Talking Points:
US Dollar Drops Alongside US Treasury Yields Amid Post-FOMC Correction
Thin Liquidity Conditions Create Knee-Jerk Volatility Risk in Holiday Trade
Markets Unlikely to Find Direction in US Jobless Claims, Japan CPI Releases
The US Dollar resumed its post-FOMC downward correction in overnight trade after brief respite in yesterday’s session, falling to the lowest level in a week against an average of its top counterparts. The move played out alongside a drop in front-end US Treasury yields, hinting profit-taking on the “Fed tightening” theme into the year-end is the likely catalyst driving price action.
Looking ahead, the Christmas holiday will see most top financial markets shuddered through next week. Indeed, trading volumes for FX futures contracts tracking the major currencies have been dropping since mid-month, hinting at larger market-wide dynamics. This is likely to make for near-standstill in the final 48 hours of the trading week.
It ought to be noted however that the drop in participation may amplify knee-jerk volatility in the event that unexpected headline risk catches markets unprepared. In fact, last week’s BOJ rate decision was a case in point. With that in mind, traders would be wise to tread carefully despite apparent calm.
A handful of economic data releases will cross the wires into the week-end, with weekly US jobless claims figures as well as Japan’s labor market and inflation reports are on tap. Both ought to pass with little fanfare. Claims numbers are unlikely to single-handedly change anything about investors’ Fed policy outlook. Meanwhile, the BOJ’s reluctance to actually expand stimulus despite this month’s tinkering with the policy mix undermines CPI figures’ market-moving potential.
Gauge Trends and Spot Reversals in the Major Currencies with DailyFX SSI
Asia Session
GMT
CCY
EVENT
ACT
EXP
PREV
23:00
AUD
Conf. Board Leading Index (MoM) (OCT)
-0.1%
–
-0.3%
23:50
JPY
BOJ Minutes for November Meeting
–
–
–
04:00
JPY
BOJ’s Kuroda Speaks in Tokyo
–
–
–
European Session
GMT
CCY
EVENT
EXP
PREV
IMPACT
09:30
GBP
BBA Loans for House Purchase (NOV)
46000
45437
Low
Critical Levels
CCY
Supp 3
Supp 2
Supp 1
Pivot Point
Res 1
Res 2
Res 3
EUR/USD
1.0739
1.0826
1.0869
1.0913
1.0956
1.1000
1.1087
GBP/USD
1.4702
1.4783
1.4827
1.4864
1.4908
1.4945
1.5026
— 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.Learn forex trading with a free practice account and trading charts from FXCM.
Source: Daily fx