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US dollar continues to run strongly after Yellen speech

Market Overview

The economic data releases from last week (FOMC minutes and Retail Sales) and a key speech from Fed Chair Janet Yellen have merely helped to re-emphasise that the Federal Reserve will be moving towards its next rate increase in December. Despite some arguable mixed messages in Yellen’s speech the dollar strength on track and the early moves today show that this continues. Although Yellen seemed to advocate looser for longer (no real surprise there) there was still nothing really in the speech to suggest that a December hike was in doubt. The dollar index remains around 7 month highs, with the euro fell to its lowest since late July and the dollar bulls are still in the driving seat. Interestingly, after Yellen’s speech looked to suggest allowing the economy and inflation to run hotter, the 10 year Treasury yields continue to strengthen. However it is interesting that whilst equities had previously been reacting positively to positive data, the gains are now becoming harder to find. The outlook is fairly mixed today with Asian markets following a flat close on Wall Street on Friday, whilst European markets are also slightly weaker today.

In forex markets there is a slightly mixed outlook with the yen weaker, whilst the euro has just looked to edge slightly higher after a big sell-off into the close on Friday. There is also a decent showing from the Kiwi today. Gold and silver have also recovered some lost ground from Friday. Oil is trading marginally lower.

Traders will be looking for the final Eurozone inflation reading for September at 1000BST (+0.4% headline CPI expected and a core of +0.8%). Then attention turns to the US again with the New York Fed manufacturing at 1330BST +1.1 exp) whilst Industrial Production is at 1415BST (+0.3% MoM exp) with capacity utilization expected to show a mild improvement (75.6% exp).

Lucky 8 – FX Trader of the Year 2016 competition update

I am now moving on to look at a new set of Lucky 8 instruments for Week 3 of our competition that we are running throughout October. I will be giving daily updates on how the Lucky 8 instruments of the week are performing.

• EUR/USD – The bears remain in control and rallies are being sold into. The bounce today is unwinding a near term stretched position with resistance around $1.1100, $1.1027 and more importantly around $1.1060. Expect pressure on $1.0950. (See below for more detail).
• USD/CAD – The medium term range has been maintained as a 5 week uptrend has been broken. This comes after Thursday’s bearish engulfing candle and a break of support at 1.3135. The hourly chart is also more corrective now with resistance 1.3180/1.3220. Expect pressure on 1.3100.
• EUR/JPY – The medium term outlook is neutral and the market is still lacking direction after a series of neutral candles last week. A close below 113.90 would be a near term break, whilst the hourly chart shows a little rectangle consolidation 113.90/115.15 that if broken implies a projection of 125 pips.
• CAD/JPY – The improvement continues with a near term breakout above key near term resistance at 78.90 to open the September high at 80.28. Strong near term technical back the continued recovery and there is now a basis of support 78.50/78.90 to use for a chance to buy.
• USD/TRY – Is the rally slowing? A number of neutral candles last week suggests that the bulls are still preferred but there is now an uncertainty to the run higher. Support at 3.0865 becomes key now as a breach would open downside. The hourly chart shows a slight bull bias but an emerging neutral outlook. Resistance at 3.1130.
• DAX – Can the DAX sustain the upside recovery. Previous attempts to gain traction in the past few months have failed at lower levels which means that the early sessions this week could be key to the outlook. The resistance band 10,692/10,705 will be key. The hourly chart reflects a range play and this would mean watching for potential key corrective hourly candles for a potential trigger for another retracement.
• Gold – The market needs a breakout to remove the consolidation. Support at $1247 protects $1241 whilst $1265 protects the near term key level at $1277. A break of either extreme level would drive a move in the direction of the break. (See below for more detail).
• Wheat (WZ6 or W#_Z16) – Wheat has finally started to gain bull traction on the beak above 412. This now implies an upside recovery target of 434, a move that would also open the August high around 449. Momentum is increasingly strong and with upside potential, intraday corrections are a chance to buy.
Should you have any questions and would like to discuss this competition further, please don't hesitate to contact us at or give us a call on +44 020 7036 0850.


The bearish outlook continues to drag the euro lower for the near term and a move back towards a test of $1.0950 remains likely. Friday’s strong bear candle wiped out all of Thursday’s recovery gains and saw the bears resume full control. The momentum indicators are firmly in bearish configuration with the RSI in the low 30s but also showing further downside potential in this run lower, whilst the Stochastics are also negatively configured. The hourly chart shows that there has been an early rebound today as the stretched position unwinds but I continue to expect rallies to be sold into and there is now a band of near term resistance between $1.1000/$1.1060 in which I would expect to see the next lower high. A breach of $1.0950 would open $1.0910 but also the key support around $1.0800.
Read the full morning report on Hantec Markets website.

Monday, 17 Oct, 2016 / 9:39

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