget of gold during Yellen’s press conference could signal the Fed’s willingness to hike at every subsequent meeting just as they have done in past hiking cycles, IF the data is there.

They want to evenly space their rate hikes, that’s what the Fed does. Now we wait and see how the data is interpreted. Interestingly enough, the FOMC Economic Projections signalled that Fed officials are not overly optimistic about a return to 2% inflation until well into 2018, with the projection down from 1.7% in September to 1.6% currently.

The Charts:
SP500 15 Minute:

Click on chart to see a larger view.

EUR/USD 15 Minute:

Click on chart to see a larger view.

On the SP500 15 minute chart, you can see that US equities saw an initial drop, followed by ripping to new highs. In yesterday’s daily market update, I said to forget conventional economics, you’re a trader now and to look for a clean out of stops at new highs even if we get the interest rate hike. The market gets what the market wants, and right now it looks like it still wants those stops!

The US Dollar move on the other hand, shown here on the EUR/USD 15 minute chart, was much more of a non event. After initially dropping (EUR/USD rallying), the move was reversed and we now sit back right where we started.

Even after all the chopping and changing leading into the announcement, the Fed actually did quite well in minimising short term market shocks, (eventually) clearly communicating their path and carrying out on their word. Volatility was minimised and from here it looks as though the Fed narrative is going to continue to play out in a slow grind. Credit where credit is due, it all worked out in the end… for now.

“Reuters poll: 13 of 19 primary dealers expect the next Fed rate hike to come in March.”

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On the Calendar Thursday:
USD Federal Funds Rate (25bps Hike to 0.25%-0.50% as expected)
NZD GDP q/q

EUR German Ifo Business Climate
GBP Retail Sales m/m

USD Philly Fed Manufacturing Index
USD Unemployment Claims

———-

Chart of the Day:
Where did the Oil has bottomed stories go? In Tuesday’s FOMC Lead Up blog, we featured Oil as our chart of the day, questioning the sensationalised headlines on the back of what the charts are actually telling us.

OIL 4 Hourly:

Click on chart to see a larger view.

The 4 hour chart shows the long term daily trend line that we have been watching, being clearly re-activated as resistance again. 1 bullish daily candle does not signal a bottom!

The Fed Hikes Interest Rates. Read more in the Daily Market Update on the Vantage FX News Centre.

 

[Vantage FX]

Image: The Loft Lounge

Time to Consider Divergent Monetary Policies?:
Following the initial equities euphoria, the stops above swing highs survived and sanity prevailed. Interest rates up – Stocks down… Yes, that’s how it’s meant to go!

US Dollar strength is accelerating as it starts to sink in that no matter the speed of any subsequent rate hikes, the US is still the only major economy in the midst of a rate hiking cycle. With this latest round of risk-off buying, commodities have continued to sell off, with the most notables in Oil and Gold both sitting on their lows.

But sticking with Forex on this quiet Friday morning, it was interesting to note that UK Retail sales nearly TRIPLED expectations, but Cable stayed stubbornly weak. I’ve said it before and I’ll say it again: USD really is king.

“GBP Retail Sales m/m +1.7% v 0.6% expected.”

GBP/USD Daily:

Click on chart to see a larger view.

It wasn’t that long ago that we were talking about the Bank of England being the next to raise rates, and that storyline is sure to make headlines again soon enough. Especially with data beating expectations like that!

Now that the Fed has moved, diverging monetary policies from different central banks will give us plenty to trade around heading forward and Cable at both a long term horizontal support zone as well as short term channel support, this chart has got my attention again.

With FOMC out of the way and the Fed finally putting us out of our misery, you can enjoy your easy Friday to end the week. Take the opportunity to maybe clean up and re-set the short term levels marked on your MT4 charts.

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On the Calendar Friday:
NZD ANZ Business Confidence
JPY Monetary Policy Statement
JPY BOJ Press Conference

CAD Core CPI m/m

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Chart of the Day:
USD/CAD continues to be the best performing currency pair on the Vantage FX Market Watch, breaking decade old swing highs and refusing to let up.

USD/CAD Daily:

Click on chart to see a larger view.

Following the immediate post-Fed USD drop, the Dollar bulls stepped it up a gear and wrestled back control. This Dollar strength combined with lower oil prices has seen USD/CAD go parabolic.

Today's blog asks is it Time to Consider Divergent Monetary Policies? Read more in the Daily Market Update on the Vantage FX News Centre.