Market Analysis: 18 November 2016

Market Analysis: 18 November 2016

by Christala Parmaxi

Overview

Yellen retriggers US Dollar’s rally 

Janet Yellen testified yesterday before the Joint Economic Committee of Congress and she definitely reignited the greenback rally to the upside as new record highs were recorded for the US Index and the US Dollar. The Chairwoman said that an increase in short-term interest rates could “become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the committee’s objectives”. Yellen also commented on Donald Trump’s attacks during his election campaign, stating that “Sometimes central banks need to do things that are not immediately popular for the health of the economy”. Moreover, Yellen is awaiting for a big fiscal stimulus next year by the new President and thus the election has created uncertainty over the future path of economic policy. It seems that the Chairwoman kept a slightly hawkish stance and the likelihood of a rate hike on Fed’s December policy meeting has increased up to 83% according to Reuters.

USD Daily Change

 

Mario Draghi

The European Central Bank President said in a speech today that the recovery in Europe is not strong enough to deliver sustained reflation: “Going forward, our assessment will depend on whether we see a sustained adjustment in the path of inflation towards that objective and that means that inflation convergence towards 2 percent is durable, even with a reduction in monetary accommodation. Inflation dynamics, in other words, need to be self-sustained”. The Euro did not react to the President’s speech since it is still trading on 1-year low against the US Dollar and on 2-month low against the British Pound.

 Economic Calendar

Today the economic calendar is light with 3 speeches from FOMC members William Dudley and Esther George at 16:30 server time and Robert Kaplan at 20:30. Meanwhile, Canadian Core Consumer Price Index is going to be released at 15:30 with expectations to remain steady at 0.2%.

Technical View

USDJPY

The Gopher rose up to 110.9 today reaching a 6-month high since the last time that it was at these levels was around the end of May. The triple SMAs indicate bullish momentum while ADX is on overextended positive levels and both RSI and MACD are slopping upwards at overbought levels. The price’s momentum is still bullish while the next valid supports and resistances are around the psychological levels of 109 and 111 respectively. A correction down to 110 on the short term timeframe is possible before the pair rise again to the upside.

USDJPY

USDJPY

USDCHF

The Swiss Franc is back to parity against the US Dollar and the pair reached a 10-month high today. However, on the long-term timeframe MACD is very close to its equilibrium level while RSI is slopping upwards on bullish levels. The average Directional Index also indicates indication since it is on neutral levels.

USDCHF

USDCHF

On the hourly timeframe, we are looking for a possible correction down to Fibo 23.6% level before the pair rise again back to the resistance of 1.012. The valid supports are near Fibo which coincides with the parity levels and then the level of 0.998.

 

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