The FOMC has set the dollar bulls off and we’re seeing US dollar levels not tested since the summer of 2020. A breakout above the $96.93 level will under usual circumstances need to be retested for confirmation of support, but the moves are so powerful we could just as easily accelerate through $98.00.
Market Wrap
Some good news for the US today as the Bureau of Economic Analysis reported that GDP grew at an annualized rate of 6.9% in Q4 of 2021. This is not the final reading so we could get a revision, but the advanced data was above expectations of a 5.5% increase. In this instance, I would be happy to be wrong as I had been calling for a reduction in the US GDP expansion. With the US government running a monthly balanced budget I’ll be interesting to see if this GDP figure gets revised lower and the next GDP reading comes in weaker. Government spending makes up a large portion of GDP but if they are taxing more $’s out of the economy this should be a drag on the economic output.
US Core PCE Prices for Q4 came in as expected whereas advanced Sales came in 1.8% higher than the previous readings. US durable goods for December show a marked decline and came in below expectations at -0.9%. Orders dropped further than the estimated 0.6% and had a total value of around $267.6 billion.
The National Association of Realtors (NAR) said on Thursday that pending home sales in the United States fell 3.8% in December compared to November. According to the Pending Home Sales Index, the reading was 117.7. This was 6.9% lower than December 2020 reading.
US Initial Jobless Claims came in as expected and below the previous revised higher 290K report. At 260k the jobless claims dropped for the first time in 4 weeks.
The US dollar carried on within its uptrend that started yesterday after the FOMC and has now cleared the $97 level. The US dollar strength has pushed the precious metals and oil prices down and the forex heatmap is showing the greenback with its global reserve status and safe-haven tendencies is the currency of choice with the Fed preparing to raise rates.
The Australian dollar is the weakest currency at the London close relative to the other fx pairs we monitor. Tonight the Australian Bureau of Statistics release their latest PPI data, which is unlikely to support the Australian dollar in this environment.
Another pair that is tumbling lower through significant price levels is the EURUSD.
The idea this morning was to wait for a test of the H1 50-period EMA but the sell-off was more extreme than it has been these last few days and we trended below the 1.11600 and with little market structure support, we could be at 1.1000 very soon.