US dollar mixed against major currencies. FOMC minutes hawkish and BoE inflation report dovish. NY Fed manufacturing highest since June.

CURRENCY TRADING SUMMARY

  • U.S. Dollar Trading (USD) was mixed against the majors in the overnight forex trading session as the FOMC minutes reiterated inflation concerns. Reducing inflation over time to counter higher prices was the greatest concern to the Federal Reserve. “All members agreed that the risks to achieving the anticipated reduction in inflation remained of greatest concern.”  The view from the minutes showed that the majority of Fed officials are inclined to raise interest rates if inflation does not recede. The NY Fed manufacturing index for November rose to 26.66 from a 15.1 estimated level. In other markets, the Dow Jones index rose by 33pts and the NASDAQ rose 12pts as hawkish comments from the Fed Reserve boosted stock indices. Crude oil rose by US47c to US$58.75 a barrel as cooler weather has been forecasted for major cities in the US. Looking ahead, US CPI, net foreign security purchases, industrial production, and the Philadelphia Fed survey are due out tonight. 

  • The Euro (EUR) traded within a low of 1.2776 and a high of 1.2832, before closing at 1.2823 in the New York session. On the data front, Eurozone industrial production came in at -1% compared to a -0.3% forecast. Looking ahead, HICP headline/core are due out today.

  • The Japanese Yen (JPY) traded within a low of 117.58 and a high of 118.17 versus the dollar, before closing at 118.05 in the New York session. Looking ahead the BoJ announce their interest rate decision today.

  • The Sterling (GBP) traded within a low of 1.8842 and a high of 1.8969, before closing at 1.8891 in the New York session. On the data front, the BoE inflation report for Q4 noted that the BoE expects the recent steady growth in 2006 to be maintained and that inflation is expected to rise in the near term, and then fall back sharply. The BoE believes the risks to growth and inflation are broadly balanced, with greater-than-usual uncertainty over the outlook for inflation. Looking ahead, retail sales are due out today. Looking ahead, UK retail sales are due out today.

  • The Australian Dollar (AUD) traded within a low of 0.7632 and a high of 0.7662, before closing at 0.7648 in the New York session.  

  • Gold (XAU) weakened by US$1.50 to US$623.80 an ounce, little changed with relatively no movement in the greenback and oil.

TECHNICAL COMMENTARY

FX strategy

  • Euro 1.2820

Initial support at 1.2746 (Nov 8 low) followed by 1.2721 (Nov 7 low). Initial resistance is now located at 1.2901 (Nov 10 high) followed by 1.2941 (Aug 21 reaction high).

  • Yen 117.95

Initial support is located at 117.12 (Nov 13 low) followed by 116.97 (Nov 1 low). Initial resistance is now at 118.61 (Nov 9 corrective high) followed by 119.67 (Oct 24 high).

  • Pound  1.8890

Initial support at 1.8838 (Nov 15 low) followed by 1.877 (61.8% retracement of the 1.8516-1.9182 rally). Initial resistance is now at 1.8972 (Nov 15 high) followed by 1.9052 (Nov 14 high).

  • Australian Dollar  0.7645

Initial support at 0.7614 (Nov 13 low) followed by 0.7592 (50% retracement of the 0.7414 to 0.7768 advance). Initial resistance is now at 0.7679 (Nov 13 high) followed by 0.771 (Nov 11 high).

  • Gold  623

Initial support at 613.4 (Nov 8 low) followed by 598.5 (Oct 31 low). Initial resistance is now at 636.9 (Nov 10 high) followed by 640.6 (Sep 6 high).