Market News & Insights
29 September 2016

Dollar in Focus Again

Risk has found itself well supported once again, through yesterday we saw European markets trading higher on the day, expectations Deutsche Bank will only have to pay between $4bln to $8bln USD in fines vs the headlined $14bln, helped lift bank sentiment and commodity stocks also helped support appetite. The US was a little more mixed as indices swung between gains and losses but eventually closed the day higher, helped by surging oil prices and energy stocks following an OPEC agreement to cut output, while the USD was also an outperformer through the European session. The USD index, with benchmarks the greenback  against a basket of its most traded counterparts, rallied some .5% although some of those gains were given back later in the trading day. Overnight Asian stocks followed the US close, opening higher, while the JPY has been facing selling pressure and commodity/risk linked currencies are favoured.

It was a mixed bag yesterday for the greenback, over the last few weeks I’ve often mentioned the requirement for the Fed to convince  markets they will raise rates, and for that to happen we need to see unified rhetoric from FOMC members and of course, the data to back it up. Thus far this week we’ve seen some decent data points, consumer confidence, services PMI and durable goods headline figures were all better than expected but we are not quite seeing unified support from Fed members. Yellen’s testimony in front of congress offered little in terms of policy outlook, but comments from Voting member Loreta Mester suggested she wanted to hike rates in the September meeting, and we can assume she will remain a hawk as she states that all meeting going forward are “live”. However, Esther George, also a voting member said she wanted to Fed to “slowly but surely” raise rates but was conscious about raising them too quickly. Where does this leave us, from my perspective there is still considerable upside potential for USD pairs, but we’ll need to see momentum build of the market is to commit to a December rate hike. There is a whole host of USD data today and several Fed speakers as well, so we’ll likely see another active afternoon for the USD.

EURUSD remains directionless in the middle of its 1.1130 to 1.1330/50 range, we need to see a move towards extremes and break to see some shift or directional bias.

GBPUSD has rallied back above 1.3000, but major support below towards 1.2915 should hold for now, while sellers will likely emerge towards 1.3120.

EURGBP has support below .8600 for now, with near term resistance at .8640. A break above favors progression back towards .8700