GBPUSD making lower highs this month

Prices as of previous day instrument closing.

• The Swiss National Bank kept interest on sight deposits at -0.75%  and will remain active in the foreign exchange market as necessary.  The SNB is expecting the inflation rate at 2.1% in the third quarter 2020, thus, as Jordan stated, the SNB won`t raise rate for relatively long time. The BoE left rates unchanged and the MPC expect that inflation will decline to its 2% target in the medium term. November inflation, at 3.1%, was above the target and modest interest rate increases are expected the next year to protect real salaries and savings as UK living standards deteriorated after the Brexit. The ECB also kept rates unchanged and became more confident on its growth expectations. The inflation rate is expected at 1.4% on 2018 thus the dovish monetary policy approach adopted by Draghi will not have material changes on rate policy for a significant amount of time, albeit from January next year and September that monthly purchases of bonds will be halved to €30bn  a month.

• US indices slid on Thursday as the DJIA lost 76.77 points or 0.31% to 24,508.86 and the S&P500 lost 0.41% or 10.84 points to 2,652.01. Nasdaq Composite slid 0.28% or 19.27 points to 6,856.52. European indices closed in negative territory as well, as the Euro Stoxx 50 slid 25.53 points or 0.71% to 3,556.22 and the DAX lost 57.56 points or 0.44% to 13,068 points.

• In the FX market EURUSD slid 0.40% to 1.1778 and GBPUSD closed at 1.3431, up 0.08%. USDJPY slid 0.13% to 112.39 while USDCHF rose 0.38% to 0.9891.

• Gold dropped 0.20% to 1,252.96 $/oz and Silver lost ground as well at 15.80 $/oz, down 1.11%.

Chart of the day

GBPUSD  (daily chart)

The rate is still in a medium term bullish channel but it is off its 2017 top 1.3657. Weakness on GBPUSD was seen since the beginning of this month as the rate started to make lower highs, but technically the rate is on the middle of its channel, thus are more likely short term set ups than strategic positions, that will materialize when the rate will reach either the lower or the higher side of the channel.

Economic Calendar

 Quadruple witching takes place today. Trading volume is likely to increase in the last hour of the NY session as futures and options on stock market indices and single stocks simultaneously expire. Eurozone’s seasonally adjusted trade balance is forecasted to decrease to a surplus of 24.3bln in October. The Bank of Russia is likely to cut rates by another 25bps to 8% as the 2.5% YoY inflation is well below the target of 4%. The decision is scheduled for 11:30 CET and is followed by a press conference from CBR governor Nabiullina. In the afternoon, Canadian manufacturing sales are forecasted to rise 0.9% month-over-month from 0.5%. The Empire State manufacturing index for December is expected to decline to 18.8. Both are released at 14:30 CET. US industrial production at 15:15 CET, forecasted to rise 0.3% in November from 0.9%, rounds up the week.

Technical Analysis

EURUSD (Daily timeframe)

EURUSD found resistance against its short term supply line. A breakout should lift the rate to 1.1930 and then to 1.20. Below 1.1724 the pair should test 1.1680.

EURCHF  (Daily timeframe)

The rate went up only 1 day out of 6 session and the lower side of the channel will be the most relevant short term test. Beneath this level the rate could drop to 1.14 and then near its 200 daily MA, near 1.12. Above 1.1372, its 2017 high, EURCHF could rise to test its higher side of the channel, but the static level 1.20 is the most relevant resistance.

DAX Index (Daily timeframe)

The index reduced its volatility and in case of a bullish breakout it may test 13,300 and its record high 13,525.  Below 13,000 DAX could retrace to 12,900 and then to 12,500, its 61.8% Fibonacci retracement of the bullish wave started last August that ended in November.

XAGUSD (Daily timeframe)

Silver it may develop a short term range between the triple bottom it made at 15.60 $/oz and the most recent high 16.12. Beneath the most recent low the commodity could test 15.18 while above 16.12 there could be a rally to 16.5.