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Currency Markets Face Reversal Risk in Thin Pre-Holiday Trade

Currency Markets Face Reversal Risk in Thin Pre-Holiday Trade

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar retraces lower after yesterday’s Yellen-inspired rise
  • Australian Dollar stung by dovish shift in RBA policy outlook
  • Year-end flows may thrive amid liquidity drain, event risk lull

The US Dollar retraced downward in overnight trade having outperformed against most of its major counterparts yesterday. That move seemed to be inspired by hawkish comments from Fed Chair Janet Yellen that put the spotlight back on the steepening in the projected 2017 rate hike path in recent weeks.

It was the Australian Dollar that underperformed however, losing aground against the entire G10 FX spectrum. The move tracked a drop in front-end bond yields, suggesting a shift in RBA policy bets toward the dovish side of the spectrum drove the selloff. A singular spark for the move was not readily apparent.

Looking ahead, a quiet economic data docket in European and US hours leaves markets somewhat rudderless. This coupled with thinning pre-holiday liquidity conditions may make for lackluster activity. As noted in our weekly forecast however, the lull may give way to market-wide reversals ahead of the year-end.

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Asia Session

GMTCCYEVENTACTEXPPREV
21:45NZDNet Migration SA (NOV)6220-6230
21:45NZDTrade Balance (NZ$) (NOV)-705m-500m-815m
21:45NZDExports (NZ$) (NOV)3.86b4.00b3.91b
21:45NZDImports (NZ$) (NOV)4.56b4.50b4.72b
21:45NZDTrade Balance 12 Mth YTD (NZ$) (NOV)-3175m-2951m-3266m
23:30AUDWestpac Leading Index (MoM) (NOV)0.0%-0.1%
0:00AUDSkilled Vacancies (MoM) (NOV)0.0%--0.3%
2:00NZDCredit Card Spending (MoM) (NOV)-4.2%-3.0%
2:00NZDCredit Card Spending (YoY) (NOV)4.1%-10.1%
4:30JPYAll Industry Activity Index (MoM) (OCT)0.2%0.1%0.2%
5:00JPYSupermarket Sales (YoY) (NOV)0.8%-0.6%

European Session

GMTCCYEVENTEXPPREVIMPACT
7:45EURFrench PPI (MoM) (NOV)-0.8%Low
7:45EURFrench PPI (YoY) (NOV)--0.9%Low
8:00CHFMoney Supply M3 (YoY) (NOV)1.9%2.9%Low
9:30GBPPublic Finances (PSNCR) (NOV)--3.4bLow
9:30GBPCentral Government NCR (NOV)--4.0bLow
9:30GBPPublic Sector Net Borrowing (NOV)11.6b4.3bLow
9:30GBPPSNB ex Banking Groups (NOV)12.2b4.8bLow
15:00EUREurozone Consumer Confidence (DEC A)-6.0-6.1Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EUR/USD1.02541.03201.03541.03861.04201.04521.0518
GBP/USD1.21711.22671.23181.23631.24141.24591.2555

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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