Dollar Traders Whether FOMC Minutes Will Keep the March Towards Hikes

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Talking Points:

• Dollar Traders Whether FOMC Minutes Will Keep the March Towards Hikes
• British Pound Fails to Regain Traction after CPI Uptick
• Yen Crosses Steady after Snap Election Call, Will the BoJ Help Soothe Uncertainty?

Dollar Traders Whether FOMC Minutes Will Keep the March Towards Hikes

The Dollar put in for a mixed session Tuesday despite a stir in risk trends. Perhaps the upcoming FOMC minutes can tap into the currency’s more active fundamental drive: monetary policy. From this past session, EURUSD was the biggest mover amongst the majors (with a 0.7 percent rally). This was certainly not inspired by the S&P 500’s nudge higher – a genuine risk upgrade would have likely leveraged a bigger USDJPY move. Once again, this illustrates how influential a more active counterpart can be in the FX market. For the Euro, better-than-expected investor sentiment survey (more on that below) caught the market off guard. Yet, with that EURUSD charge – the biggest since October 15 – we still wouldn’t turn the benchmark’s pair dominant bear trend. Resilience is still the name of the game for the Dow Jones FXCM Dollar Index (ticker = USDollar) as it remains in a tight holding pattern at five-year highs.

As we head into the new trading session, the question is what it takes to break free of the recent consolidation to transition back into a concerted bull trend. A relative performance – taking advantage of eroding confidence or value in the Euro, Yen, Pound – will offer a few sparks, but their capacity is likely limited. The safe haven appeal in the currency’s tie to the FX Volatility Index is another aspect that is light for known catalysts. That leaves US-central policy forecasts. On that front, we have the minutes from the FOMC’s October 28-29 meeting. That wasn’t one of the quarterly meetings with details and updates on forecasts as well as Chairwoman Yellen’s press conference. In other words, there is plenty of opportunity for clarifying the lines of heavily speculated rate forecasts. Currently, Fed Funds and Eurodollar futures are pricing in a first hike around 3Q 2015 and around 50bps of tightening through December 2015. A sentiment shift from the Fed, can tip this view and the Dollar.

British Pound Fails to Regain Traction after CPI Uptick

Interest rates are a key driver for the British pound, but traders’ expectations are not so sensitive that a modest tick in inflation readings can turn a trend as prominent as the moderation of timing for the Bank of England’s first rate hike. This past session, we were watching the October inflation data closely as an important and tangible benchmark for the central bank’s policy evaluation. After four months of firm depreciation, it is reasonable to suspect some equilibrium in the Fed-vs-BoE rate forecast is being found. If we were very close to that balance, the unexpected uptick in the headline UK CPI figure (1.3 versus 1.2 percent expected) would have rallied GBPUSD. Instead, the market was little moved. This is a modest pickup from a five-year low and still well below the 2 percent-target. Perhaps the upcoming BoE minutes will elicit more.

Yen Crosses Steady after Snap Election Call, Will the BoJ Help Soothe Uncertainty?

The rumor and conjecture was confirmed Tuesday. Japanese Prime Minister Shinzo Abe announced a snap election for December 14. Having come under pressure with news of the 3Q official tip into recession as a fall out to the unpopular sales tax hike, the Prime Minister’s program – Abenomics – has been put into jeopardy. This vote will look to reestablish commitment to this plan and to defer the second sales tax hike another 18 months to April 2017. This creates both uncertainty and hope for more ‘stimulus’ – which weighs yen. Yet, that doesn’t seem to be enough to extend these crosses. Ahead, we have the BoJ rate decision. They are unlikely to offer back to back stimulus upgrades, but stranger things have happened lately. More likely, the focus will turn to what Governor Kuroda and crew’s view of the economic and policy future.

Euro Gains Ground after Investor Sentiment Survey Jumps from Multi-Year Low

The Euro was this past session’s top performing ‘major’. Already on the rise through the morning, the shared currency received a sizable boost from the release of the Eurozone and German investor sentiment surveys from ZEW. For November, confidence in Germany posted its first increase in 11 months and subsequently recovered from the previous month’s negative reading. The region-wide report posted a similar rebound from a hefty tumble. Does this data meaningfully change investors’ view of the region’s investment environment as well as the economy and Euro performance by association? No. If the ECB confirms government bond buys or Thursday PMIs show economic recovery, we may.

Australian and New Zealand Dollars – A Return to Monetary Policy Extremes

The Australian and New Zealand Dollars were remarkably on opposite ends of the monetary policy spectrum earlier this year. On one hand, the RBNZ was on run of four consecutive rate hikes while the RBA was just coming off a spaced series of rate cuts. With a slowdown in global activity (and thereby trade demand), a weakening China, imported disinflation; they may be conforming on the dovish side.

Emerging Market: Russia Tries its Hand at Bond Auctions Again

The MSCI Emerging Market ETF was once again little changed in its tightening congestion pattern as volume dropped to a four-month low. Traders are looking for a clear signal on capital flows for the asset type. One member of this group is making its own progress. The Russian Ruble advanced 0.7 percent this past session amid news the Finance Ministry would try to sell bonds for the first time in five weeks today.

Gold More Inspired by News of Russian Buying, Uncertainty or Stimulus?

What is driving gold? Answering that question better positions us to establish whether there is follow through to be found from the fundamental theme. On the headlines, Russian Central Bank Governor Elviar Nabiullina said in testimony that the central bank has bought 150 metric tons of the precious metal this year – which would suggest a 35 ton purchase since the beginning of October (the most in 16 years). That is material, but not a lasting bid. More staying power comes through updates like Japan’s snap election or the collective shift towards policy easing. **Bring the economic calendar to your charts with the DailyFX News App.

ECONOMIC DATA

GMT	Currency	Release	Survey	Previous	Comments
23:30	AUD	Westpac Leading Index (MoM) (OCT)		-0.10%	This measure isn’t likely to be market moving for the Aussie as this measure hasn’t been volatile this year
0:00	AUD	Skilled Vacancies (MoM) (OCT) (OCT)		0.50%	It has been increasing this year.
1:45	CNY	MNI November Business Indicator
4:30	JPY	All Industry Activity Index (MoM) (SEP)	1.00%	-0.10%	This measure isn’t expected to be market moving after the GDP report on Sunday showed that Japan entered into a recession in the 3Q.
5:30	JPY	JPY Nationwide Department Sales (YOY) (OCT)		-0.70%	Retail sales have been declining since Japan increased the sales tax in April 2014.
5:30	JPY	JPY Japan Nationwide Retail Sales (YOY) (OCT)		-0.70%
9:00	EUR	EUR Euro-Zone Current Account (euros) (SEP)		18.9B	Europe’s current account has been rising in the past five years. In August, Europe’s current account was lower than the value at the beginning of the year. With many countries in Europe like Germany being dependent on exports, this measure might help paint a picture of Europe’s economic situation.
9:00	EUR	EUR Euro-Zone Current Account (euros) (SEP)		15.1B
10:00	CHF	CHF ZEW Survey (Expectations)		-30.7	It has been declining which might show that confidence over business conditions has been declining. Since Switzerland is dependent on the Eurozone for its exports, weakness in the Eurozone might be weighing on confidence in Switzerland.
10:00	EUR	EUR Euro-Zone Construction Output s.a. (MoM) (SEP)		1.50%	On a MOM basis, the Eurozone Construction has been rising in all but two months out of the year.
10:00	EUR	EUR Euro-Zone Construction Output w.d.a. (YoY) (SEP)		-0.30%
12:00	USD	USD MBA Mortgage Applications (NOV 14)		-0.90%	A volatile measure
13:30	USD	USD Building Permits (OCT)	1040K	1031K	These measures can help us measure the strength of the housing market.
13:30	USD	USD Housing Starts (OCT)	1025K	1017K
13:30	USD	USD Housing Starts (MoM) (OCT)	0.80%	6.30%
13:30	USD	USD Building Permits (MoM) (OCT)	0.60%	2.80%
21:00	NZD	NZD ANZ Job Advertisements (MoM) (OCT)		2.40%	Not likely to be market moving as the measure is for the month of October.
21:45	NZD	NZD Producer Prices- Inputs (QoQ) (3Q)		-1.00%	Price changes on the Producer side can impact the CPI figure. Inflation has been recently at the bottom of RBNZ inflation target
21:45	NZD	NZD Producer Prices- Outputs (QoQ) (3Q)		-0.50%

GMT	Currency	Upcoming Events & Speeches
9:00	EUR	EUR ECB's Praet Speaks in Frankfurt
9:30	GBP	GBP Bank of England Minutes
14:45	GBP	GBP BOE's Shafik Speaks at Parliament Hearing in London
19:00	USD	USD Fed Releases Minutes from Oct. 28-29 FOMC Meeting

SUPPORT AND RESISTANCE LEVELS

To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal

To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table

CLASSIC SUPPORT AND RESISTANCE

EMERGING MARKETS 18:00 GMT							SCANDIES CURRENCIES 18:00 GMT
Currency	USD/MXN	USD/TRY	USD/ZAR	USD/HKD	USD/SGD		Currency	USD/SEK	USD/DKK	USD/NOK
Resist 2	14.0100	2.3800	12.7000	7.8165	1.3650		Resist 2	7.5800	6.1750	7.2900
Resist 1	13.6800	2.3000	11.8750	7.8075	1.3250		Resist 1	7.5000	6.0900	7.0000
Spot	13.5823	2.2315	11.1048	7.7548	1.2974		Spot	7.4186	5.9681	6.7772
Support 1	13.0300	2.0700	10.2500	7.7490	1.2000		Support 1	6.7750	5.8000	6.3145
Support 2	12.8350	1.7500	9.3700	7.7450	1.1800		Support 2	6.0800	5.7300	6.1300

INTRA-DAY PROBABILITY BANDS 18:00 GMT

CCY	EUR/USD	GBP/USD	USD/JPY	USD/CHF	USD/CAD	AUD/USD	NZD/USD	EUR/JPY	Gold
Res 3	1.2573	1.5766	117.89	0.9723	1.1367	0.8812	0.8030	146.88	1214.79
Res 2	1.2548	1.5738	117.55	0.9700	1.1347	0.8790	0.8008	146.50	1207.54
Res 1	1.2523	1.5709	117.21	0.9677	1.1327	0.8769	0.7986	146.12	1200.28
Spot	1.2473	1.5652	116.54	0.9632	1.1286	0.8726	0.7943	145.36	1185.78
Supp 1	1.2423	1.5595	115.87	0.9587	1.1245	0.8683	0.7900	144.60	1171.28
Supp 2	1.2398	1.5566	115.53	0.9564	1.1225	0.8662	0.7878	144.22	1164.02
Supp 3	1.2373	1.5538	115.19	0.9541	1.1205	0.8640	0.7856	143.84	1156.77

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--- Written by: John Kicklighter, Chief Strategist for DailyFX.com

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