Morning Report 3rd January 2017

Dollar enjoys New Year as yield gap most since 99

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The dollar recovered from a two-week low against a basket of six major currencies on Monday, though trade was thin with many markets closed for the New Year holiday.

The greenback had soared to 14-year highs in December, boosted by market expectations that the U.S. Federal Reserve will hike rates as many as three times this year, and that President-elect Donald Trump will stoke growth and inflation with a programme of fiscal expansion


AUD/USD opened the week at 0.7175 and touched a low of 0.7161.The pair then reversed directions and climbed to a high of 0.7247, testing resistance at 0.7223. AUD/USD was unable to consolidate at this level and closed the week at 0.7178. Overall  the sentiment remains bearish.


USD/JPY opened the week at 117.30 and climbed to a high of 117.81, testing resistance at 117.52. The pair then reversed directions and dropped to a low of 116.02. USD/JPY closed the week at 116.76. Sentiment remains Bullish.


EUR/USD made a move to the upside in thin end-of-year trading, closing 2016 above 1.05. The first week of 2017 is already packed with events, with inflation and PMIs standing out. The monetary and fiscal divergence seen in 2016 is likely to spill over into early 2017. The ECB continues printing money while the FED is set to hike also in the new year. Sentiment remains bearish.


Gold markets fell slightly during the day on Friday, as we continue to see a little bit of negativity in this market. The market has certainly been in a downtrend for some time, it seems that there is plenty of resistance above. There was a bit of a bounce on Thursday, but quite frankly a lot of that would’ve been position squaring for the end of year reporting. Markets foresee that gold markets will continue to fall, so exhaustive candle is more than enough reason to start shorting again.

1245pm (AEST) - Chinese PMI ( impacts AUD)
02:00am (AEST) - US ISM Manufacturing PMI

Chart of the Day

USD/JPY Intraday: the bias remains bullish.
Pivot: 117.15

Our preference: long positions above 117.15 with targets at 117.50 & 117.80 in extension.

Alternative scenario: below 117.15 look for further downside with 116.60 & 116.40 as targets.

Comment: the RSI advocates for further advance.

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Posted: 1/3/2017 1:02:11 AM