USD Higher as Fed Meeting Looms; BoE Interest Rates on Hold; US Indices Rose

The dollar rose as the traders wait for Fed policy meeting to enter the market while the euro fell possibly on closing positions. The sterling remained was virtually unchanged as BoE interest rate left on hold. CAD continued to extend its losses vs USD while the NZD/USD held gains after RBNZ meeting. AUD/USD 50-50 for a recovery above 0.7270 or a drop below the 0.7240 barrier. US indices edged higher after three consecutive negative daily candles.

USD

Buck Rises ahead as Fed meeting looms
The dollar gained momentum against the other major currencies on Thursday as the Fed policy meeting looms and about 97% if business and academics economists believe that will raise the benchmark federal-fund rate on Wednesday. Both the continues and the initial weekly jobless claims increased more than expected while the initial reached a five-month high. U.S. budget deficit was more ballooned that the market expected, however, it was less than October’s level ($-65B vs $-136B). Today’s agenda includes the US Retail Sales for November which are expected to grow by 0.3%, a steeper pace than October’s increase of 0.1%.

Euro on quiet sessions
The euro suffered losses against almost all of the G10 currencies on Thursday and early Friday as both days do not enclose significant economic announcements. Following the gains after the ECB policy meeting, euro traders lock their profits ahead of the awaited Fed policy meeting, where is turned all the attention.

The single currency has been on the defensive the last couple of days on the back of the sell-off in European equities, adding pressure to dollar longs again. The EUR/USD it holds above the psychological level of 1.0800, which coincides with the 4-hour 200-SMA and the 50-SMA and as long as it stands above that obstacles I will remain euro-positive. However, with the all-important Fed meeting coming up next week, I will expect some consolidation between 1.0800 – 1.1000 in the next few days. Therefore, a neutral stance is required.

GBP

BoE left Interest Rates Unchanged – Limited GBP Affection
The sterling closed Thursday’s trading session virtually unchanged against its major peers despite the Bank of England policy meeting. The central bank voted 8-1 to hold rates unchanged at 0.5% where they have been since early 2009. The monetary policy also predicted that inflation would stay below 1% until the second half of next year. The trade deficit of the country widened further to GBP 4.14bn from GBP 1.07bn before as the imports recorded a big increase and the exports decreased slightly.

The GBP/USD pair has plunged below the 1.5140 – 1.5260 zone following the BoE policy meeting which appeared to be a non-event. The 200-SMA on the 4-hour chart will be the first obstacle for the bulls while the 1.5080 barrier, which coincides with the 50-SMA, will be the next target for the sellers in a case of a further pressure.

USD/CAD to a fresh 13-year high; AUD/USD under pressure below 0.7300; USD/NZD hold on to gains
The commodity currencies continued to extend their losses following the aggressive rally few days ago with the Canadian dollar falling to a fresh 13-year low against the U.S. dollar. The Australian dollar failed to sustain any moves above the key support level of 0.7300 following the spike few days ago at 0.7385, where the daily 200-SMA has provided a strong resistance to the bulls preventing any moves above it. Going forward, the 0.7185 will be the next level to watch since it coincides with the 4-hour 200-SMA while the 0.7270 - 0.7280 will be the first obstacle for the intraday bulls. On the other hand, the NZD has been holding a side trend against the USD the last few days following the aggressive rally after the Reserve Bank of New Zealand cut rates by 0.25 basis points to 2.5% and signaled the end of near-term easing. Technically, the first obstacle for the NZD bulls will be the 0.6790 while the on the downside the first area to watch would be the 0.6685 barrier, which coincides with the 50-SMA on the 4-hour chart. Slightly below here, the short-term ascending trend line could be a good support for the near term, around 0.6600 – 0.6620.

  Daily Technical Analysis and Forecasts

U.S. Indices Rose after Three Negative days
After three consecutive days of losses, the US indices recorded gains near 0.5%. The Dow Jones rose by 0.47% with just three negative performed stocks, among the two tech-stocks, United Technologies Corp (NYSE: UTX) and Intel Corporation (NASDAQ: INTC). The weekly performance of the blue-chip index currently stands at -1.53%. The S&P 500 had the smallest appreciation of 0.23%, however, is about to close the week with losses slightly below 2%. The high-tech index Nasdaq edged 0.44% higher with the same weekly performance as the S&P500.

Economic Indicators
Today will be a quiet day in the market, as traders await Fed’s policy meeting to open positions. The ECB will announce the targeted LTRO. The UK inflation expectations will attract considerable attention. Going to US, Retail Sales are forecasted to have grown by 0.3% in November from 0.1% before. The preliminary Michigan consumer sentiment index for December is expected to decrease to 91.0 versus 91.3 prior.

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