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Market Outlook

Winding down trading activity before the Christmas and New Year holidays

The week began on a sluggish note as markets were in anticipation of three major central bank announcements.

Fed set the rhythm on Wednesday as Yellen hiked rates as projected but chose a dovish attitude than was predicted. Markets were prepared for a more hawkish stance as they hoped Yellen would sound more buoyant in her final Fed press meeting.

Gold heaved a sigh of relief as $1240/oz. was protected by the bulls and following a dovish stance from the Fed succeeded in testing the resistance at $1261/oz. Fed did increase GDP growth conjectures for the coming year but went on to project merely 3 cuts next year against an anticipated 4.

Following Fed was Bank of England which went on to retain rates by consensus but pared Q4 GDP growth projection. BoE displayed assurance in Brexit talks and remarked that bad times were over and hailed the Chancellor’s budget presented the previous week.

GBPUSD came under tremendous pressure for the entire week as effort to breach the 1.3450 was thwarted and GBPUSD ended the week at 1.3317, below 70 pips for the week.

European Central Bank which also had its fiscal policy meeting last week retained its existing rates as forecast while pointing at the need of holding QE on board to bolster growth. ECB increased inflation forecast for 2018 to 1.40% from an erstwhile 1.20. It also increased GDP growth rate for 2017 and 2018 depicting a rather clear picture of the economic circumstances in EU.

EURUSD was however feeble on QE remarks as it shed about 100 pips to close the week at 1.1749.

Bank of Canada’s Poloz did an about-turn as he dismissed rate hikes and showed apprehensions on trade pacts regarding NAFTA and dismal exports. USDCAD that was near to testing support at 1.2670 ricocheted to close the week at 1.2858.

The upcoming week also has 2 central bank fiscal policy decisions and a slew of other important economic figures that should keep the markets occupied.

Gold that got a fillip following the previous week’s Fed meeting was unable to trade above $1261. Technical charts signal a risk of Gold testing the lows of $1240/oz. witnessed recently as the recovery seems to be fizzling out. Outline for Gold will be defined by developments in tax reforms as its approval would witness a huge chunk of dollars going back into the US mainland by US corporate houses redirecting their offshore incomes.

EURUSD is slated to begin the week as they see the announcement of EU CPI figures on Monday, followed by statistics from Germany, France and Italy as the week advances. On charts EURUSD looks enmeshed between 1.1700 support and resistance at 1.1850.

GBPUSD is showing support at 1.3300 and even firmer support at 1.3210 where the growing trend line and 100dma are seated. In the coming week GBPUSD doesn’t have any important economic figures until Friday when UK GDP and other associated data comes out. Needless to say that GBPUSD will be high beta to any developments on Brexit.

The Bank of Japan (BoJ) meeting is scheduled on Thursday as it mulls over the efficacy of its easy fiscal plan. At the start of December Kuroda had emphasised the drawbacks of low interest rate hikes heightening expectations that BoJ would begin tightening soon enough. However, it would be rather early to imagine BoJ to perform this week as Yen’s positons relative to the Dollar is an indicator of Japanese economic robustness particularly when you deliberate on it as a very export-reliant economy.

USDJPY has shown support at 112.00 that was defended the previous week while resistance is at 113.50.