Deal on Iran nuclear programme spurs dollar buying, keeps Yen pressured

Gold, Silver had interesting bullish reversal sessions. Aud, Nzd holding above their lows.

The deal to ease Iranian sanctions in return for a compromise in its nuclear development programme has been the main event of the day, triggering an enthusiasm to buy the US dollar, reversing some of the EU strength of recent sessions, in the process. The Yen remains under general pressure ahead of today’s BOJ minutes, and the Aud has managed to recover from session lows ahead of some more RBA talk which could again attempt to pressure the downside. The UK inflation report and US housing data and Consumer Confidence will be the other highlights today ahead of the US Thanksgiving holiday.

EUR/USD: 1.3513

The news of an Iranian nuclear deal, which will ease global sanctions in return for Iran cutting out some of the more sensitive aspects of its nuclear programme, has eased political tension and boosted optimism on economic growth, helping to underpin the dollar today.

The Euro was not helped after comments from ECB board member Ardo Hansson said he saw more room for the Bank to cut interest rates, repeating previous board members views, and the market now has an eye firmly on the chances of negative deposit rates. Thursday sees the German inflation data and the market is already putting that into focus as a soft number will increase the chance of an ECB easing.

US data was once again soft and stopped the dollar from making further gains. US Pending home sales fell by a seasonally adjusted 0.6% in October, disappointing market expectations for a 1.3% gain, while the US November Dallas Fed manufacturing survey came in at only (1.9 v 5.0 exp).

Today sees a fair bit more on the housing front from the US, as well as the Consumer Confidence figure, in what will be a shortened week, ahead of Thanksgiving.

Technically, the daily Kijun and the weekly Tenkan which both lie at 1.3560 managed to rebuff the Euro today and it is has fallen back to the pivot level of recent weeks at just below 1.3500. The outlook remains for pretty choppy trade and I would not be getting too excited in either direction, with the 4 hour charts are pointing for a test of slightly lower levels, while the dailies currently remain supportive of buying dips.

Flexibility is the key, and the points to watch, on the downside, are at 1.3490 (session low), below which would head towards 1.3460(61.8% of 1.3398/1.3557) and then to the minor rising trend support at 1.3420. Under that bids would arrive at the 21 Nov low at 1.3396 and then there are a series of higher lows, starting at 1,3408 which previously supported the Euro in its recent trend higher. I don’t think we are going down here yet and would be a bit surprised to see it much below 1.3420 today – if indeed we get that far.

On the topside, there is now descending trend resistance at 1.3540, ahead of the 1.3560 level. Beyond there, last week’s high at 1.3578 will be a hurdle ahead of 1.3600 and 1.3627 (61.8% of 1.3832/1.3294).A break of that will see further progress towards 1.3710 (76.4%) but is well out of touch for now.

Use 1.3460/1.3540 as a guide today, and most likely  it will be another choppy but rather directionless session.

Economic data highlights will include:

US Housing Starts, Building Permits, Case Schiller House Price Index, Consumer Confidence

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EUR/USD: 4 hour

USD/JPY: 101.70

Once the stops were triggered at 101.50, the dollar raced quickly to 101.80, a 6 month high, since when, it has squeezed up to 101.91, with the dollar underpinned by the Iranian deal and at the same time curbing the safe haven appeal for the Yen.

EurJpy reached as high as 137.98 but has since headed a little lower on the back of the weakness in the Euro, dipping to 137.15, before stabilising roughly in the middle at 137.45. The cross, although looking headed to 138.50, and then later to 140+ in the more medium term, would appear to have a little more corrective action in front of it in the shorter term and another look at 137.00 or 136.50 would not surprise.

BoJ Governor Kuroda again reiterated he will continue with the Abenomics stimulus programme,  saying that he  is prepared to take further steps if necessary in order to meet the 2% inflation target, keeping the pressure on the Yen.

Today sees the BOJ minutes, which will presumably reiterate Kuroda’s comments and will most likely be supportive of the dollar. For today though, I am still a bit wary of the upside, given the overbought nature of the 4 hour charts and given that the market is overwhelmingly short of the Yen, a quick reversal to flush some of them out would not hurt at all.

If we do see a dip, support would be seen 101.50 and then at 101.30 (both minor). Under there is not an awful lot until 101.00 (minor), 100.65 (23.6% of 96.56/101.91) and then 100.40 (minor) and 99.90 (38.2%).

On the topside, above the day’s 101.91 high, there are reputedly good option related offers protecting 102.00. A break would see a run towards the May high at 102.53 and ultimately to 103.73. I would be surprised to see a run to much above 102 today, although that is the obvious medium term direction, and would rather be patient and wait for a bit of a reversal before looking to buy dollars.

Economic data highlights will include:

BOJ Minutes

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USD/JPY: 4 hour

GBP/USD: 1.6140

Cable definitely does not like it up at 1.6240/60 and has once again strongly rejected it in falling sharply to a low of 1.6132 as the dollar discovered  a new-found bid tone on the back of the Iranian nuclear deal.

So we are back within the range and the 4 hour charts look as though there could be some more pain ahead for Cable, although there will be minor support at the current level (1.6148: 23.6% of 1.5853/1.6240).A break would see a run below 1.6130 towards 1.6115 and then to 1.6090 (38.2%).

On the topside, Cable needs to regain 1.6200 and then 1.6240 but this looks a bit unlikely right now. This remains very strong resistance and comes ahead of the equally strong 1.6260 and I think it is too early to try for a real test of the higher levels.

For today, look for 1.6110/1.6190 to cover it, in what could be a rather rangebound session, at least until the release of the UK Inflation Report which could provide some volatility ahead of the US data release. The MPC will testify before the Treasury Select Committee with expectations being for continued low rate guidance for the time being

Economic data highlights will include:

Inflation Hearing Report.

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GBP/USD: 4 hour

USD/CHF: 0.9122

The dollar has at last found the bid tone that we have been looking for, bouncing off its lows at 0.9061 and recovering so far to as high as 0.9130.

The coming session looks as if it could be a bit choppy as the charts are rather mixed, but the short term charts look as though we could see mild further gains.

Having held the channel base, stops under 0.9060 have so far been avoided, but I would not want to see it back down there as a break could swiftly lead to 0.9028 (61.8%  of 0.8890/0.9249) and below 0.9000, possibly to 0.8975 (76.4%) although this is not likely to be seen for a while.

Resistance will be seen at the top of the channel, now at 0.9170 and that could well cap it today. If wrong, a break would take us onto 0.9200 and 0.9250 but I don’t see it yet.

The preference remains to play it from the long side though and today I would be looking for a range of 0.9085/0.9075

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USD/CHF: 4 hour

AUD/USD: 0.9160

The jawboning of the RBA to talk the Aud lower, without having to take any concrete action to follow it up, has been pretty successful so far and today we have the Deputy Governor Lowe  speaking at 9.15 AET on productivity and infrastructure and he may well take the opportunity to add his weight to the “lower Aud” argument. The recent threat of intervention has ensured the Aud has remained under pressure today, touching a low of 0.9120, although it has since recovered a bit of equilibrium and is currently not too much changed from yesterday’s opening level.

Technically,  the Aud does look as though it could see a short term squeeze to slightly higher levels within the overall greater down trend, where the Aud looks as though it will eventually test 0.9000, and eventually 0.8750 should not be ruled out.

For today, look for minor resistance at 0.9185 and 0.9200. That may well cap it, but if wrong look for a stronger rise towards 0.9240.

On the downside, 0.9140 could support it and I would be a little doubtful today of heading under the 0.9120 session low, but If wrong, look for 0.9100 (76.4% of 0.8892/0.9757). Under that there is not too much to stop it heading quickly towards 0.9000 although there is some minor support at 0.9040, but not today.

Look for 0.9120/0.9200 to cover it today, to allow the short term charts to unwind.

Economic data highlights will include:

RBA Deputy Governor Lowe Speech

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AUD/USD: 4 hour

NZD/USD: 0.8200

The Kiwi has been choppy day, but at the end of the session is pretty much unchanged as it hangs close to the head-shoulder neckline, making up its mind whether or not to continue the move towards the 0.7850 objective. Much will depend on the Aud, and for the coming session I suspect we should not be looking for too much on the downside, given the oversold nature of the short term charts.

For the Kiwi, look for another day of chopping around 0.8200, with a chance of a squeeze to slightly higher levels, possibly to revisit the session high at 0.8228 (0.8225: 38.2% of 0.8393/0.8124) and then 0.8260 (50%), but not today.

The downside looks supported at 0.8175 (200 DMA), the session low, and I doubt we are going under there today. If wrong the 100 DMA at 8130 should provide backup support.

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NZD/USD: 4 Hour