Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 12 December 2017 at 22:48 GMT

US Wrap: Oil sinks and greenback rises

FX Trade Strategist /
• WTI loses 2%, but bounces back on lower US inventories
• Weak German ZEW data and firm US PPI lift greenback 
• Senator Rand Paul says he can’t support tax bill 

By Michael O'Neill

NY Focus: Traders bought US dollars this morning on better than expected November US PPI data (actual 3.1% against forecast 2.9%, y/y).

The report was just one more in a series of robust US economic releases that suggest a “data-dependent” FOMC may release a hawkish statement tomorrow.
EURUSD opened with an offered bias, undermined by the earlier ZEW Economic Sentiment which missed the forecast and by the the US PPI report which didn't. 

 Rand Paul: Unable to back a tax bill that would balloon the deficit. Photo: Shutterstock

Prices dropped from 1.1778 to 1.1718 before bouncing during the afternoon. Sterling followed EURUSD lower.

USDJPY rallied from 113.44 to 113.72 on broad US dollar strength. 

That move evaporated when Rand Paul, Republican Senator from Kentucky, tweeted that he "cannot in good conscience vote to add more to the already massive $20 trillion debt" which raised questions about the prospects for the US tax reform deal getting done.

Prices only managed a tepid bounce into the close. The Canadian dollar led the commodity bloc currencies lower. Traders are waiting to see if the Federal Open Market Committee can break USDCAD out of the 1.2660-1.2915 range.

WTI oil prices dropped from $58.53/barrel to $56.88/b before bouncing to $57.46/b after-hours when API reported that US crude inventories fell 7.382 million barrels.

Wall Street was mixed. The Dow Jones Industrial Average and the S&P 500 were in the “green” while the NASDAQ shed a few points.

Wednesday Focus: The FOMC meeting is the major focus. However, Sterling traders will care more about UK employment and how it could impact the Bank of England’s think at Thursday’s policy meeting. 

EURUSD is in a downtrend channel from the beginning of December, bordered by 1.1710 on the bottom and 1.1790 on the top, with further resistance at 1.1810.  

A break of the bottom will yield 1.1620 while a top-side break will target 1.1930

EURUSD 4-hour chart
Source: Saxo Bank

-- Edited by Adam Courtenay

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

John Shaw John  Shaw
Not too many sane thinking deficit hawks left in Washington there Mike.
Corker and Paul are pretty much about it.
Saxo user tired of spam Saxo user tired of spam
Saxo, please stop sending me this spam in my notifications in the trading app.

Thanks a lot


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