Daily Market Analysis: 24 November 2016
by Christala Parmaxi, CFTe, Harborx Investment Analyst
The better-than-expected US Core Durable Goods Orders figure has boosted the US Dollar to the new highs and reignited the greenback’s rally to the upside as new record highs were recorded for the major currency after two days of consolidation. The core Durable Goods orders were expected at 0.2% while the actual change in the total value of October’s new orders came out at 1%, the highest figure since July 2016. However, October’s US New Home Sales dropped by almost 2%, with September’s figure being revised downwards by 19K. The market remained unchanged during the announcement of the decreased Home Sales as it was still appreciating the extraordinary growth on the Goods Orders at that time.
Just as it was expected, November’s FOMC meeting minutes did not cause significant volatility to the forex markets since the meeting was held before the US Presidential Elections and thus Fed’s members were not too decisive on their views and steps in view of an uncertain environment. The minutes revealed the slightly hawkish Fed’s favorite statement of the last few month; if the economic data, including jobs creation and growth, continue improving, then the rate hike will be deemed necessary “relatively soon”. The media are still indicating a mean likelihood of 95% for the rate hike with the Fed funds probability lying at 93.5%. Since it is almost certain that the Fed will raise the rates in December, we do not expect the US Dollar to gain further upside stimulus upon the possible rate hike announcement. However, we would expect investors to pay attention to the policy statement of the meeting.
The biggest looser of the day against the US Dollar was the Japanese Yen that has sunk by 1.25%; the Gopher reached the record high price level of 113 yesterday and it is currently moving around this psychological level at the time of writing. The only currency out of the G7 that almost managed to close the day unchanged against the strong US Dollar was the Great Britain Pound.
The main currency did not manage to break the bearish cross of SMA50 and SMA100 and instead it broke the ascending triangle to the downside, reached our suggested bearish target at 1.057 and stopped its rally down to the 1-year low level of 1.052. The pair is moving within the rectangle formation today trying to reach the resistance level of the SMA50 at 1.06. If it manages to break this psychological level, then we would expect a further rise up to the resistance of 1.065. The indicators are slopping upwards with no luck to reach their bullish levels yet. Our view for the pair is still bearish as we would expect it to reach around SMA50 and then fall down again. The valid resistance levels are near Bollinger’s middle band at 1.055 and then the record low level of 1.052.
On the weekly timeframe, the pair has been moving within a rectangle formation for the past 8 months, with the upper band being near 1.155 and the lower band near 1.045. Despite the bearish momentum of the last 3 weeks, the SMA50 is attempting to break to the upside the SMA100 which is usually a bullish alarm. ADX indicates no directional movement while the MACD and RSI are slightly bearish. If the price manages to break the lower band of the rectangle, then we would expect the downside rally to expand its losses down to parity. However, if the support of the lower band does not break, then we expect the price to move upside to the level of 1.10 by the end of the year.
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