USD Supported By Confident Fed And Strong Data

Nov 25 21, 09:19 GMT

The USD gained against a number of its counterparts yesterday after the release of strong US economic data and the Fed’s November meeting minutes which showed a rather confident Fed. The minutes showed that a number of policymakers of the bank were open to the idea of expediting the tapering of the bank’s QE program, indicative of the climate in the meeting which could result in a faster tightening of the bank’s QE program. Also, it should be noted that some of the financial data yesterday came out stronger than expected as the initial jobless claims figure dropped below 200k, a low level not seen since 1969 making headlines, while consumption for October also accelerated more than expected and the University of Michigan Consumer Sentiment for November improved in comparison to the preliminary release. Other data provided mixed signals moderating somewhat USD’s bullish tendencies. Today given the lack of high impact US financial data we expect the greenback to be influenced by fundamentals. Also please note that it’s Thanksgiving holiday in the US and Black Friday is to follow, so some abnormal trading conditions may occur.

The USD index continued to rise yesterday breaking the 96.65 (S1) resistance line, now turned to support. We remain bullish for the index as long as it remains above the upward trendline incepted since the 10th of November. Please note that the RSI indicator below our 4-hour chart is between the readings of 50 and 70 confirming the bullish sentiment yet in a declining slope, which could imply that the bulls may be loosing some steam. Should the buying interest continue be present for the greenback, we may see the index aiming if not reaching the 97.30 (R1) resistance line. Should sellers be in charge of the index’s direction we may see it breaking the 96.65 (S1) support line the prementioned upward trendline and take aim if not reach the 96.15 (S2) support level.

Pandemic, ECB weigh on EUR

Despite some stabilisation against the USD yesterday the common currency’s slide lower against the USD and the GBP continued. Today we note the release of Germany’s Detailed GDP rate for Q3 and Germany’s forward looking GfK consumer sentiment for December. Monetary wise for EUR traders, we note the speeches of ECB policymakers Elderson, Schnabel and President Lagarde, while BuBa President Weidman is also scheduled to speak. Also, we note the publication of the account of the monetary policy meeting of the Governing Council held on 27-28 October 2021. Overall, should a dovishness be detected in Lagarde’s speech or in the minutes, we may see the common currency sliding while a more hawkish approach by BuBa president Weidman could support EUR. On the fundamental level, the path of the pandemic in Europe remains the main worry for EUR traders and could weigh, as a number of European governments are considering lockdown measures to curb the spreading of the disease.

EUR/USD continued to drop yesterday breaking below the 1.1225 (R1) support line, now turned to resistance. We maintain a bearish outlook for the pair as long as it remains below the downward trendline incepted since the 10th of November. Please note that the RSI indicator runs along the reading of 30 confirming the bearish sentiment yet may also imply that it is near oversold levels. Should the bears actually maintain control over the pair we may see it aiming if not breaking the 1.1165 (S1) support line. Should the bulls take over, we may see the pair reversing course breaking the prementioned downward trendline, the 1.1225 (R1) resistance line and aim for the 1.1300 (R2) level.

Other market highlights for today

Today we also note the release of UK’s CBI distributive trades for November and the scheduled speeches of BoE’s Haskel and BoE Governor Bailey. In tomorrow’s Asian session we get Japans’ Tokyo CPI rates for November and Australia’s final retail sales for October

USD Index H4 Chart