- The S&P500 is having a small pullback down after reaching a new all-time high this Thursday.
- The trend remains strongly bullish with the 50, 100 and 200-day simple moving averages rising and widening while the RSI, MACD and Stochastics are in positive territories.
- Small pullbacks can find support near 2,917.00 (August 29 high) and 2,900.00 figure.
S&P500 daily chart
Spot rate: 2,925.00
Relative change: -0.28%
Main trend: Bullish
Resistance 1: 2,938.00, 138.2% Fibonnacci extension (Aug-Sept, high/low)
Resistance 2: 2,950.00, 161.8% Fibonnacci extension (Aug-Sept, high/low)
Resistance 3: 3,000.00 round figure
Support 1: 2,917.00 August 29 high
Support 2: 2,900.00 figure
Support 3: 2,877.00 January swing high
Support 4: 2,863.75 August 7 high
Support 5: 2,853.00 August 9 low
Below are the key quotes, via Reuters, from Fitch Ratings' assessment of Switzerland's credit rating.
- Fitch affirms Switzerland at 'AAA'; outlook stable.
- We do not expect the Swiss National Bank to tighten monetary policy before next year.
- We do not envisage tax reform to have an adverse impact on Switzerland's attractiveness for corporate investments.
"Gold positioning was little changed but silver speculators covered more shorts in comparison to longs that liquidated, while platinum and palladium speculators added length and covered shorts," TD Securities analyst noted.
"Stabilizing emerging markets and President Trump's tariffs on China being interpreted as less impactful than previously feared spurred risk-on markets and a weakening in the greenback, which ultimately persuaded precious metal traders to add back length."
"But, with the trade situation still very uncertain and the Fed set to increase interest rates next week, we do not anticipate any substantial rally or increased spec positioning in precious metals."
- Dow outperforms other major sectors on a weekly basis.
- Financials and technology slip on Friday.
- WTI rally helps energy finish week on a strong note.
After starting the last day of the week modestly higher, major equity indexes in the United States closed mixed as investors booked their profits ahead of Monday's sector reshuffle. During the first half of the session, both the Dow Jones Industrial Average and the S&P 500 indexes touched fresh record highs before retracing their gains into the closing bell. The S&P 500 Financials and the S&P 500 Information Technology sectors, which performed well throughout the week, finished the day 0.36% and 0.34% lower respectively.
Commenting on today's market action, “The feeling is the stock market resembles a drunk at the top of a hill. He’s wobbling, and you know that drunk’s going to fall, but you just don’t know when or how hard,” Bernard Baumohl, the chief global economist at the Economic Outlook Group in Princeton, New Jersey, told Reuters.
Following some wild swings during the NA session, the barrel of West Texas Intermediate settled near the $71 mark with a 1% gain and boosted the S&P 500 Energy Index, which added 0.72% on the day. Meanwhile, led by the AT&T's sharp rally, the S&P 500 Telecom Services Sector added 1%.
The Dow Jones Industrial Average rose 70.75 points, or 0.27%, to 26,727.73, the S&P 500 lost 1.44 points, or 0.05%, to 2,929.31 and the Nasdaq fell 41.86 points, or 0.52%, to 7,986.37. On a weekly basis, The DJIA and the S&P 500 gained 2.18% and 0.83%, respectively, while Nasdaq shed 0.3%.
- Aussie main bear trend is getting tested as the AUD/USD is nearing the 50-day simple moving average (DMA) and the multi-month bear trendline from late January 2018.
- AUD/USD bulls want to break above 0.7294-0.7307 zone (August 13 high, 50 DMA) to target 0.7383 August 21 high and 0.7485 July 10 high.
- The RSI, MACD and Stochastics indicators are in positive territories which suggests a continuation of the bullish momentum above the 0.7294-0.7307 zone.
AUD/USD daily chart
Spot rate: 0.7284
Relative change: -0.09%
Main trend: Bearish
Short-term trend: Bullish
Resistance 1: 0.7294-0.7307 August 13 high, 50 DMA
Resistance 2: 0.7383 August 21 high
Resistance 3: 0.7485 July 10 high
Support 1: 0.7255 August 13 low
Support 2: 0.7236 August 24 low
Support 3: 0.7200 figure August 15 low
Support 4: 0.7144 September 5 low
Support 5: 0.7085, 2018 low
Support 6: 0.7000 figure
Support 7: 0.6830 January 15, 2016 low
According to analysts from Rabobank, the Mexican peso remains the most attractive carry currency and offers the best risk-adjusted returns. They see that the relationship between USD/MXN and oil remains insignificant and the relationship with 2yr rate differentials has diminished as it still remains attractive despite the decline. They noted that NAFTA risks continues to loom but progress between the US and Mexico erodes the worst case scenario for Mexico even if a trilateral agreement isn’t reached.
“MXN is the best performing currency this year and with a gain of 4.5% against USD, it is the only currency to post gains of more than 1.5% against the Greenback. It is interesting to note that MXN sits with traditional safe havens JPY and CHF (and NOK) as one of the only currencies to rally against USD this year. Of course, at first glance MXN would seem like an odd bed fellow with safe haven currencies given that MXN has historically been one of the highest beta currencies globally (alongside ZAR). But, MXN has not relinquished that role.”
“We maintain the view that MXN is likely to continue outperforming most EM currencies in the coming months and we still prefer being long MXN and collecting the carry than positioning for a move higher in USD/MXN. That being said, for those unable to be nimble in positioning it is important to be cognisant of the likely spikes in USD/MXN we will see on the back of carry trade unwinds and profit taking. We have seen these sharp, short-lived moves occur on numerous occasions in recent months and we expect that we will continue to see these types of moves in the months to come. For USD/MXN sellers and carry trade players this offers opportunities for more favourable entry levels but of course it also poses a risk to those already holding long MXN positions and from their perspective USD/MXN protection through options looks historically attractive.”
“Our USD/MXN forecast maintains the same logic we have outlined over recent months which has held us in good stead. We expect carry trade demand to remain supportive of MXN but our bullish USD view is likely to mean that a 17 handle is off the cards for USD/MXN. We expect the pair to primarily trade in the 18-19 region over the course of the coming months. We suspect a NAFTA deal is unlikely in the coming weeks but headline noise could lead to a rise in USD/MXN vols as could the US midterms in November, particularly if a NAFTA deal has not been solidified by that juncture.”
“We expect Banxico to leave rates on hold at 7.75% which we expect will prove to be the terminal rate of this hiking cycle. While it is true that inflationary pressures are ticking slightly higher, we don’t expect CPI inflation to remain on a course higher and instead see pressures easing as we head into next year.”
Analysts at Danske Bank, expect HICP inflation to slow further to 2.01% y/y driven by lower contribution from both food and energy prices in the Eurozone. Also of attention next week are the Italian projections with special attention to the budget deficit.
“In the euro area, we will receive HICP figures for September on Friday. In August, headline inflation fell to 2.05% y/y and we expect the September print to slow further to 2.01% y/y, still driven by lower contribution from both food and energy prices. Although we saw negotiated wages pick up in Q2, core inflation disappointed at 0.96% y/y in August from 1.07% y/y in July and we expect September’s figures to linger at 0.97% y/y, as the feed through from higher wages materialises only gradually.”
“On Thursday, Italy will publish growth, dept and deficit projections for 2019 and it will be very interesting to see if Finance Minister Tria has succeeded in keeping the budget deficit in line with EU regulations or if populist leaders Matteo Salvini and Five Star Movement leader Di Maio achieved extensive spending on their flagship proposals. We expect the 2019 budget to include some kind of tax reforms and citizen income, but policies will likely be phased in only gradually or implemented by tweaking some already existing schemes in order to avoid the deficit breaching EU rules. Therefore we expect the 2019 to land somewhere between 2.0-2.4%.”
- The US Dollar Index (DXY) bull trend is transitioning into a neutral to bearish trend as the market broke below the 100-day simple moving average (DMA).
- DXY had a small reaction up after the sell-off seen on Thursday but the move seem only corrective at this stage. The RSI, MACD and Stochastics indicators are in negative territories suggesting bearish momentum.
- Bears targets are 93.71 July 9 swing low and 93.17 June 14 swing low.
DXY daily chart
Spot rate: 94.21
Relative change: 0.33%
Trend: Neutral to bearish
Resistance 1: 94.43-51 August 28 swing low, 100-day SMA
Resistance 2: 94.91 July 27 high
Resistance 3: 95.00 figure
Resistance 4: 95.24 July 13 high
Resistance 5: 95.52 August 6 high
Resistance 6: 95.65 July 19 high
Support 1: 93.71 July 9 swing low
Support 2: 93.17 June 14 swing low
Support 3: 92.24 May 14 swing low
According to Andrew Grantham, an analyst at CIBC, the Bank of Canada will likely raise rates in October despite today’s inflation data, supporting the Canadian dollar.
“August inflation wasn’t a big market-mover, but over the past year the currency has been swayed slightly more by CPI results than GDP. That largely reflects the bigger surprises in CPI data on average. However, it could also show that investors are paying too much attention to such data. Even though the BoC’s mandate is inflation, its decisions seem to have been driven more by surprises in GDP growth recently. That’s because growth is a guide for future inflation and, as we’ve seen in the past two months, the CPI figures can be choppy on a month-to-month basis.”
“We don’t expect the BoC to read too much into this month’s headline pullback or core uptick, and hike interest rates in October as long as there’s a resolution to NAFTA uncertainty. That would support the C$ in the near-term.”
As the real economy is in good shape in the US, the Federal Reserve is on autopilot until the target range reaches 2.75-3.00%, where most FOMC members’ estimate of the neutral rate, according to analysts from Danske Bank.
“In line with everyone else, we expect the Fed to raise the target range by 25bp to 2.00-2.25% at next week’s meeting. We do not expect it to be necessary for the Fed to send any new important signals to the markets. We believe the most important parts of the statement will remain unchanged and even if the sentence ‘monetary policy is accommodative’ is removed or changed, it should not matter much, in our view, as it would just reflect reality.”
“With respect to the dots, the Fed will most likely still signal another hike in December (and probably that more FOMC members support this) and three hikes next year (it was divided between two or three additional hikes next year and it would take four members to move it higher). The Fed will also still signal that it is going to raise the Fed funds rate above the longer-run dot. The longer-run dot may be revised higher to 3.00%.”
“Most FOMC members are signalling that the (nominal) natural rate of interest (the rate where monetary policy is neither expansionary nor contractionary) is around 2.75- 3.00% and many, even the more dovish members, have signalled in speeches that the Fed is on autopilot until neutral is reached. That means that the hikes in December and in March seem very likely. Another hike during the summer next year, perhaps June, is also likely.”
“After the Fed funds rate reaches neutral, it is more ‘stop and go’ depending on how the economy is doing and how markets are reacting to monetary tightening. At the June meeting, Fed Chair Powell hinted that the reason why the Fed removed much of its forward guidance was because he wants more flexibility going forward. It is also going to be easier, as every meeting is ‘live’ next year when Powell is hosting a press conference after every meeting. We believe the Fed will be able to continue hiking with one hike in H2 19 (i.e. three hikes next year and a total of five hikes from now until year-end 2019). Markets are pricing in 3.75 hikes from now until year-end 2019 (i.e. including the hike next week).”
Sacha Tihanyi, Deputy Head of Emerging Markets Strategy at TDS, explains that they see inflation decelerating much less rapidly through 2018. Banxico could start easing in April according to them.
“For the price perspective past the end of this year, our projection for 2019 is less constructive due to still high current inflation within the context of elevated expectations and the potential for energy price shocks to interact positively with expectations. This however does not nullify the chance that Banxico will ease in 2019 even if inflation remains above target and converges more slowly. We are optimistic that expectations should begin to fall more rapidly once the current energy price surge begins to dissipate, this may not be for a period of time, though peso stability is very helpful for supporting a quicker convergence in expectations.”
“We are thus changing our long-held rate call for Banxico to begin easing in December, to a view that easing will begin at the first meeting in Q2 (April), and then proceed at a 25bp cut at every other meeting. This will imply an end of 2019 overnight rate of 6.50%. We see cuts continuing in 2020, to reach a floor of 5.25% in the overnight rate by October.”
“We note that inflation uncertainty is further clouded by risks posed by the upcoming fiscal budget, though the exact scope and speed of implementation of the Lopez-Obrador administration's fiscal policy agenda remains unknown. We see the potential for an increase in fiscal expenditure to pressure not only inflation, but also the current account deficit. With a relatively tight labour market and strong wage growth, in the presence of still elevated inflation expectations, the potential for an opening of the fiscal spigots to complicate Banxico's inflation outlook remains elevated.”
Analysts at Wells Fargo, expect the Federal Reserve to raise rates next week and continued with 25bps hikes per quarter through the third quarter of 2019.
“The FOMC is all but certain to take the fed funds rate up another 25 bps at next week’s meeting. Currently the market places the chance of a quarter-point hike at 98%. That will make any communication tweaks about future rate hikes the main draw on Wednesday.”
“There are likely to be few changes to the post meeting statement. Recent indicators point to growth remaining “strong.” Risks still look to be balanced as the Fed navigates the tailwinds of fiscal stimulus with the potential headwinds of trade dislocations and volatility in emerging markets.”
“While the statement is unlikely to provide much new insight, updated economic projections should help bring the near-term rate path into view.”
“More uncertainty surrounds 2019. The additional two rate hikes before the end of the year would bring the fed funds rate to 2.25%-2.50%, only about 50 bps below what most Fed officials estimate to be “neutral”.”
“We are in the camp that the FOMC will carry on raising the fed funds rate 25 bps points once a quarter through Q3-2019. At that point, the fed funds rate is likely to be slightly restrictive based on FOMC estimates. Markets, however, are more skeptical. Futures point to the fed funds rate rising to about 2.75% by next September.”
“The timing and degree of policy changes next year come with an added degree of uncertainty as we reach a critical stage of the cycle. Not only are there questions about neutral, but press conferences after each meeting and new members, including Vice Chair Rich Clarida this month, may also sway the timing and path of policy changes.”
- MXN lagged during the week among emerging market currencies.
- USD/MXN steady, for now, under 19.00 and above 18.50.
The Mexican peso recovered on Friday, after falling to the lowest in a week against the US dollar and it was about to end the week unchanged despite the rally in many emerging market currencies.
The USD/MXN pair peaked at 18.93, the highest since September 13 and then dropped back to 18.80, where it was trading, slightly below the level it had a week ago. The greenback remained mostly flat against commodity currencies and extended weekly losses versus most emerging markets.
Latin American currencies posted strong weekly gains while the Mexican peso failed to benefit. Weeks ago, when the greenback soared versus those currencies, MXN showed resilience. During the last session, they rallied but the peso also remained decoupled.
The USD/MXN continues to consolidate between 18.70 and 18.90, after the slide from 19.67 (Sep 5 high). The short-term trend points sideways with a modest bearish bias. The main drivers for the week ahead are likely to be trade talks between Mexico, US and Canada, sentiment toward EM and the Federal Reserve meeting (the following week will be the turn of Banxico).
“We expect the pair to primarily trade in the 18-19 region over the course of the coming months. We suspect a NAFTA deal is unlikely in the coming weeks but headline noise could lead to a rise in USD/MXN vols as could the US midterms in November, particularly if a NAFTA deal has not been solidified by that juncture”, wrote analysts at Rabobank. They see the MXN likely to continue outperforming most EM currencies in the coming months.
USD/MXN Levels to watch
The current consolidation phase is likely to continue as longs as it remains within 18.70 and 18.90. A close above 19.05 could signal more gains ahead with a target at 19.15; on top, the next strong resistance is seen around 19.40. On the flip side, a close below 18.70 is needed to open the doors for a slide to 18.50. The key support is the barrier at 18.40/50.
"The FOMC will hike 25bp in September, and a few more Fed officials should signal their comfort with four rates hikes for this year in the dot plot," TD Securities analysts note.
"The 2020 and 2021 dots will continue to show a sizable majority supports hiking beyond neutral, while the median longer-run dot could drift down to 2.75% thanks to newly added participants. This then raises the odds that the statement language is modified to suggest “policy remains somewhat accommodative.” Risks should remain balanced, with Chair Powell potentially de-emphasizing some of the downside risks that have preoccupied markets of late."
"Rates: The September hike is well priced in and the market is pricing in more than an 80% chance of a December hike and about 2 hikes next year. Given recent price action, our base case scenario for the Fed should result in a modest bull steepening reaction. Note that the market is not pricing in hikes beyond neutral, which could make it vulnerable to a bear flattener if the Fed stresses on overshooting neutral."
"FX: We believe that the market is leaning towards a hawkish reaction, owing to recent Fed speeches and elevated positioning in the USD. While we think the Fed maintains the accommodative language and delivers a rate hike, this is mostly priced in now. That leaves a possible asymmetric response in the FX markets where the USD weakens more on a dovish take than rallies on a hawkish one. If the market takes the USD higher on that baseline, we think it offers attractive risks rewards to fade against the EUR."
- Oil rig count ticks down to 866 in the U.S.
- OPEC is reportedly looking to increase output by 500K bpd.
- OPEC and its allies to meet in Algeria on Sunday.
Following Thursday's steep fall, the barrel of West Texas Intermediate gained traction on Friday and rose to its highest level since July 11 at $71.77 as investors reacted to the Iranian crude exports falling more than initially anticipated. However, ahead of Sunday's meeting in Algeria, a Reuters report claiming that the OPEC and its allies could decide to increase the output by 500,000 barrels per day triggered a heavy sell-off and dragged the WTI to a daily low at $70.
Citing three sources familiar with the talks, Reuters said that OPEC and non-OPEC countries pumped less oil than they did in July and were planning to introduce a 500K bpd production boost.
On the other hand, the weekly report published by Baker Hughes Energy Services revealed that the number of active oil rigs in the United States decreased to 866 from 867 recorded a week ago and helped the WTI advance into the positive territory. At the moment, the barrel of WTI is trading at $71 and is up 80 cents, or 1.15% on the day.
Technical levels to consider
The initial support for the pair aligns at $70 (psychological level) before $69.30 (20-DMA) and $68.45 (50-DMA). On the upside resistances could be seen at $71.75 (daily high), $72.90 (May 22 high) and $74 (Jun. 28 high).
Next week, the Federal Reserve will meet. According to analysts from Danske Bank, continued Fed hikes should help EUR/USD revisit the 1.15 area again during the course of the autumn.
“With the Fed set to stay on autopilot for now, US rates are set to stay a source of USD support. This should help cement the status of the dollar as a carry currency both in terms of the level of and the change in short-end yields.”
“With the Fed still keen to continue the process of moving rates back towards ‘neutral’, it remains too early in our view for the FX market to price the Fed going on hold. This should help EUR/USD revisit the 1.15 area again during the course of the autumn.”
“As the ECB is set to signal a first hike coming up at a time where the Fed could be looking to go on hold, a EUR/USD uptick will start to materialise. Indeed, it is when easing stops – rather than when hikes occur - that currency appreciation is seen, and vice versa.”
- Gold bear trend is on hold for the fifth consecutive week as the market is trading sideways.
- The 50, 100 and 200-period simple moving averages are coiled together as Gold is trading sideways. Gold has a neutral to bullish bias as long as it holds above 1,189.49.
- Bulls target can be located near 1,225.90 (July 17 low).
Gold 4-hour chart
Spot rate: 1,197.17
Relative change: -0.84%
Short-term trend: Bullish above 1,182.90
Resistance 1: 1,204.10, August 3 swing low (key level)
Resistance 2: 1,211.17 July 19 low
Resistance 3: 1,214.30 August 28 high
Resistance 4: 1,217.89-1,220.90 zone, August 6 high and July 18 low
Resistance 5: 1,225.90 July 17 low
Resistance 6: 1,237.60 July 3 swing low
Support 1: 1,194.30 March 10, 2017 low
Support 2: 1,189.49 September 4 low
Support 3: 1,172.82 current 2018 low
Support 4: 1,145.20 March, 1 2017 low
- USD/CHF main bear trend remains intact.
- USD/CHF is trading below its 50, 100 and 200-period simple moving average suggesting a strong bearish bias. USD/CHF rebounded from the 0.9550 level and the market is set to consolidate the recent losses.
- If bulls manage to break the 0.9600 resistance they can expect to reach the 0.9650 level (August 29 low). USD/CHF remain strongly bearish and any pullback up can be short-lived.
USD/CHF 4-hour chart
Spot rate: 0.9588
Relative change: -0.02%
Main trend: Bearish
Resistance 1: 0.9580-0.9600 April 17 low, figure
Resistance 2: 0.9650 August 29 low
Resistance 3: 0.9700 figure
Resistance 4: 0.9745-47, August 28 low, 200-day simple moving average
Resistance 5: 0.9768 September 4 swing high
Resistance 6: 0.9788 June 7 swing low (key level)
Resistance 7: 0.9807 August 22 low
Resistance 8: 0.9820 August 25 low
Support 1: 0.9550 figure
Support 2: 0.9500 figure
Support 3: 0.9400 figure
Below are the key quotes from the European Council President Donald Tusk's recently published statement on the Brexit negotiations.
- The European Union and its leaders fully respect the UK’s decision expressed in the referendum on leaving the EU.
- We studied the Chequers proposals in all seriousness. The results of our analysis have been known to the British side in every detail for many weeks.
- The UK stance presented just before and during the Salzburg meeting was surprisingly tough and in fact uncompromising.
- The response of the EU27 leaders was to reiterate our trust in chief negotiator Michel Barnier and to reiterate our position on the integrity of the Single Market and the Irish backstop.
- While understanding the logic of the negotiations, I remain convinced that a compromise, good for all, is still possible.
Speaking to reporters after his meeting with Turkish leaders, Germany's Finance Minister Olaf Scholz crossed the wires saying that Turkey didn't seek an economic aid in Berlin talks today and added that he was not expecting President Erdo?an to do that next week. Scholz also stated that he was expecting Turkey to recover from economic difficulties.
- USD recovery in the NA session weighs on AUD/USD.
- The pair remains on track to close the second straight week higher.
- Markit data shows robust expansion in the manufacturing sector.
After rising above the 0.73 mark for the first time in three weeks on Friday, the AUD/USD pair reversed its course in the American trading hours and set its daily low at 0.7264 before recovering a small part of its losses. At the moment, the pair is trading at 0.7280, down 0.18% on the day.
In the absence of significant macroeconomic data releases from Australia on Friday, the greenback's market valuation remained the primary driver of the pair's price action. On the back of a sharp drop seen in the GBP/USD pair, the US Dollar Index broke above the 94 handle and now remains on track to close the day with modest gains above 94.20.
Today's data from the U.S. showed that the business activity in the manufacturing sector expanded at a stronger pace than expected in September with the Markit PMI data improving to 55.6 from 54.7. On a negative note, the Service PMI dropped to 52.6 from 54.8 and missed the market expectation of 55.
With an empty economic calendar in the remainder of the session, the pair is likely to stay in its recent range. Despite today's retreat, the pair remains on track to close the week around 140 pips higher.
Technical levels to consider
The initial resistance for the pair aligns at 0.7300/05 (psychological level/daily high) ahead of 0.7370 (100-DMA) and 0.7450 (Aug. 9 high). On the downside, supports are located at 0.7260 (50-DMA), 0.7180 (20-DMA) and 0.7140 (Sep. 18 low).
- USD/JPY bulls are extending the bull trend by keeping the market above the 112.50 resistance.
- USD/JPY is trading above its 50, 100 and 200-period simple moving averages (SMA) which are rising and widening confirming the bullish bias. The market is also trading above the bull trendline. If bulls are able to keep the market above 112.50 the next objective is 113.18, July high.
- However failure to break above 113.18 can lead to a rotation down towards 112.00 figure
USD/JPY 4-hour chart
Spot rate: 112.58
Relative change: 0.09%
Main trend: Bullish
Resistance 1: 113.18, July high
Resistance 2: 114.00 figure
Resistance 3: 114.80 November 2017 high
Support 1: 112.50 figure
Support 2: 112.00-112.17 zone, figure and August 1, swing high
Support 3: 111.84 August 29 swing high
Support 4: 111.84 August 29 swing high
Support 5: 111.54 August 6, high
Support 6: 111.45 August 8 high
Support 7: 111.00 figure
Support 8: 110.75, July 23 swing low
Support 9: 110.00 figure
Support 10: 109.37 June 25 low
- US dollar recovers ground as Euro gets hits by Brexit concerns.
- EUR/USD still heads for weekly gains despite Friday’s slide.
The EUR/USD pair pulled back from the highest level since June and trimmed part of yesterday’s gains. A modest recovery of the US dollar and UK PM May comments on Brexit hit the Euro.
Earlier today, the pair extended the rally and reached 1.1802. It lost momentum around the 1.1800 and pulled back modestly. After UK PM May demanded respect from EU leaders and raised concerns about a “no deal” outcome on Brexit, EUR/USD dropped following the dramatic slide of GBP/USD.
After the beginning of the US session, the euro bottomed at 1.1730. During the last hours it had been moving sideways in the 1.1765/1.1730 range, down for the day, but still more than a hundred pips above the level it had a week ago. It is about to post the highest weekly close since June. Weekly gains were supported by a weaker US dollar. Next week the key event will be the Fed’s meeting. A rate hike is expected and the tone and projections of the FOMC staff are likely to set the tone of the US dollar.
Levels to watch
The rally of EUR/USD eased on Friday, but the trend still points to the upside. As long as it remains above an uptrend line from August lows, currently at 1.1640, the bullish trend will remain in place. Before that line, support is seen at 1.1720 and 1.1700.
To the upside, the immediate resistance is seen at 1.1765/70 and then the 1.1800/05 area. A break higher could clear the way for a test of 1.1850.
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