background image background image background image

NY Open: Greenback slip, sliding away

Forex 4 minutes to read
MO
Michael O’Neill

FX Trader, Loonieviews.net

Summary:  Green shoots of recovery are evident in equities ahead of the Fed's monetary policy announcement later today. But the greenback is grinding lower in tack with wilting Treasury yields.


The greenback is grinding lower, slowly but steadily in the run-up to the Federal Open Market Committee meeting. US dollar sellers are taking their lead from 10-year US Treasury yields which have ticked down from 2.823% to 2.810%. Those traders expect a “dovish” tilt to the FOMC statement, Summary of Projections and from Fed chair Jerome Powell. 

Powell got the dovish ball rolling at the end of November when he said that interest rates were “just below” neutral, a marked change from his previous comment that rates were “a long way from neutral”. Traders are hoping that the FOMC will help them rebuild from the carnage on Wall Street for the past two weeks. It has already started. European bourses and the major US equity indices are modestly higher. The Dow Jones Industrial Average gained 0.67% as of 1400 GMT.

EURUSD opened in New York at 1.1364 and is trading at 1.1428. A break above resistance at 1.1440 would trigger a sharp rally to 1.1510, which is the 50% Fibonacci retracement level of the September-November range.

USDJPY is suffering from the drop in US Treasury yields and is probing uptrend channel support which has survived multiple tests since June. A decisive break below 112.10 would extend losses to 110.70

Oil traders are still reeling from yesterday’s 7.0% plunge. Prices have found a short-term bottom in the $45.80-$46.00/barrel area. Some traders believe thin, holiday markets exaggerated the oil price drop. Prices will also find support from positive news around the US/China trade talks.

The drop in oil spanked the Canadian dollar. USDCAD rallied from 1.3393 to 1.3495 yesterday and then spent the overnight session in a 1.3451-1.3480 range. Canadian CPI was -0.4% in November, which was “as expected” because of the drop in oil prices. USDCAD ignored the data and sank on the back of broad US dollar weakness.
Chart: EURUSD 4-hour. Source: Saxo Bank
Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged foreign exchange trading); Type 4 Regulated Activity (Advising on securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.