Most important moves of the week

Introduction

We have seen interesting moves this week in the financial markets. The most important was the ECB decision to cut the monthly asset purchases but extend them until September 2019. The market considered this decision very supportive and dovish by the ECB. The euro was hit by this decision and the problems in Spain. The UK released a better than expected product that helped the British Pound to hold its value versus other currencies. On the other hand, the energy markets have moved a lot. The Crude Oil Brent closed the week at 60.44, the 2 year high.

Crude Oil Brent

    Source: TradingView, Crude Oil Brent Dec17 future, daily

The Crude Oil Brent has broken key levels and has risen like a rocket in the last two days. I fell on Monday and I questioned my bullish idea as it could keep raising and break the 58.20 level. On Tuesday it closed at 58.33, above the key level formed the week before.  The selling pressure wasn’t strong enough on Wednesday at this contract closed flat at 58.45. The big movement was in Thursday and Friday. After Wednesday support, it tested the 59.54 on Thursday. It continued the bullish trend on Friday. It closed at 60.44, which represents the 2 year high.

US Dollar Index

      Source: TradingView, US Dollar Index futures, daily

As you can see it’s been a tough year for the USD. In June, and due to the interest rate hike by the Fed, seemed that the US Dollar Index could go up. But it didn’t. The weakness in the energy markets and the geopolitical problems didn’t allow the USD to rise. The market expected more hikes in 2017, unfortunately, with the hurricanes, the Fed officials were obliged to delay this decision. We have seen good economic data this week in the US:

Macroeconomic indicator	Reading	Expected
Core durable goods orders (MoM)	0.7%	0.5%
New home sales	667K	557K
GDP	3.0%	2.5%

The Fed is showing confidence and a hawkish approach because they have confirmed that the interest rate hikes will continue in the next year and they will reduce the asset purchases. 

     Likelihood of December Rate Hike, CNBC, https://www.cnbc.com/2017/09/18/traders-are-getting-ready-for-another-fed-hike.html

       December FED rate hike probability, Bloomberg, http://uk.businessinsider.com/markets-almost-certain-fed-hiking-interest-rates-in-december-2016-11?r=US&IR=T

These charts show how the likelihood of a rate hike in December is increasing, and the dollar has done the same movement since September. Is anyone building a big position?

All of these facts were the key to help the USD. Technically the most important thing is that the downtrend was broken 1 month ago. The most important levels for me are 92.63 (as a key support) and 96.585 (as a resistance)

Another interesting fact is that Janet Yellen won´t continue as a Fed president.

Euro

    Source: TradingView, EURUSD Dec17 future, daily

The Euro has fallen this week due to the dovish speech by the ECB this week and the USD strength. This is always the same if you don’t deliver what the market participants expect, the value of your assets decline. As I said in my last article, I understand that the ECB prefers to be cautious with the QE cuts. Having a weak currency in a growing environment can help the inflation to peak. It has broken 2 key levels this week as you can see in the chart. I think it can keep going down and test the 1.1530 level. In part, the last decrease was due to the issues in Spain.

British Pound

    Source: TradingView, GBPUSD Dec17 future, daily

Surprisingly for me, the GBP is holding its value vs the dollar. We have seen a better than expected GBP in the UK. It’s difficult to know what will happen in the Brexit negotiations. There are a lot of doubts and speculation about what will happen. The biggest investment banks confirmed that thousands of employees will be relocated to Europe. 

    Source: TradingView, GBPUSD Dec17 future, daily

We have seen the same down movement than in the EURUSD. We can see a double top that indicates that the GBP will rise vs the Euro. The 0.8733 level is a very important support that has been tested several times.

I hope you like it.

Have a good trading!

Disclaimer

I wrote this article myself, and it expresses my own opinions that shouldn't be used as a trading advice. Trading carries considerable risk due to the high leverage involved

#Trading #fx #euro #gbp #USD #energy markets #brent #macroeconomics #UK #US #Europe #fundamentals, #Bloomberg #FED #interestRate #qe #Assetpurchases #ECB