Dollar bulls unwind post FOMC minutes

Global Markets

The growing optimism over the increased likelihood of a US interest rate rise in December has given the global financial markets a sense of positivity. Investors have acquired some clarity from the mildly hawkish FOMC meeting minutes concerning the potential interest rate hike timings, and as a result global equity markets have rallied. Asian and European equities enjoyed a day of gains on Thursday and this may leak into the New York session propelling American equities even higher. The confidence markets have received may be reflected in the Fed futures which show a near 70% probability of the Fed acting to raise rates, and such metrics should empower the Dollar bulls in the longer term.

Whilst American equities surged on Wednesday around the swelling expectations of a December hike, the Dollar decided to unwind across the board. Regardless, a dominant Dollar remains the recurrent theme in the global currency markets and this depreciation may simply be a relief rally. Dollar sensitivity to interest rate expectations remains potent and this may be viewed in the USD index which is currently trading towards 100. The next major event for the US economy will be the unemployment claims on Thursday, and if the release exceeds expectations then USD bulls may be offered an opportunity to send the Dollar Index back towards the daily highs of 99.60.

Technically speaking, the Dollar Index is heavily bullish as there have been consistently higher highs and higher lows. Prices comfortably trade above the daily 20 SMA and the MACD has crossed to the upside. The candlesticks may bounce from the respected bullish channel or use the 98.40 support to gain momentum for a drive back towards 100.

Currency spotlight – GBPUSD

The GBPUSD has hit a weekly high at 1.529 despite last week’s mixed UK labor report which unearthed some concerns about the potential slowdown in economic momentum in the UK economy. The BoE has remained hesitant towards committing itself to raising UK rates and this may punish the Sterling in the longer term. The GBPUSD remains fundamentally bearish and this relief rally may extend to the 61.8% Fibonacci retracement level around the 1.53 area before sellers send prices back down.

Looking at the daily timeframe, this pair is technically bearish with prices finding some resistance across the Fibonacci levels. The 1.53 area is also below the 200 daily SMA which should offer an opportunity for sterling bears to take control again.

GBPNZD

The GBPNZD is technically bullish on the daily timeframe. Prices are trading above the daily 20 SMA and the MACD has crossed to the upside. The previous 2.3350 resistance may act as a dynamic support which should send prices towards 2.4000.

GBPCAD

The GBPCAD is turning technically bullish on the daily timeframe on the condition that prices breakout above 2.0350. This may invite an opportunity for buyers to send prices towards 2.0550.

EURJPY

This pair remains technically bearish on the daily timeframe as long as prices can keep below the 133.00 resistance. The candlesticks trade below the daily 20 SMA and the MACD has crossed to the downside. A breakdown below 131.00 may open a path to the next relevant support at 129.50.