Wednesday's Forex Analysis: EUR/USD, GBP/USD, AUD/USD
SGT Markets | Dec 06, 2017 05:55AM ET
EUR/USD
The U.S. Federal Reserve is likely to raise interest rates again next month, said Fed chair nominee Jerome Powell. Reports showed that initial jobless claims fell for a second straight week as labor market conditions continued to tighten.
Moreover, the U.S. dollar bounced as traders marked the passage of a Senate tax bill over the weekend, a move that raises the risk of more aggressive rate hikes in the world's largest economy. ABC News reported former national security adviser Michael Flynn was prepared to tell investigators that Donald Trump directed him to make contact with Russians during last year's presidential elections.
Eurozone CPI inflation data (Preliminary release) ticked down while U.S. GDP preliminary release ticked upper than expected. Eyes on today U.S. ADP Nonfarm Employment data.
German Ifo and Manufacturing PMI data came again higher than expected.
President Draghi said the ECB was becoming increasingly confident that the euro zone's economic recovery would continue but sluggish growth in wages meant monetary policy needed to remain easy.
1.1856, first important Supply area, has been broken on an overshoot. We expected a strong correction down to that precise level and this is happening. Next step is either in 1.19 overbought area or (much more probable) in 1.176 area.
Our special Fibo Retracement is confirming the following S/R levels against the Monthly and Weekly Trendlines obtained by connecting the relevant highs and lows back to 2012:
Weekly Trend: Overbought
1st Resistance: 1.1856 (fake breakout)
2nd Resistance: 1.1990
1st Support: 1.1756
2nd Support: 1.1655
GBP/USD
Sterling rose amid hopes that a deal on Brexit would be reached. A report said that Britain is close to a deal over the Northern Ireland border, and that came after reports telling that Britain has reached a deal with the European Union over the size of its Brexit divorce bill. Nonetheless, we think the sentiment will turn negative very soon, as Pound will discount this heavily overbought speculative situation.
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UK Retail Sales came better than expected. Last UK job market data also better than expected while UK inflation recently ticked down.
As written previously, pound is inside an overbought area. 1.336 – 1.346 area represents a strong Resistance and now prices start to be overheat, so that an overbought pattern can trigger and we expect price to fall below 1.329 area.
Our special Fibo Retracement is confirming the following S/R levels against the Monthly and Weekly Trendlines obtained by connecting the relevant highs and lows back to 2001:
Weekly Trend: Overbought
1st Resistance: 1.3460
2nd Resistance: 1.3610
1st Support: 1.3362
2nd Support: 1.3285
AUD/USD
Australia GDP worse than expected is deteriorating the hopes of a future hawkish RBA behaviour, though Retail Sales were higher than expected.
The Aussie central bank pointed to potential wage growth ahead as it kept rates steady and retail sales came in stronger than expected. Last Australia building approvals better than expected, while private sector credit pared expectations. Australia AIG Manufacturing Index disappointed analysts’ expectations.
RBA’s Lowe said no strong case for near-term change in interest rates but more likely next move in rates is up rather than down. Weakening case for lower rates as the economy picks up.
"Inflation and wage growth remain low. Both are expected to increase only gradually over time," Governor Phil Lowe said.
The U.S. Federal Reserve is likely to raise interest rates again next month, said Fed chair nominee Jerome Powell.
As we wrote previously, we are Neutral as we expected a consolidation phase starting around 0.757, important Demand area.
Our special Fibo Retracements are confirming the following S/R levels against the Monthly and Weekly Trendlines obtained by connecting the relevant highs and lows back to 2012:
Weekly Trend: Neutral
1st Resistance: 0.7680
2nd Resistance: 0.7735
1st Support: 0.7570
2nd Support: 0.7480
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