US Dollar Talking Points:
– The economic calendar over the next two days brings a couple of rate decisions: At 2PM ET tomorrow, the last FOMC meeting that’s not expected to be a ‘live meeting’ at the Fed. December is a quarterly rate decision that will bring an updated dot plot to go along with new projections and an accompanying press conference. And then starting next year – any FOMC rate decision could be a ‘live meeting’ and will bring an press conference with Fed Chair, Jerome Powell.
– The Dollar has dropped down to a confluent area on the chart following yesterday’s mid-term elections in the US. Democrats gained a majority in the House while the GOP increased their majority in the Senate. Focus now shifts towards the 2020 Presidential Election, and markets appear optimistic around yesterday’s outcome at the early stage of the matter as equity futures have moved-higher overnight and appear poised to gain at the open.
– DailyFX Forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.
Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.
US Dollar Drops to Trend-Line Support Following US Mid-Terms
The results of 2018 mid-terms are still being tallied in a couple of races but for most intents and purposes, the results are in. Democrats took the house while the GOP increased their Senate majority, and focus now shifts towards the 2020 Presidential Election in what will almost surely be billed as another ‘most important election of our lifetimes’. Markets have put in some interesting moves in response, as the risk trade caught another shot-in-the-arm and global equity markets are in varying forms of bounce; and the US Dollar caught a stern run of selling to drop down to two-and-a-half week lows as risk appetite showed more prominently through the FX space.
At this point, the Dollar appears to be trying to hold support on a trend-line projection that can be found by connecting the September and October swing lows in the currency. This current support is also confluent with the 61.8% Fibonacci retracement of the bullish breakout from October.
US Dollar Two-Hour Price Chart: Trend-Line, Fibonacci Support Hold Lows Ahead of FOMC
Chart prepared by James Stanley
As I’ve been discussing in webinars over the past month, themes of USD-strength and weakness have appeared to be unevenly distributed amongst major currency pairs. While EUR/USD retains some bearish structure on the four-hour chart, pairs like AUD/USD and NZD/USD are trading at fresh monthly highs; and this comes after each of those pairs built-in and held key support during the US Dollar’s prior topside run. This can help to denominate strategy in the Greenback moving forward, and I look into a series of major pairs below.
EUR/USD Tests Resistance – Italian Budget Due Next Week
One of the larger items of risk aversion over the past couple of months is the continuing situation between Italy and Brussels. The European Commission rejected Italy’s budget proposal in October. Italy is now supposed to re-submit a revised budget by November 13th, and a bit of suspense remains here as markets still don’t know whether the newly-elected Italian government will cave to the EC’s requests.
This theme has been a source of Euro pain for a chunk of this year already, as the currency went into a swan-dive in April and May as the government was being elected, and then again in late-September into early-October as budget concerns were coming to light.
EUR/USD Four-Hour Price Chart: A Strong November as Prices Re-Test 1.1500 Resistance
Chart prepared by James Stanley
Cable Rips Back Above 1.3000
Brexit waves continue to push price action in the British Pound, and the bid has been active thus far in November trade as GBP/USD has jumped by more than 450 pips in the early portion of this month. Along the way a number of key levels have been tested and then taken out, and prices are now finding some resistance at 1.3164, which is the 50% marker of the 2016-2018 topside move in the pair. This also projects around the descending trend-line taken from September and October swing-highs.
Given the volatility in GBP/USD over the past few months, it would appear that Brexit may have a bit more pull than just standard USD trends, as this was somewhat of a hyperbolic USD move. As the Dollar was really strong through October, GBP/USD was extremely weak, as risk around Brexit added-on to those Dollar gains and this pushed GBP/USD down towards yearly lows. But as USD-weakness has showed up over the past week, optimism around Brexit has added on to that theme and the pair has posed a stern topside move back above the key 1.3000 area.
This could add an item of risk to USD-strategies traded through GBP/USD, as we likely haven’t seen the end of volatility around the British Pound as Brexit negotiations will probably continue to push prices in either direction.
GBP/USD Daily Price Chart: An Even Stronger November as GBP/USD Jumps Above 1.3000
Chart prepared by James Stanley
AUD/USD Breaks Trend-Line Resistance, Runs to Fresh Monthly Highs
During the US Dollar’s topside run last month, I began to look at the longer-term support build in AUD/USD. While the pair had spent most of 2018 in some form of down-trend, adhering to a bearish trend-line for much of the period, October brought respect of lows above the .7000 level and, even as USD strength was running vividly elsewhere, it seemed to dry up against the Australian Dollar.
Coming into November, I began to look at topside plays in the pair, and as USD-weakness has come back, AUD/USD has put in a fairly bullish past week of price action. This has brought along a break of the 2018 bearish trend-line, another re-load of higher-low support at prior resistance, followed by fresh monthly highs in the pair. This can remain attractive for strategies designed around further USD-weakness; and in AUD/USD, that could open the door for higher-low support around the .7250 area of prior resistance.
AUD/USD Eight-Hour Price Chart: Bulls Take Control, Higher-Low Support Potential Around Prior Resistance
Chart prepared by James Stanley
NZD/USD Jumps to Three-Month-Highs
Similar to AUD/USD above, NZD/USD had a relatively strong October considering the strength that was seen in the US Dollar. While the Greenback was jumping up to fresh yearly-highs, NZD/USD retained its own bullish structure and respect of prior support. In late-October, as USD was rushing up to fresh highs, NZD/USD held higher-low support around the .6500 handle.
And as that USD theme softened, NZD/USD lifted off of support, breaking above a symmetrical wedge pattern in the process. As USD-weakness has grown a bit more prominent, that topside move in NZD/USD has continued to drive-higher, now bringing on fresh three-month-highs in the pair.
At this stage, the pair might be a little too hot to try to buy, particularly given that prices remain perched near three-month-highs. But – there is an area of prior resistance that retains interest for higher-low support, and that takes place around the .6700 handle that was broken-through without so much as a pause yesterday.
Also of note – there is an RBNZ rate decision lurking on the calendar for later today, ahead of the November rate decision from the Federal Reserve, set to take place tomorrow.
NZD/USD Eight-Hour Price Chart
Chart prepared by James Stanley
To read more:
Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q4 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.
Forex Trading Resources
DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.
If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.
— Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
Traders Net-Short Are 63.3% Higher from Last Week
TRADERS REMAIN NET-SHORT
US 500: Retail trader data shows 24.6% of traders are net-long with the ratio of traders short to long at 3.07 to 1. In fact, traders have remained net-short since Jan 07 when US 500 traded near 2473.53; price has moved 11.9% higher since then. The number of traders net-long is 1.7% higher than yesterday and 1.6% lower from last week, while the number of traders net-short is 5.2% higher than yesterday and 63.3% higher from last week.
For more in-depth analysis, check out the Q1 2019 Forecast for Equities
S&P 500 SUGGESTS STRONG BULLISH BIAS
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests US 500 prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger US 500-bullish contrarian trading bias.
— Written by Nancy Pakbaz, CFA, DailyFX Research
Follow Nancy on Twitter @NancyPakbazFX
On to the Next Big Levels of Resistance
S&P 500/Dow Jones/Nasdaq 100 Technical Highlights:
- S&P 500 nearing 2800-area, several swing-highs from last year
- Dow Jones 26k-ish stands between it and record highs
- Nasdaq 100 trading around resistance already
Check out the forecasts for Global Stock Indices and other markets on the Trading Guides page.
S&P 500 nearing 2800-area, several swing-highs from last year
The S&P 500 is continuing to show impressive strength since its v-bottom began the day after Christmas, with it having a few points along the way where it could have been stopped in its tracks. But it wasn’t, and this has levels prior to the December swoon in view. The area surrounding 2800 is a big one.
From 2800 up to 2817 there were three peaks created from failed rallies, a logical area, with the rally having come this far, to look for stocks to weaken from. Watching price action will be key, as always, but especially around the levels just ahead.
While resistance looks likely to get tested soon, the upward channel structure over the past month will keep stocks pointed higher for as long as it holds. If the S&P is rejected off resistance, to further bolster the notion of a sizable retracement we’ll need to see the underside parallel undermined.
For now, the top-side must be respected, but the time for material weakness may be nearing…
Stocks are rallying, but will it last in the long-term? Find out where our analysts see stocks headed in the Global Equities Forecast.
S&P 500 Daily Chart (2800/817 big spot)
Dow Jones 26k-ish stands between it and record highs
The Dow is nearing the 26k-area, a spot which is basically the equivalent of what 2800 is to the S&P 500. The zone runs up to near 26300. The focus is primarily on the S&P right now as it is the broader index, but depending on how price action plays out, the Dow may be the better index to short at some point if it shows relative weakness to the broader market.
Dow Daily Chart (26k-ish stands in the way)
Nasdaq 100 trading around resistance already
The Nasdaq 100 continues to lag behind, which is something to continue monitor given it was the bull-market leader with its leading group of stocks – FAANG – dominating price action and sentiment. The NDX is trading around the 200-day and near late-year swing highs equivalent to the ones discussed with regard to the S&P 500 and Dow. So far, relative weakness is making the 100 the preferred fade if the S&P finds material selling off resistance surrounding 2800/17.
Nasdaq 100 Daily Chart (trading around resistance)
To learn more about U.S. indices, check out “The Difference between Dow, Nasdaq, and S&P 500: Major Facts & Opportunities.” You can join me every Wednesday at 10 GMT for live analysis on equity indices and commodities, and for the remaining roster of live events, check out the webinar calendar.
Tools for Forex & CFD Traders
Whether you are a beginning or experienced trader, DailyFX has several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.
—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
Aussie Dollar Falls on RBA Minutes, US-China Trade Talks Eyed
TALKING POINTS – AUSSIE DOLLAR, RBA MINUTES, ZEW, TRADE WARS, CHINA
- Aussie Dollar, commodity bloc FX down on downbeat RBA meeting minutes
- Germany’s ZEW survey may compound worries about slowing global growth
- Trade wars in focus on US-China negotiations, fears of US auto tariff hike
The sentiment-linked Australian, Canadian and New Zealand Dollars weakened in otherwise quiet Asia Pacific trade. The move appeared to be inspired by an ominous tone in minutes from February’s RBA policy meeting. Meanwhile, the US Dollar corrected gently higher.
RBA officials cited “significant uncertainties”, noting that trade tensions and cooling domestic demand have increased negative knock-on risks from China. They added that consumption may fall if domestic house prices fall much further. They suffered the worst drop since 1983 in the three months through January.
TRADE WAR DEVELOPMENTS, GERMAN ZEW DATA MENACE MARKETS
Looking ahead, Germany’s ZEW survey of analyst sentiment may compound the downbeat mood, especially if it echoes the disappointing trend in regional data outcomes since September. A small improvement in the forward-looking Expectations index is nevertheless expected to keep it within a hair of six-year lows.
The tone of US-China trade negotiations may also be formative as a delegation from Beijing arrives in the US for continued talks. Both sides painted a rosy picture earlier in the week, but the Trump administration may be preparing a spoiler as the President ponders raising auto import tariffs.
What are we trading? See the DailyFX team’s top trade ideas for 2019 and find out!
ASIA PACIFIC TRADING SESSION
EUROPEAN TRADING SESSION
** All times listed in GMT. See the full economic calendar here.
FX TRADING RESOURCES
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
To contact Ilya, use the comments section below or @IlyaSpivak on Twitter
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