The USD rallied against the EUR and JPY on Wednesday, but lost ground with the sterling pound. The Greenback was strengthened by positive economic reports from the United States. The household spending and incomes went up at a faster rate for the second time from the month of October. The United States government report also showed that consumers rather than businesses are behind economic growth. Another economic report released yesterday showed that hiring in the private sector continued at a faster pace in October, indicating that the economy of the United States is stronger now that earlier this year.
Moreover, other reports are due to be released later this week on the U.S employment figures. If the report is positive, then traders should expect stronger USD against major currencies through to the New Year and even beyond. In fact, the fed is expected to take a serious review on monetary policy on 14th December, and hiked interest rates are anticipated to boost the dollar. The increased interest rate may trade in the market in the first few months of the new administration of Trump.
GBP/USD off higher ahead of the UK PMI
The GBP/USD pair pause its ongoing recovery at 1.2550 levels, transferring the rate sharply lower to test daily lows, before finding fresh bit above 1.2500. The GBP moves away from high, but manages to stay above the 1.2500 barrier amid minor corrections seen in the USD against major currencies. This was seen after an extensive risk-on rally following a nine percent increase in oil prices, in the wake of the OPEC production cut agreement. Besides, the strong gains seen in equities in Asia also increased the risk on trades, further enhancing the GBP risk.
The fact that the market continues to cheer the upbeat talks from Governor Carney following the release of the financial stability report by BOE, traders are now focusing on the UK manufacturing PMI report expected to be released ahead of ISM manufacturing data and the U.S unemployment claims, which is going to be published in the American meeting. Carney is expected to draw attention to the banking sector Brexit related risks, and the bank stress test results. Temporarily, an oil-driven boarder market reaction is expected to continue influencing the spot. So, if you want to fade this move by selling the highs, GBP/USD could be the best currency pair to do it. However, with this unclear move in USD, it could be very difficult to muster the need to fade a move at this time. In terms of technical levels, the upside barriers of GBP/USD are lined up at 1.2550 with a November high at 1.2614, while support resistance is seen at 1.2484 with a November low of 1.2416.
EUR/USD extends decline
The EUR/USD slid to 1.0594 following the release of the U.S economic data and during the American session after the OPEC deal. The USD gained momentum across the board and widened gains, striking multi-months high against the JPY. The EUR/USD pair fell below 1.0550 on Monday and Tuesday’s lows, quickly gained support above the resistance zone, 1.0550. Today, the EUR bounced to the upside and it is trading at 1.0580/90 and still experiencing some bearish pressure as the USD consolidate gains in the CMC Markets. More than expected, reading the U.S employment report, income and spending data contributed to keep expectation high about the December Fed hike rate.
Despite the Fed points towards increasing the rate, the European Central Bank is more likely to announce an extension of its purchase program next week, hence increasing the differential between the Euro-Zone and the U.S monetary policy. Even if the EUR/USD has dropped more than 100 pips from daily highs, it continues to move higher around 1.0600.
USD/JPY is bullish
The Greenback shoots high against the JPY following the rise in oil prices. The OPEC decided to reduce its production, which triggered an increase in oil prices and improve the inflation outlook of the U.S. The witnessed bias for the USD/JPY is very bullish and currently testing the intraday resistance around 114.815. However, if this intraday resistance breaks, the USD/JPY may continue its rally up to 115.470 to 116.6.300. Fortunately, that hourly stochastic stopped yesterday; therefore, there could be a different move today. Investors must be very cautious if the prices managed to break the current support at 113.104 because it might turn the intraday partiality to bearish and push the USD/JPY down to 112.670 or 112.050.