FX Rundown: Euro Up. Yen Stronger. Neutral Aussie. No Relief for CAD

12/18/2018 12:14 pm EST

Focus: CURRENCIES

Bill Baruch

President and Founder, Blue Line Futures

Euro up on worries about FOMC Wednesday. CAD languishes. Yen strongerBill Baruch, president and founder of Blue Line Futures, reviews and previews the euro, Japanese yen, Chinese yuan, Aussie and Canadian and the upcoming economic calendar.

 

Bill Baruch’s FX Rundown Dec. 18-19 here.

Wednesday is Fed Day and they are expected to hike rates. What to know about the probabilities and levels for the USD, Dollar Index (DXY) as well as the euro, yen, Aussie and Canadian.

Euro (March)

Session close: Settled at 1.1442, up 46 ticks.

Fundamentals: Weakness in U.S. equity weighed on the dollar (USD) late Friday and into Monday morning. With the Federal Reserve beginning their two-day policy meeting Tuesday and concluding with not only a rate decision but releasing economic projections including a dot plot, broad weakness in markets and a shrinking of the global risk appetite is seen to support a less hawkish and even dovish Fed. Famous hedge fund managers have made headlines today and in recent weeks saying that the Fed should not hike rates on Wednesday. Friday morning, the euro (EUR) was down sharply after French Flash PMIs contracted and the Eurozone read missed. However, the tables began to turn after equity market weakness and a miss on U.S Flash PMIs. Monday, the worst read on NY Empire State Manufacturing in over a year continued to unleash the same sentiment; a lower dollar on much lower stocks, thus a stronger euro. The probability of a Fed hike on Wednesday has now slipped below 70%. However, the probability of a follow-up hike in March is now less than 25% from nearly 40% one month ago.

Technicals: Price action has traded very constructively since reversing from the Friday morning low. Today’s move stalled at a trend line which aligns with first key resistance at ...

 

Yen (March)

Session close: Settled at .89405, up 42.5 ticks.

Fundamentals: Weakness in both the U.S, dollar and equity markets is a perfect storm for the yen (JPY). The question now is whether the yen’s newfound strength can stick. The March contract has failed two tests just shy of the psychological .9000 barrier. While we think equity markets could be due for a bounce on a more accommodative Federal Reserve Wednesday, this makes for a much weaker U.S. dollar. We imagine continued volatility in general coupled with dollar weakness over the next few sessions make for a third test to the .9000 level.

Technicals: The range is defined and there is now a path of least resistance up to major three-star resistance at…

 

Aussie (March)

Session close: Settled at .7187, unchanged.

Fundamentals: With the Aussie (AUD) on its back heel in the midst of a global risk-off move, the RBA holds a policy meeting Monday night. Here, they will release their Economic and Fiscal Outlook. We have been upbeat on a technically constructive Aussie, but there is no question that after a move below our technical support and not only given the broad turmoil but an RBA meeting and FOMC meeting Wednesday that we are nothing but outright Neutral.

Technicals: The Aussie broker below what was major three-star support in the March contract at ... 

 

Canadian (March)

Session close: Settled at .7474, down 19 ticks.

Fundamentals: The Canadian (CAD) was not only a casualty to the shriveling global risk appetite but its own poor data. Outside of a bright read here and there, the data out of Canada for much of the year has been horrendously inconsistent. Monday, data showed that Foreign Security Purchases were half of what was expected, and this is in line with the trend. Furthermore, Crude Oil broke below $50 and this gives no reason to look for relief in the Canadian. Manufacturing Sales are out.

Technicals: Price action is extremely depressed in a manner in which it could ... 

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