What Happened Yesterday

The Euro continued on it’s downward trajectory on Friday after the European Central Bank decided to prolong its bond purchases and signaled its willingness to stick with an ultra-loose policy stance.

The tension between Madrid and Catalonia’s secessionists also stoked selling in the single currency after the Catalan parliament on Friday declared independence from Madrid following a secret ballot. Spain Prime Minister Mariano Rajoy retaliated by sacking the Catalan government and set elections on Dec. 21.

But the downmove stalled even after strong US GDP data which showed the US economy grew at a 3.0% annual rate in the third quarter, faster than the 2.5% forecast among economists polled by Reuters. The cause of the USD stall was the Bloomberg report that said Trump was leaning towards nominating Fed Governor Jerome Powell as the next Fed chief, but has not made up his mind. 

The USD pared gains briefly on that report as Powell is seen less hawkish than Stanford University economist John Taylor, another potential nominee to lead the central bank.

Trump, who is expected to announce his Fed chief candidate within the next week, is also considering Yellen, former Fed Governor Kevin Warsh and his economic adviser, Gary Cohn, for the Fed’s top job.

Today’s Fundamental Drivers

Load of European data to start the week. But keep an eye on the Spanish ‘Catalan’ situation as that is a potential negative geopolitical event for the Euro.

Technical Set Up – What’s Happening with the Majors

The majors should start the week with a neutral bias as focus switches to the BOE & FED meetings.

Most of the majors are grinding through short term trendlines as USD sentiment fades. This is a tricky trade set up so I’ll be sitting back and waiting for this to clear up before trading.

AUDUSD

Downtrend looks in play. I’m looking to get short back towards resistance at 0.7725.

Check our detailed AUDUSD Analysis

NZDUSD

Downtrend clearly in place. It looks stretched so chance for a relief rally before downtrend continues.

Check our detailed NZDUSD Analysis

USDJPY

Uptrend stalling as strong USD sentiment fades. Sideways as focus switches to FED on Wednesday.

Check our detailed USDJPY Analysis

EURUSD

Downtrend in play but keep an eye on Euro data for next leg of direction.

Check our detailed EURUSD Analysis

GBPUSD

Choppy sideways trading in big ranges. I like it up but focus switches to BOE now.

Check our detailed GBPUSD Analysis

USDCHF

Tracking the USD index pip for pip. Sideways with upward bias as focus switches to FED.

Check our detailed USDCHF Analysis

USDCAD

Upmove stalling as Oil rally offsets neutral tone from Bank of Canada last week.

Check our detailed USDCAD Analysis

Today’s Focus – Major Currencies in Play

You need to follow the economic data releases & best technical set ups to work out where the majority of action and interest will be.

EURUSD

Technical Set Up: Mixed technicals – resistance back at previous low 1.1667.

Fundamental Driver: German & Eurozone data

Potential Strategy: The trend is down so I’m looking to sell on rallies or on weak data.

Check our Next Best Trades list for full details.

Summary

We should have a pretty quiet start in Asia but there is potential for some moves in Europe with a bunch of data scheduled for release.

The two major events for the week are the central bank meetings: FED Wednesday & BOE Thursday.

Don’t forget we have a few geopolitical issues still lingering: Trumps tax reforms & his choice for next Head of the FED.

These events should be enough to keep the USD on hold for now.

Tune up your charts & get ready to trade…..see you in the 247 Trade Zone!

Brad