Forex news for US trading on Dec 15, 2015:
- November 2015 US CPI 0.5% vs 0.4% exp y/y
- US Empire Manufacturing for Dec -4.59 vs. -7.00 est.
- BOE's Cunliffe: Next move is up
- Bank of Canada's Poloz: Positive effects of rate cuts still flowing through
- BOC's Poloz says rate cuts have eased the drop in incomes
- BOC warns that housing market vulnerabilities are edging higher
- China shifts overseas investment headquarters away from Canada
- December 2015 US NAHB housing market index 61 vs 63 exp
- Canada existing home sales rise 1.8% m/m in November
- New Zealand Fontera dairy prices +1.9% in latest auction
- Fed rate hike has the potential for disruption says RBA's Stevens
- Gold flat at $1061
- WTI crude up 43-cents to $36.74
- S&P 500 up 21 points to 2043
- US 10-year yields up 4 bps to 2.26%
- NZD and USD lead, GBP lags
Here's my theory on US dollar strength on Tuesday: Fast money was piling into US dollar longs in anticipation of a Fed hike and instantaneous jump in the US dollar. If that unfolds as expected, they'll be closing out the positions by this time tomorrow and the spike high in USD will be at least a short-term top.
What argues in favor of it was how widespread the US dollar bid was. USD finished the day up about 0.65% right across the board. The exceptions were CAD (oil) and NZD (Fonterra), and they had their independent reasons.
Technically, euro longs are beginning to look damaged. The highs near 1.1050 look like a triple-top and the close today down below 1.0930 helps to confirm a reversal. The good news in the ZEW couldn't inspire any fresh buying in Europe so that's negative. Then again, I hate to draw conclusions ahead of Fed day.
Cable is back down testing 1.5000, which is the inevitable magnet for the pair. We started US trading at 1.5150 and sold off hard down to 1.5034 at the London fix. We touched narrowly lower late in the day but finished at that level.
USD/JPY held a strong bid in US trading on upbeat risk sentiment and higher yields. The pair started near 121.00 and made a slow, sustained move up to 121.75 before a 10 pip pullback late.
USD/CAD didn't fall as much as you might think given the second day of gains in oil. It tried 1.3675 in Asia but that held and the pair bounced to 1.3765 as the BOC mull housing and other risks. Then it was back down to 1.3700 before finishing at 1.3734.
