AUD Rose on Strong GDP

AUD Rose on Strong GDP; BoC Policy Meeting and Yellen's Speech in Focus!

The volatility in the greenback continued to be thin on Tuesday as all the investors eye the Fed Chair Yellen speech today, for confirmation that the odds for December’s rate hike are still high.

The US manufacturing sector contracted in November, falling to 48.6, its worst levels since June 2009, when the economy was still in the midst of a recession. Note that the readings below 50 indicate contraction.

Euro traders await Inflation rate and ECB policy meeting
The euro halted a five-day losses against the U.S. dollar on Tuesday, ahead of some significant data coming from the Eurozone today, as well as ahead of the all-important ECB meeting tomorrow. As the Eurozone recovery faces a slowdown, it’s widely expected that the ECB president, Mario Draghi will announce further loosening of monetary policy on Thursday, a move which can shake the markets. Eurozone’s unemployment rate fell to 10.7%, the lowest since January 2012. The German unemployment also surprised positively, as it fell to a record low and the employment people rose by 13k well above expectations of 5k. Today the euro traders will closely monitor November’s final inflation rate, as the soft numbers worry the investors. The data released on Tuesday didn’t trigger much volatility in the EUR/USD pair, as since it fell below the 1.0900, it moved in a range of 300 pips in the last 4 weeks.

On the daily chart, the technical indicators turned higher, but remain below their mid-lines, suggesting for a short-term recovery, whilst the price is aiming to recover above its 50-SMA on the 4-hour chart. If the recent pullback extends and remains above 1.0600, then it can continue advancing towards the psychological level of 1.0700. Alternatively, any move lower should see the pair target 1.0525, finding support along the way around 1.0560.

Pound remains in a weak tone
The sterling was broadly lower against the other G10 currencies as BoE Governor Mark Carney avoided to discuss economy or monetary policy in the speech had yesterday. The Manufacturing sector plunged to 52.7 in November from the record high of 55.5 the month before according to the Markit Purchasing Managers' Index (PMI). In addition, the major banks of UK passed the annual stress tests which means that are strong enough to withstand a crisis scenario and prolonged deflation.

The GBP maintains a weak tone against the USD, as it moves below some significant levels, including the psychological level of 1.5100, as well as, the 4-hour 50-SMA and the 200-SMA. The pair came under pressure and fell below the key support level of 1.5030 a few days ago, however, the bulls found the strength and recovered from the psychological level of 1.5000, which includes the lower boundary of the downward sloping channel that started back in mid-2015.

Going forward, the 4-hour chart shows that the MACD is moving upwards, near the zero and trigger lines, whilst the RSI is testing its mid-level. In the same chart, the momentum indicators have recovered from near oversold readings. Therefore, with the above in mind, I would expect the pair to test the 1.5030 level, and more likely the 1.5000 barrier in the next couple of hours. However, I will change my stance from bearish to neutral-bullish, since the momentum indicators are indicating a slowdown in momentum.

Australia’s GDP surpassed expectations!
The Australian dollar was the best performed major currency on Tuesday, posting the second day in a row after the Reserve Bank of Australia left the interest rates unchanged, the GDP outperformed figures and RBA Governor Glenn Stevens comments. The GDP has expanded by 0.9% percent in the third quarter, compared to the upward revised growth 0.3% the quarter before justifying the RBA Governor’s statement that after the absence of the mining sector growth has been a little disappointing but it is "quite respectable." He also said that inflation is on the way up, towards the central bank’s target of between 2% to 3%.

The Australian dollar surged for a second consecutive day, catching a 250 pips rally vs the US dollar since it rebounded from the daily 50-SMA and the 4-hour 200-SMA, near 0.7170. The AUD/USD pair rose more than 1% after the RBA left the cash rate on hold at 2%. Technically, the 4-hour chart shows that the price is back above its daily 50-SMA, whilst the technical indicators recovered positive territory, suggesting strong buying interest defending the 0.7000 mark. The key to watch for a trend reversal will be the 0.7400, which coincides with the daily 200-SMA.

NZD higher as dairy product prices rose by 3.6%
The New Zealand dollar rose due to the dairy prices that has picked up for the first time since early in October. The Global Dairy Trade Index recorded gains of 3.6% after the greatest decrease of 7.9% over the last months on the previous auction.

The NZD rose for a second consecutive day against the USD following the strong rebound from the 0.6430 level. The NZD/USD is holding above the lows of the month, but for the time being it is still trapped below the psychological level of 0.6700. If it is able to close above here then the next target becomes 0.6800, towards the highs of October. A reversal should find support around 0.6620, which includes the 4-hour 200-SMA and then down at 0.5570.

USD/CAD ahead of the BoC policy meeting
The Canadian dollar was almost unchanged versus the majors after the GDP report that revealed the Canadian economy contracted by 0.5% in September versus expectations to have remained flat. The Annualized GDP was also disappointing as showed a growth just by 2.3% less than the forecast of 2.4%. Today, the CAD traders are widely expecting the Bank of Canada to keep the monetary policy unchanged, however, the rate statement will accompany the interest rate decision will be closely watched for cues about the economic future.

The USD/CAD pair remains stuck in a tight range slightly above the psychological level of 1.3300 ahead of the BoC policy meeting due later in the day. So far today an attempt to break the key resistance level of 1.3400 has been defeated. On the longer-term picture, the USD confirmed the bullish bias against the CAD, following the break above some significant obstacles, including the daily 50-SMA and the 1.3300 level. With both the MACD histogram and stochastic moving higher, the momentum indicators are supporting the bullish sentiment. However, we should watch for a pullback towards the 1.3330 level, where the 1-hour 200-SMA and the ascending trend line both are ready to provide a significant support to the intraday bulls. Below here, the psychological level of 1.3300 could prove to be a strong obstacle for the short- and medium-term. Therefore, short and medium term holders should watch that closely.

USD/JPY – Technical Outlook
Not much movement in USD/JPY with prices trading within 122.20 – 123.60 in the past month. The daily 50-SMA and the 200-SMA are ready to provide a significant resistance around the 121.70 barrier, the most possible target if we face a pullback, while to the upside we cannot spot any significant obstacles. Therefore, a break through here should make a move towards the 124.20 barrier while a turn lower would head towards the aforementioned target, before testing support around 122.20. However, with daily indicators turning upwards, it looks like the buyers are back in charge here.

U.S. Indices gained momentum
After two positive consecutive months, the US indices entered the last month of the year on a good mode. Following the weak manufacturing figures, all of the three indices rose nearly 1%. Dow Jones Industrial Average rose up 168.43 points towards 17,900 with United Health Group Inc. (NYSE: UNH) the best perform stock with gains more than 3%. The S&P500 pushed up 1.07% mainly by the energy related stocks. The high-tech index Nasdaq appreciated by +0.93% to 5,156.

99% of Facebook shares - $45 billion - to charities!
Facebook Inc. (NASDAQ: FB) shares surged 2.76% during yesterday’s session and snapped a three positive months in a row. The month of October the share price recorded a rise of 13.43% while it added 2.23% to its value the previous month. The FB shares are now trading above the psychological zone of $99.00 – $100.00, and as long as the bulls maintain the price above that zone I would expect a further pressure towards the $120.00 level.

Yesterday, CEO Mark Zuckerberg made an announcement saying that he will give away 99% of his shares, valued at around $45 billion, to the charity that he and his wife Priscilla Chan founded. So, with such move, I believe that it will add value to Facebook’s integrity.

Economic Indicators
During the European Session, Germany is going to provide a Retail Sales report as well as the Euro Zone will release the preliminary Consumer Price Index and Producer Price Index figures. Most likely the inflation indicators will show no increase. On a yearly basis, the inflation rate is expected to show a small increase by 0.2% from 0.1% the previous month while the producer prices are expected to show a larger decrease than before. Going forward, the Bank of Canada will announce its interest rate decision alongside with a rate statement.

In US, the ADP Non-farm Employment Change will be closely eyed for cues about Friday’s Non-Farm Payroll report. The Fed Chair Janet Yellen will have a press conference in Washington regarding the Economic Outlook.