London 07/12/2022
The US dollar shows signs of recovery as we run the middle of the current week. A part of the negative sentiment in the markets has returned, although the lockdown easings in China should cause the opposite effect. The dollar had important profits on Monday, after the services PMI was announced above the markets’ expectations, these profits continued on Tuesday but today it is dropping again. Since there are no other important announcements within the week for the US economy, the dollar and the US markets will be driven by the perception about the next steps of the Fed. Next week there’s the interest rates decision and the inflation announcement for November so the markets may be highly volatile.
US stock indices are in a deep correction this week and the same picture is for European and UK indices as well. Commodities such as gold and oil also perform losses while the drop in the bond yields continues since the US 10-year bond yield is currently close to 3.47%.
EURUSD (current price at 1.0527) has managed to take back the losses of the previous two days. The US dollar was strong but today’s correction is combined with a strong euro after some good news from the macro space. In Europe, we saw a GDP rise for the 3rd quarter of 2002 by 2.3% (on a yearly basis) which was considered good news for the Eurozone economies. This news erased the negative retail sales result in the Eurozone that was announced on Monday, at -2.7%. Also, Germany had good results in industrial production and factory orders. A possible breakout above 1.06 may trigger a stronger uptrend.
GBPUSD (current price at 1.2213) is mildly bearish this week, after two bearish days and an attempt at recovery today. No important news in the UK this week so the dominant factor on the pair is the US dollar. There are speculations for both central banks (Fed & Bank of England) since their monetary policy is on the run and the decisions are in this month. It takes a bullish breakout above 1.2350 for the uptrend to carry on while any pullback to the zone of 1.20 gives the downtrend scenario extra credits.
USDJPY (current price at 136.51) is bullish this week. The strength of the US dollar prevails on the pair since the bond yields have just a marginal fall. Last week there were voices from Bank of Japan officials that the loose monetary policy must come to end since the inflation problem is getting bigger. This week though, Toyoaki Nakamura, a board member from the Bank of Japan, said that the bank needs to continue with loose monetary policy because the economy is still recovering from the pandemic. If the pair moves above 138 there is a good chance for further bullish recovery. The bears have a better chance if the price drops below 135.
DISCLAIMER: The information produced by a-Quant is of a general nature only. It is not personal financial advice. It does not consider your objectives, financial situation, and personal needs.
