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The US Dollar is soft against most major currencies as markets are awaiting some key events today,
and for the rest of the week. As for today, the US calendar will start with the ADP employment
report, followed by Q4 GDP and then the Federal Open Market Committee rate decision. And,
there will be personal income and spending tomorrow, and non-farm payrolls and ISM on
Friday so plenty of volatility is anticipated. The greenback is now at a critical junction
against the Euro as Euro US Dollar is pressing both a medium term resistance level at 1.3486
as well as a near term channel resistance. We remain bullish on Euro / Dollar as long
as the 1.3414 minor support holds and an important point to note is that a firm break of 1.35
will have larger bullish implications and indicate acceleration in the current rally.
Nonetheless, dollar is still near term bullish against the Japanese Yen, British Pound and
Canadian Dollar and we don't expect a reversal in these pairs.
The market is awaiting the Federal Open Market Committee meeting for January. However, policymakers
are not expected to make any changes in the monetary policy or quantitative easing policy.
Yet, the tone of the statement is expected to remain dovish. Note also that, due to voting
seat rotation, four new presidents (Esther George, James Bullard, Charles Evans and Eric
Rosengren replacing John Williams, Dennis Lockhart, Jeffrey Lacker and Sandra Pianalto)
will be on board this month. We suspect while Esther George and James Bullard might be dissenters
to the current Fed stance, little would be done to affect the outcome. The Fed might
revise the Statement of Longer Run Goals and Monetary Policy Strategy released in January
last year, clarifying how the near-term guidance for the fed funds rate works with the central
bank's longer-term target of 2% inflation and "maximum" employment.
US Q4 GDP growth is expected to slow back to 1.2% annualized rate, compared to 3.1%
in Q-3. The Price index is also expected to slow to 1.5%, down from 2.7%. ADP employment
growth is expected to slow from 215,000 to a decent 163,000 in January. Other data to
be watched today includes Eurozone confidence indicators, UK mortgage approvals , Swiss
UBS consumption and KOF.