Daily Market Reviews

Economic Calendar for January 24, 2017

Time (GMT) Currency Event Previous Forecast
00:30 JPY Flash Manufacturing PMI 52.4 52.3
09:00 EUR Flash Manufacturing PMI 54.9 54.8
09:00 EUR Flash Services PMI 53.7 53.9
09:30 GBP EU Membership Court Ruling
15:00 USD Existing Home Sales 5.61M 5.54M

 

Global Market Overview

The Euro finished mixed on Monday as traders were rebalancing based on the protectionist tone of incoming U.S. president Donald Trump during his inauguration speech last Friday, as well the perception that he will work to weaken the USD.  The Pound firmed significantly versus rivals as it was perceived as a haven against the uncertainties in the U.S.  The U.S. dollar fell sharply versus rivals as traders are betting that U.S. economic policy going forward will favor a weaker USD.  The Yen was firmer across the board as safe haven demand pushed the Japanese currency higher.  Gold also gained on the safe haven demand, as well as the weakness of the USD.  Crude fell due to rising U.S. production and trader worries that it would overshadow the production cuts being made by OPEC.

Daily Currency Pair Analysis

EUR/USD – The pair gapped above the 1.0700 level at the open Monday and kept climbing throughout the day as the USD exhibited broad based weakness in response to the inauguration speech of incoming U.S. president Donald Trump.  The pair did stay well below the 1.0800 level during the session however, indicating that the current move might be fleeting.  Indeed there is good resistance at the current levels and up to the 1.0800 level and this could keep the pair from rising further, especially if traders calm down over the future prospects for the U.S. dollar.

USD/JPY – The pair gapped below the 114.00 level at the open and continued falling throughout the day, slicing right through the 113.00 level as well.  The pair did try to regain prior levels, but fell to resistance as it reached back up to the 114.00 level, leading to a drop of nearly 200 pips on the session.  Currently there is a combination of a lack of confidence in the USD and safe haven demand for the Yen in response to uncertainties over U.S. economic policy under president Trump.  The pair closed around the 112.70 level and sees support from here down to the 112.50 level, as well as a second area of support around the 111.75 level.  If it breaks below that however we could see the pair heading all the way back to the 103.50 level where it traded in October.

USD/CAD – The pair dropped on Monday, but the fall wasn’t as severe as for other USD pairs, totaling just 80 pips.  The pair held up as it found support at the 1.3200 level, and weakness from crude certainly helped it from falling further.  We should continue to see this dynamic from the pair as currency traders are currently very bearish over the USD, while crude traders are worried that increased U.S. crude production will overshadow the production cuts that have come from OPEC over the past months.  While this combination will almost certainly slow any downside moves for the pair, there is still a definite downside bias at this time due to the extreme USD weakness we’re seeing across the board.

GBP/USD – The pair surged higher on Monday, moving up through the 1.2400 level early and continuing higher to break above the 1.2500 level as well.  The pair closed around the 1.2530 level, which keeps it below the resistance seen at the 1.2600 level, but we are expecting to see the pair test that resistance later this week, and probably sooner rather than later.  All concerns over a hard Brexit in the U.K. seem to have been put aside for now, and the driving momentum for the pair is going to be the USD bearishness that is being seen across the board currently.  Until that dissipates we should see this pair continue higher.

 

Commodity Update

Gold – Gold made further gains on Monday as the protectionist comments of Donald Trump at his inauguration last Friday spooked traders.  A falling U.S. dollar helped lift gold, which gained nearly 1% Monday and is up by 5.6% in the month of January.  As the uncertainties over a Trump administration continue to increase following his inauguration, rather than receding as was hoped, we could see further gains coming for gold in the coming months.

Oil – Crude traders have put rising U.S. production ahead of OPEC production cuts in their thoughts, leading to falling prices on Monday.  Traders are now worried that increased U.S. crude production could outpace the cuts being made by OPEC, even as signs of compliance from OPEC member countries has recently emerged.  The drop took crude back below the $53 a barrel level, and more losses can be expected until trader sentiment turns positive once again.