Daily Commentary | 27/12/2018
US: inner issues bring uncertainty in the spotlight
The USD rose yesterday making a small comeback, after the market was overshadowed by uncertainty and fear in the previous days. During the past day’s President Donald Trump publicly took shots at the FED, accusing it for the recent market plunge. The US president specifically stated the only problem the US economy has, is the FED. At the same time, the US government is undergoing a partial shutdown for the fifth consecutive day, due to a dispute of Democrats and Republicans over the budget required to build the wall on the U.S.-Mexico border. Democrats disagree with spending money on a wall, but instead suggest the use of technology, to control the border. US officials said the shutdown could carry on into January, as President Trump stated, the shutdown could persist until we have a wall. Further developments on the pre mentioned news could create volatility for the US dollar and safe havens like Gold. XAUUSD opened with a positive gap on Monday the 24th of December breaking our 1270.70 (R1) resistance level. The movement could due to the negative impact of the pre mentioned news on the USD. However, yesterday the USD was seen strengthening and the precious metals fell below the pre mentioned level, only to stabilize very near to that price. It must be noted that, Gold has reacted significantly to the previous day’s news coming from the US, and in 1 week and since the 20th of December, it has risen over 20 USD in value. If the soaring continues then we may see the shiny metal breaking the 1270.70 (R1) resistance level and aim for higher grounds, with the next level being our 1280.59 (R2) resistance level. On the contrary, if the precious metal is to correct on the downside, then we may see a movement towards our 1261.05 (S1) support level which could even be breached. If the bearish movement persists then we could see it moving even lower for the 1252.15 (S2) Support line.
BOJ could take further action to reach its goals According to BOJ Governor Kuroda, the bank will seek to hit his inflation target as soon as possible, changing his previous wording that went “at the earliest date possible.” The change of wording has provoked some attention towards the BOJ, while analysts remain curious in the next steps the bank could take. BOJ targets a 2 percent inflation rate, however Governor Kuroda said global risks have prevented such a target to be reached, adding that the trade wars require further attention. He stated that the Japanese economy is performing well and will maintain the current powerful easing while weighing the benefits and costs of our policy in a balanced manner. Further news on the matter could create volatility on JPY pairs. USD/JPY moved higher yesterday, especially in the US session, correcting for its recent plunge on Monday. USDJPY was able to climb over the 110.70 (S1) support level and moved even higher to surpass the 111.150 levels (now turned to resistance). In case the bullish momentum persists today, we could see the pair climbing even higher and breaking the 111.150 (R1) resistance level and aim even higher for the 111.650 (R2) resistance area. On the other hand, should the bears dictate the pair’s direction in today’s European and American sessions, we could see it dropping below the 110.70 (S1) support line and aim even lower for the 110.30 (S2) support level.
In today’s other economic highlights: In today’s European session, we get the ECB Economic Bulletin which could create volatility for EUR pairs. In a quiet American session, we get from the US the CB Consumer Confidence for December and the New Home Sales for November. From all of us here at IronFX we would like to wish you solid trading and best wishes for a merry Christmas and happy holidays.
• Support: 1261.05 (S1), 1252.15 (S2), 1241.02 (S3)
•Resistance: 1270.70 (R1), 1280.59 (R2), 1290.41 (R3)
• Support: 110.700 (S1), 110.300 (S2), 109.874 (S3)
•Resistance: 111.150 (R1), 111.650 (R2), 112.150 (R3)