Bears Hold Upper Hand In Dollar
DOLLAR: The dollar has been able to follow through on Tuesday’s reversal from a 2 1/2 month low with mild early strength coming into today’s trading. Despite a softer than expected Chicago Fed national activity index reading and a much softer than expected US existing home sales reading, the dollar managed to reject a test of the 200-day moving average at 103.05. There were few surprises from the November FOMC meeting minutes with the Fed rhetoric hawkish enough for the dollar to extend its recovery move. Unfortunately, the dollar will have another set of key US economic data to get past this morning as the October durable goods result is likely to have a sizable downtick from the September result. With the market still technically oversold, the dollar is likely to see pre-holiday short-covering if it can avoid sluggish US data this morning. The bears continue to hold the upper hand in the dollar, however, as the November downtrend remains intact.
OTHER CURRENCIES: The euro has seen mild early downside follow-through from Tuesday’s reversal, but a lack of key Euro zone data today has helped it to avoid sizable losses this morning.
The pound remains in close proximity to Tuesday’s 11-week high, but it could see volatile action as the UK Autumn Budget statement is read in Parliament later today. If there are no negative surprises in the budget, the pound should be in a strong position to regain upside momentum.
The Canadian dollar was able to avoid a pullback on Tuesday following lower than expected Canadian CPI results, and its recent coiling action has posted 5 higher lows in a row. If it can avoid negative results for October Canadian manufacturing sales later this morning, the Canadian dollar could see an upside breakout.
INTEREST RATE MARKET FUTURES
The US bond market is flirting with new cycle highs as it was up slightly overnight with very little in terms of Asian or European economic data. Yesterday’s FOMC’s November meeting minutes said that the committee’s position was to proceed carefully, current monetary policy is restrictive and has put downward pressure on economic activity and inflation, and that financial conditions have significantly tightened in recent months.
The market is looking for more signs of a possible recession before the front end can continue on up to fresh highs.
Ongoing jobless claims are forecast to have a mild weekly increase from the previous 1.865 million result.
October Canadian manufacturing sales are forecast to have a moderate downtick from September’s 0.4% reading.
STOCK INDEX FUTURES
Global markets were able to bounce back from early pressure and hold a mildly positive tone coming into this morning’s action. Asian equity markets saw mixed results as gains in the Japanese Nikkei were balanced against moderate losses in the Shanghai Composite and Hong Kong Hang Seng indices. European equity markets are mostly in positive territory and were led to the upside by the German DAX and French CAC-40 indices. Today’s UK Autumn Budget announcement will include a 10% increase in the UK minimum wage. Today’s trading will start out with a weekly private survey of mortgage applications followed by a weekly reading on initial jobless claims that are expected to have a modest downtick from the previous 231,000 reading. Ongoing jobless claims are forecast to have a mild weekly increase from the previous 1.865 million result. October US durable goods are expected to have a sizable downtick from September’s 4.7% reading. October Canadian manufacturing sales are forecast to have a moderate downtick from September’s 0.4% reading. A private survey of November US consumer sentiment is expected to have a minimal uptick from the previous 60.4 reading. Earnings announcements will include Deere & Company before the Wall Street opening.
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