Currencies and the ever-shifting odds of a Fed rate hike
Session close: Settled at 1.17415, down 49 ticks
Fundamentals: The euro fell out of bed this morning after U.S PPI came in strong and the YoY November read was 3.1%, the fastest growth in nearly six years. Earlier in the morning, the euro was put on its back foot after German and Eurozone Sentiment data missed expectations. Traders now gear up for tomorrow’s Fed meeting in which they are expected to hike interest rates at 1:00 pm CT. First, CPI data is due at 7:30 am CT and if it comes in as solid as PPI we will see further pressure on the euro into the afternoon. However, we continue to believe that the dollar is a ‘buy the rumor, sell the fact’ into the Fed meeting. Lets also not forget that Thursday brings the ECB meeting.
Technicals: Our technical levels continue to work tremendously in the euro with major three-star support stopping price action in its tracks with a session low of 1.17215. For tomorrow we are looking for a move out above resistance at 1.1820 or below major support to encourage follow through into Thursday. Though we remain long-term bullish, a close below 1.1728-1.1730 will signal lower price action in the near term.
Resistance – 1.1820**, 1.18875-1.1903**, 1.1942**, 1.19975-1.2019***, 1.2154-1.2180****
Support – 1.1728-1.1730***, 1.1672**, 1.15785*, 1.1481-1.15***
Session close: Settled at .8806, down 6 ticks
Fundamentals: Last night PPI data out of Japan came in strong, however, the currency showed little reaction as much of the focus comes down to this week’s Fed meeting. Strong U.S PPI put pressure on the Yen early but concern over comments from Senator Paul signing the tax bill spiked price action briefly. We continue to feel the downside risk is limited and the Yen is only one small catalyst away from reinvigorating a rally to multi-month highs.
Technicals: Price action appears as if it is trying to bottom against support at .8790-.8801 and the 14-day RSI is at the lowest level in more than a month. The 9-day moving average is attempting to round out and if we can see a move back above there at .8854 that will neutralize the Yen in the near-term and give the bulls a shot at taking it higher immediately.
Resistance - .8845-.8854**, .8886**, .8934-.8941**, .9018-.9045***
Support - .8790-.8801**, .8730***