The main FX story that we have discussed on numerous occasions over the last few weeks in response to the ‘Trump’ bounce, has been that of the surging US Dollar. This morning though, US equities are grabbing the headlines and are worth commenting on. Last night the Dow Jones Industrial Average hit record highs and at one stage got within 13 points of the symbolically significant 20,000 level. Despite this weeks’ attacks in Europe, markets generally have reacted in much calmer fashion than previous such events with European bourses generally up on the week too. Overall this suggests we could be entering into a relatively calm Christmas and year end period. As we noted yesterday, the VIX (the volatility index or a proxy fear index) didn’t respond and in fact is at lows last seen in July 2014
In currency markets activity was once again mixed and synonymous of lighter pre holiday trade. The USD gave back some ground overnight, the USD index initially pressed to fresh 14 year highs in yesterday’s trade spurred on by Yellens bullishness on the labour market and supportive rhetoric of 3 rate hikes next year, but the greenback failed to hold on to gains and found some sellers emerge in the overnight session. The AUD was also facing some pressures, falling yields suggesting markets are re-positioning for a dovish RBA, despite the previous minutes released this week showing improvements their global outlook.
In major currency crosses the ranges remain in play, EURGBP managed to once again close just below the 200 day ema, although a pop above .8400 this morning has failed to find sellers just yet. Resistance towards .8450 area should see the first test, while .8550 area likely finds firmer resistance while support remains towards .8330/70 zone. EURUSD continues to favour its range, 1.0355 to 1.0430, however similar to EURGBP, EURUSD will likely have larger sellers lined up above towards 1.0485/1.0500 area. GBP has been taking a bit of a scolding this week as Brexit headlines knocked the pound, GBPUSD no supported just above 1.2300, with resistance to the upside likely coming in around 1.0430 area