Hope of a December rate hike by Fed is high. Possibility of “Frexit” and possibility of Italian Prime Minister stepping down plagues Europe. Will the EUR/USD head towards parity?
The US presidential election is over and market is optimistic about the outcome. The rise in US treasury yields and US equity market are the biggest clues. The dollar index has rose more than 4% since early November. Fed Chair Yellen has indicated her confidence in the outlook and highlighted the risk of delaying the rate hike for too long. Market is almost certain a rate hike will happen in December. Hopes are high. If there is any reason for traders or investors to believe otherwise, we are likely to see a significant drop in the US dollar. FOMC will release the minutes of last meeting this week. We expect the minutes to echo Yellen’s comments and do not foresee much deviation from it.
Political woes are surfacing in France and Italy, the second and third largest economies in Eurozone. Italy will hold a referendum on 4th December to vote on the constitutional changes proposed by their Prime Minister Matteo Renzi. Renzi hinted he would quit if the changes were rejected. Donald Trump’s recent victory has given a boost to populist movement around the world. France will hold their election next year and one of the potential candidates is anti-EU leader Le Pen. Le Pen is gathering support from discontent white voters. What puts her in the spotlight is the possibility of her calling a referendum for “Frexit” – France to exit the EU. Brexit followed by Frexit is definitely no good news for the Euro. The French presidential election in April 2017 will be something currency traders should watch for next year. With a high chance of a Fed rate hike in December and political woes in Europe, we see the EUR/USD may continue to head towards parity.
Bets have increased on the WTI Oil, market is hoping OPEC will complete the output deal by 30th November. The indecision of the output deal has caused the WTI to fall from the high of $52 a barrel. Once the deal comes to a positive conclusion, WTI is likely to head towards $52 a barrel again.
EUR/USD – Sell on rally. Upcoming Fed rate hike and on-going Europe political uncertainties could push this pair lower. A possible play would be to consider selling around the resistance of 1.0630.
U30/USD (Dow Jones) – Slightly bearish. With little high impact data releasing this week, we expect the Dow Jones to consolidate. A hawkish FOMC meeting minutes could push the Dow Jones slightly lower.
OIL/USD (WTI) – Slightly bullish. We could adopt the “Buy the rumour, Sell the news” approach. Market is expecting a positive outcome from the OPEC output deal. Consider a breakout play to go Long after price closes above resistance.
Fullerton Markets International Limited (FMIL) is committed to providing the highest level of service to its customers. In some instances, and due to regulatory or legal requirements, FMIL is unable to provide services or accept customers from certain countries. Currently FMIL does not accept customer from Iran, Cuba, Sudan, Syria and North Korea.
FMIL subscribes to the rules of FX regulated jurisdictions such as Hong Kong, Singapore, Japan and United Kingdom accordingly, does not accept solicited clients from these countries. This is not an exhaustive list of countries from which FMIL does not accept solicited clients and is updated as required. Customers should familiarise themselves with the FX rules applicable in their country's before deciding to use FMIL's services.
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor.