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The European trading session opens today with the euro bashed lower by fresh fears that the proposed Grand Coalition in Germany won't happen; the Mexican peso ahead on hope of a "softer" Trump approach to NAFTA; buoyant equity performance in Asia and an emerging likelihood that the commodity metals and energy rally will run out of steam.
Article / 08 December 2017 at 15:40 GMT

FX Board: USD rally trying to hang in there after US jobs report

Head of FX Strategy / Saxo Bank
Denmark
image
 Unimpressive US hourly earnings numbers held the greenback back Friday. Images: Shutterstock

By John J Hardy

Key developments in FX today:

  • The USD surged to new local highs versus the JPY, EUR, CHF and elsewhere before a tepid US jobs report and disappointing average hourly earnings figures for November held the big dollar back from further gains – keeping the tactical outlook a bit muddled if the USD closes today on a weak note, but not providing any notable resistance if the greenback can clawback within shouting distance of the highs for the week into today's close. Next week is big on central bank event risks.

  • Elsewhere, sterling rallied hard overnight as the market sniffed out a coming Brexit breakthrough that indeed came to pass early today. But then comments from an EU official suggesting there was no way that a trade deal could be reached before March of 2019 (the supposed month when Brexit becomes a reality) saw sterling weakening sharply back above the key 0.8750 line in EURGBP - keeping GBP traders in limbo.

  • See further comments in the Notes of Interest on the attached FX Board PDF and all of the latest Trend and Trend Heat readings.

Charts

EURUSD
EURUSD needs to maintain the action below the recently pivotal 1.1800-25 area to keep the focus lower, where the next point of contention is the 1.1715 pivot area and then the cycle lows 1.1555 consolidation low, with the 200-day moving average creeping back higher toward 1.1500 in the weeks ahead.
eurusd
Source: Saxo Bank
 
USDJPY
USDJPY pulling above the local pivot and 61.8% Fibonacci today – a move that came under fire a bit after the US jobs report late today. But as long as the pair remains above 113.00, traders will look to take it higher for a test of the 114.50+ range overhead that has defined the top of the chart on three occasions since March of this year. Bulls would also appreciate a close that is clear of the Ichimoku cloud.
usdjpy
Source: Saxo Bank

EURGBP
EURGBP appeared ready for a breakdown below the key 0.8750 area on the Brexit negotiation breakthrough early today - but the subsequent price action throws that move into doubt, as much of it has been reversed.
eurgbp
Source: Saxo Bank 

XAGUSD - weekly
Silver has suffered a long and steep slide here that looks bearish, though the range into 15.20 remains intact. As well, if we look back at the last eighteen months or so of price action, the 15.20-90 area has supported on numerous occasions, so value hunters could be afoot ahead of 15.00 and if not, the last zone into 13.65 potentially opens up.
xagusd
 Source: Saxo Bank

– Edited by Clare MacCarthy

 

John J Hardy is head of FX strategy at Saxo Bank

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FX Board for Friday, December 8, 2017

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