Article / 08 January 2018 at 22:34 GMT

US Wrap: EURUSD slide halts just above support

FX Trade Strategist / www.Loonieviews.net
Canada
  • Atlanta Fed’s Raphael Bostic suggests only two rate hikes are needed in 2018 
  • Bank of Canada Business Outlook Survey kept January rate hike on table 
  • The Canadian dollar rallied on hike expectations
  • Wall Street ended mixed, while the Nasdaq closed at a record high

By Michael O’Neill

NY Focus: The euro was the biggest loser against the US dollar in a mostly forgettable FX session. EURUSD opened at 1.2005, which proved to be a high, and it touched 1.1954 before inching up into the close. The Commitment of Traders report said long EURUSD positions expanded in the previous week, which may have led to some profit taking. There were no US data releases of note.

Atlanta Fed President and 2018 Federal Open Market Committee voter Raphael Bostic said his base case was “two-three rate increases in 2018.” But his dovish comments were ignored.
The rest of the majors traded sideways and closed nearly unchanged from their opening levels.

The exception was the Canadian dollar. USDCAD dipped to 1.2388 at the open and then rallied to 1.2447. The Bank of Canada’s Business Outlook Survey showed a tightening of labour markets and an uptick in capacity pressures, which many believe confirms a 0.25% rate hike next week.

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 There was little impact on GBPUSD from Prime Minister Therese May's cabinet reshuffle, as key cabinet ministers managed to hold onto their portfolios. Photo: Shutterstock

In the UK, Prime Minister May announced a cabinet shuffle. Unfortunately, the major players, including Brexit Minister David Davis, Finance Minister Phillip Hammond and Foreign Minister/Court jester Boris Johnson, all kept their previous positions. And GBPUSD closed virtually unchanged.

The Dow Jones Industrial Average (DJIA) was almost flat (it was down 0.05%) while the S&P 500 and Nasdaq posted modest gains.

WTI prices dropped at the open, but recovered all the losses and closed unchanged for the day.

Tuesday Focus: EURUSD is likely to be the key focus thanks to a plethora of economic reports from the Eurozone and a dearth of data stateside. The big question will be if German Industrial Production and Trade reports and the Eurozone unemployment rate will be disappointing enough to drive EURUSD below support at 1.1950 and put 1.1860 in play. 

EURUSD chart

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– Edited by Robert Ryan

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Michael O'Neill is an FX consultant, currency strategist and author of the Trade of the Day at Loonieviews.net. Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.

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