FOREX 4 minutes to read

NY Open: Beware a 'Santa rally' in USD

Michael O’Neill

FX Trader, Loonieviews.net

Summary:  The greenback has steadily ticked higher since today's New York bell. Is this a sign of things to come?


The concept of a US dollar rally during the holiday-shortened week ahead is nothing to “ho, ho, ho" about. EURUSD climbed from 1.1272 last Friday to 1.1484 today – that’s 0.0212 points in conditions where the Federal Reserve is raising rates and maintains plans to do it twice more in 2019.

The single currency is still below the 23.6% retracement level of the 2018 range, suggesting the rally is merely a correction. 

GBPUSD rallied from 1.2530 to 1.2705 during the same time span despite rising risks of a “no-deal” Brexit. The Bank of England is concerned; it has left rates unchanged and said that Brexit risks are hurting the economy. It seems very unlikely that GBPUSD has a lot of upside from current levels in the present environment. 

USDJPY collapsed from 113.64 to a low of 111.57. Sure, the move was a reaction to rising risk-aversion and sinking US Treasury yields, but prices are still above support in the 111.10- 111.40 area.  

There is a lot of major data due on Friday, but arguably the conclusions from yesterday’s Federal Open Market Committee meeting and today’s BoE meeting render the data moot, providing a lot of incentive to square positions ahead of next week’s holidays. It could be happening now as the US dollar has steadily ticked higher since the New York open.

This morning’s US data were mixed and not really a factor for FX but more so for equities. The Philadelphia Fed Manufacturing Index was 9.4 versus a forecasted 15.0. Initial Jobless Claims were as expected.

Wall Street tipped into the rate at the open after looking like it would have a positive start a few hours earlier. Traders were unhappy with the news that the US has stepped up the pressure on China. The Washington Post reported that the Trump administration and a dozen other countries which include the UK, Canada, Japan and Germany are planning to condemn China for its efforts to steal trade secrets and advanced technology from other nations. Sanctions are expected.
USDJPY, source: Saxo Bank
Disclaimer

The Saxo Bank 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 Bank 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 Bank 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 Bank 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 Bank 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 Bank 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/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 Markets 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 Markets or its affiliates.