London Forex Report: FED Delivers Dollar Flies

London Forex Report: FED Delivers Dollar Flies

London Forex Report: The FOMC voted unanimously to raise rates by 25bps to 0.75% and set the stage for three quarter-point hikes next year. Recall, Fed officials pushed its projection back from three hikes to two hikes at its September projection and the latest steeper rate hike path was due to “realized and expected labor market conditions and inflation”, according to the Fed. No change to the Fed projection for three quarter point hikes in 2018. Despite a “more bullish” Fed rate outlook, the Fed may not be delivering as much as it has projected, largely dependent on actual policy implementation and implications from President-elect Trump “new” policies. Contrary to the string of upbeat indicators in recent weeks, US retail sales and industrial production turned out weaker than expected, raising concerns over softening domestic demand even with the nearing of year end festive spending. USD rallied to beat all G10s while the USD Index surged following a more hawkish than expected FOMC statement to close 0.68% to 101.76

FX Majors: EUR had been trading up against resistance during late London session but has since moved sharply lower following the Federal Reserve announcement. The euro extended losses this morning to the lowest level since March 2015, bottomed out at 1.0468 against the USD. GBP UK’s jobless rate was unchanged at 4.80% in October but underlying details signalled that the job market was losing steam as businesses slashed 6000 jobs, marking the first employment decline since June 2015.On the other hand, the number of people filing for unemployment benefits dropped to 2.4k in November (October: 13.3k), indicating that downside risks in the labour market remained contained. JPY Japan’s industrial production was stagnant from September to October, slowing down from the 0.60% MOM growth from August to September. Mining slumped 9.70% MOM and posted the biggest drag on IPI. Nikkei manufacturing PMI rose from 51.3 in November to 51.9 in December, the highest level since January. Meanwhile in the euro zone, IPI dropped 0.10% MOM in October followed a 0.90% MOM decline in September, reflecting modest recovery in the 19 bloc economy this quarter.

EURUSD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Technical: The break back below 1.05 sees bears target 1.0424 symmetry swing objective. Near term resistance is sited at 1.0650, a close over 1.0880 is required to curb bearish spirits

Retail Sentiment: Bullish
Trading Take-away: Short

GBPUSD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Technical: Near term support sited at 1.26 has been eroded, a failure below 1.25 reopens symmetry swing objective at 1.24. Only a close over 1.2730 resets attention on upside objectives.
Retail Sentiment: Bullish
Trading Take-away: Short

USDJPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish

Technical: Near term support is sited at the 116 as this area supports bulls target 118 as the next upside objective.Only a close below 112.50 would suggest a broader correction
Retail Sentiment: Bearish
Trading Take-away: Long

EURJPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish

Technical: As 120 supports scope for a test of offers above 123.50 as the next upside objective ahead of the pivotal symmetry swing resistance sited at 124.42. Only below 120 concerns bullish thesis
Retail Sentiment: Bearish
Trading Take-away: Long

Commodities FX: GOLD the FOMC announcement led to another leg lower in GOLD prices as USD soared. OIL prices were down 4.02 percent at $50.85 a barrel as US inventory data suggested a supply glut. AUD Australian unemployment rate climbed 0.1ppt to 5.70% in November. Employers added 39.1k to their payrolls last month but was offset by the 0.2 ppt increase in labor force participation rate to 64.60%, the latter pushing headline unemployment rate up. The increase in the number of jobs added to the workforce in November was larger than the revised 15.2k in October. CAD tumbled from an eight-week high against the USD, stressed by lower oil prices and broad gains for the USD after the Federal Reserve raised US interest rates for the first time in a year. The USDCAD went north as the US central bank signalled a faster pace of increase for interest rates in 2017 while the Trump administration took over with promises to boost growth through tax cuts, spending and deregulation.

AUDUSD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Technical: .7092 AB=CD remains the downside objective. Near term resistance sited at .7440 has been eroded the correction should now challenge pivotal 7530/50 as this levels contains the upside reaction there is potential for resumption of downside pressure
Retail Sentiment: Bullish
Trading Take-away: Short

USDCAD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish

Technical: Price rotating lower to test pivotal symmetry support at 1.3098 ahead of longer term channel support sited at 1.3050. Over 1.34 stabilises the pair and suggest a return to focus on upside objectives
Retail Sentiment: Bearish
Trading Take-away: Long

XAUUSD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Technical: 1149 achieved as 1155 caps upside reactions bear set sights on 1113 symmetry swing objective.. A close over 1200 suggests broader correction to the recent decline
Retail Sentiment: Bullish
Trading Take-away: Short

USOIL
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish

Technical: Near term support sited at 51.69 removed correction now targets symmetry swing support at 50.00, a close below 47.00 would concern the bulls.
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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