Forex Update: Trump Pressures Fed Ahead of Rate Decision

Forex Market Snapshot

Asset Current Value Daily Change
EUR/USD 1.1355 0.46%
GBP/USD 1.2629 0.36%
USD/JPY 112.72 -0.57%
AUD/USD 0.7177 0.03%
GOLD 1,250 0.64%
WTI Crude Oil 49.99 -2.38%
BTC/USD 3,543 10.91%

The US Dollar has been at the center of attention again, as the last full trading week of the year started off in a bearish fashion for risk assets. Although we saw a bounce following Theresa May’s statement on the Brexit process regarding a possible vote on the draft plan in January, risk-on currencies and other risk-on assets are clearly under pressure, with the US stock markets challenging their correction lows again, completing the bearish global shift.

The Dollar’s slight dip, which was triggered by another attack by Donald Trump on the Fed’s tightening schedule provided the most action in the otherwise quiet forex segment, with a lot of traders taking a step back before the Fed’s rate decision on Wednesday. The consensus estimate is still a rate hike on the central bank’s meeting, which would be the fourth tightening step this year, but now, the bond market signals no rate hikes next year and in the current cycle.

Technical Analysis

EUR/USD, 4-Hour Chart Analysis

The EUR/USD pair bounced higher in its broader trading range after last week’s bearish close, but it remains well below the key 1.1440 level, and the bearish long-term technical setup is unchanged, eve as the pair held up above the support zone between 1.1275-1.13.

The breakdown from the consolidation pattern has been aborted, and we will likely have to wait until Wednesday for the next meaningful move, but with the period of positive seasonality soon ending for the Euro, odds still favor new lows in January, barring a sharp dovish shift by the Federal Reserve.

USD/JPY, 4-Hour Chart Analysis

The Dollar also lost ground compared to the Japanese Yen, and the safe-haven currency was among the strongest majors especially in the second half of the day, as risk assets decisively turned lower. The USD/JPY pair continues to trade in a broad consolidation pattern, but today’s drop off the 113.50 level could be the start of a broader trend change, with all eyes on the October low near 111.50. Gold’s strength confirms the strong safe-haven flows, which could propel the Yen higher against all of the majors, even the Dollar.

AUD/USD, 4-Hour Chart Analysis

The AUD/USD pair continues to be in an interesting technical setup with a likely move towards the October lows being likely underway. Today, the Aussie has been showing relative weakness due to the risk-off flows, and it’s virtually unchanged against the Greenback, despite the broad dip in the reserve currency.

Wednesday’s Fed decision and Thursday’s Australian Employment Report will likely cause volatile moves in the pair before the holidays, but bears are still clearly in control of the market both short- and long-term, especially given the weakness in Chinese assets.

Gold Futures, 4-Hour Chart Analysis

We have been following the key break-out attempt in gold, and today, the precious metal likely formed a crucial swing low that could propel it to a new swing high, which would signal a likely rally towards the resistance zone near the $1300 level. While a failed break-out attempt is still in the cards, given the bullish fundamentals, and the recent relative strength of gold, odds favor a confirmed trend change and the start of a bullish cycle here.

Key Economic Events Tomorrow

ChartBook

Forex

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

EUR/JPY, 4-Hour Chart Analysis

AUD/JPY, 4-Hour Chart Analysis

GBP/JPY, 4-Hour Chart Analysis

USD/CHF, 4-Hour Chart Analysis

USD/CNH, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

Featured image from Shutterstock

Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.