iFOREX Daily Analysis : January 04,2017

The U.S. dollar racked up its biggest rise in more than two weeks in 2017's first full day of European trading on Tuesday, as dealers and investors in London returned to push the greenback close to December's long-term highs.

The greenback was supported after the Institute for Supply Management said yesterday that its index of manufacturing activity rose to 54.7 from 53.2 in November; the reading was the highest since December 2014 and easily exceeded economists’ expectation of a level of 53.6.

Elsewhere, one of January's big question-marks, China's yuan, was proving more stable in its more freely traded offshore markets, a bullish survey of manufacturing purchasing managers helping it 0.1% higher and also supporting the Australian dollar.

A bout of year-end profit-taking had halted progress in the index used to measure the U.S. currency's strength against a basket of its peers and weakened it to as much as $1.07 per euro last week.

The greenback has been on the rise since September, but its jet higher since Trump's election has prompted speculation of an attack on parity with the euro.

Treasury yields have jumped in anticipation of more U.S. government borrowing and higher Federal Reserve interest rates at a time when central banks in the euro zone and Japan are working to keep their short-term yields in negative territory. Today the U.K. is to release survey data on construction activity ; the euro zone is to release preliminary data on inflation ; while the Federal Reserve is to publish the minutes of its December meeting.

EUR/USD

On Tuesday the euro extended losses against the greenback in the wake of the manufacturing report, with EUR/USD touching lows of 1.0341, the weakest level since December 2002.

Today investors will focus on U.K. survey data on construction activity and on euro zone preliminary data on inflation; but the main attention will be on the Federal Reserve minutes of its December meeting, to gain further information on the strength of the greenback.

Pivot: 1.0435Support: 1.0375 1.034 1.032Resistance: 1.0435 1.0465 1.049Scenario 1: short positions below 1.0435 with targets at 1.0375 & 1.0340 in extension.Scenario 2: above 1.0435 look for further upside with 1.0465 & 1.0490 as targets.Comment: a break below 1.0375 would trigger a drop towards 1.0340.

Gold

The price of gold settled higher on Tuesday, despite the strong dollar. The precious metal settled at $1159.40, an increase of $7.70, or nearly 1%.

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

The price of silver also increased to $16.35, an increase of 2.26%. Platinum and palladium increased in price too on Tuesday, as copper slid.

Financial media, meanwhile, is reporting that there may be a new vice chairman of the Fed soon. The name of John Allison is being touted in Washington as a possible Fed nominee by President-elect Trump. Allison may be named for a Federal Reserve Board of Governors vacancy that would make him "vice chairman and head of banking regulation," a position left technically unfilled since it was mandated by the Dodd-Frank banking reforms, analysts said.

Pivot: 1155.5Support: 1155.5 1152.5 1149.5Resistance: 1164.6 1167 1170Scenario 1: long positions above 1155.50 with targets at 1164.60 & 1167.00 in extension.Scenario 2: below 1155.50 look for further downside with 1152.50 & 1149.50 as targets.Comment: the RSI is mixed to bullish.

WTI Oil

Oil prices rallied in the first trading session of 2017 on Tuesday, hitting the strongest levels since July 2015 on hopes OPEC’s deal to cut production that set in on Sunday will help stabilize the market in 2017. January 1 marked the official start of the deal agreed by OPEC and non-OPEC member countries such as Russia in November last year to reduce output by almost 1.8 million barrels per day. The deal, if carried out as planned, should reduce global supply by about 2%.

However, some traders remain skeptical that the planned cuts will be as substantial as the market currently expects. There are also some worries in the market about production increases in Libya and Nigeria, which are both allowed to ramp up production as part of the OPEC deal.

Meanwhile, indications of increased drilling activity in the U.S. remained in focus.

Pivot: 52.9Support: 52.1 51.83 51.57Resistance: 52.9 53.45 53.9Scenario 1: short positions below 52.90 with targets at 52.10 & 51.83 in extension.Scenario 2: above 52.90 look for further upside with 53.45 & 53.90 as targets.Comment: the upward potential is likely to be limited by the resistance at 52.90.

US 500

Wall Street rose sharply on Tuesday as a post-election rally extended into the new year, helped by gains in Verizon Communications (NYSE:VZ) and technology companies Alphabet (NASDAQ:GOOGL) and Facebook (NASDAQ:FB).

U.S. stocks have surged over the past two months on expectations that President-elect Donald Trump will stimulate the economy with tax cuts and infrastructure spending and slash regulations in the financial industry.

For the day, the Dow Jones Industrial Average climbed 0.6%; the S&P 500 gained 0.85% and the Nasdaq Composite added 0.85% as well.

Today investors will focus on the Federal Reserve minutes of its December meeting, to gain further information on the strength of the American economy.

Pivot: 2248 Support: 2248 2240 2233 Resistance: 2258 2262 2267 Scenario 1: long positions above 2248.00 with targets at 2258.00 & 2262.00 in extension. Scenario 2: below 2248.00 look for further downside with 2240.00 & 2233.00 as targets. Comment: the RSI calls for a new upleg.

Written By: iFOREX