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US data hits the greenback and EURUSD reverses

Desc: The trading year is ending, as we only have one more day of trading in 2021. Generally, the stock markets are higher, even at all-time highs in some instances, so 2021 will be seen as a year where the markets shrugged off the Delta and Omicron variants.

The US dollar has taken a bit of a worse turn today but is overall near its highs for the year.

Market Wrap

The US trade deficit in goods ballooned to a record in November as imports surged and exports slipped. The goods trade deficit widened last month by 17.5% to $97.8 billion from $83.2 billion in October, the Commerce Department said on Wednesday. That exceeds the previous record deficit set in September of $97 billion. Goods exports declined 2.1%, while imports rose by 4.7%. The report also showed wholesale inventories climbed 1.2% last month. The economy grew at a 2.3% annualized rate in the third quarter, a step-down from earlier in the year but activity has rebounded in the fourth quarter. Trade has been a drag on gross domestic product growth for five straight quarters, while inventories added to output in the third quarter.

In light of the US Energy Information Administration (EIA) data showing US inventories fell more than expected last week, as well as investors' easing concerns about the omicron variant, WTI crude prices rose over 1% to over $77 per barrel and Brent touched $79.96. The gains extended for a sixth session after EIA data showed US inventories fell more than expected last week. US crude inventories declined by 3.576 million barrels last week, marking the 5th consecutive decline compared with expectations for a drop of 3.143 million barrels.

The ActivTrader sentiment indicator is showing that more traders are trying to short the oil contracts so I would expect this cohort to be squeezed as oil pushes towards $80 per barrel.

In November of 2021, the number of contracts to buy previously owned homes in the US fell -2.2%, compared to market expectations of a 0.5% rise, and following a 7.5% rise in October. In all four major regions, contract transactions declined. The number of pending home sales was down 2.7% year over year. This comes as Lumber futures approach the 61.8% retracement from the highs when buyers were moving out of the cities and renovating suburban and rural properties during the pandemic, which ended up coinciding with supply chain disruptions and increased tariffs on Canadian lumber.

In the penultimate trading day of 2021, the EURUSD did a 180º about-turn and broke higher having already broken lower out of the 50-pip range between 1.1300 and 1.1350. The daily 50-period EMA acted as dynamic resistance capping any further moves higher.

The forex heatmap is mixed but leaning towards being risk-on as the yen is weakening against its peers. The Swiss franc once again is at odds with the safe-haven flows and the US dollar is being heavily offered.

Tech stocks are being sold so the Nasdaq is trading lower for the second consecutive day, this follows news that Elon Musk sold some more Tesla shares. The US industrials and benchmark S&P500 have held their own and are green for the day going into the London close and after the US news came out under expectations.


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