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Big Day for Both the Dollar and Euro

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FX Rundown

Euro (December)

Session close: Gained 33.5 ticks and settled at 1.1908

Fundamentals: The Euro spiked at 4:00 am CT on comments from ECB Council Member Praet that the economy is seeing notable expansion and he added that the groundwork laid through structural and institutional reform will help aide the economy. This implies that less stimulus is needed going forward and that the ECB could end QE at the end of 2018. Yes! This is exactly why we are long term bullish the Euro. Data today, however, did not favor the bull camp, German Retail Sales widely missed expectations and Eurozone CPI just missed the mark. Helping the Euro was also positive talks out of the Brexit and the Pound put in a strong session. The tape fought a strengthening Dollar on strong data and John McCain giving his support on tax-reform. Tomorrow morning, we have regional Manufacturing data beginning at 2:15 am CT and the Eurozone read coming at 3:00. Fed Presidents Bullard and Kaplan speak at 8:05 am CT and 8:30. ISM Manufacturing is at 9:00 and Harker speaks at 9:15 am CT.

Technicals: Price action was fairly constructive all week as it relieved from slightly over bought conditions. As we spoke of the last few evenings, the buyers showed up at the 1.18 mark to take the Euro back out to major three-star resistance at 1.1921-1.1942 with a high of 1.1942 before settling at 1.1908. As price action has backed off from this key level, it allows major three-star resistance to now come in at 1.19975-1.2019 and a weekly close above here will spark the next bullish leg higher. Look for support to come in at 1.1866-1.18815 but a close back below here will encourage a continued consolidation.


Resistance 1.1942**, 1.19975-1.2019***, 1.2154-1.2180****

Support 1.1866-1.18815**, 1.18185-1.1833**, 1.1728-1.1730***, 1.1672**, 1.15785*, 1.1481-1.15***

Yen (December)

Session close: Lost more than half a penny and settled at .8892

Fundamentals: The Yen took the brunt of the pain from a strengthening Dollar, as did all safe havens. Equity markets began melting higher in the first half of the session and saw further strength on news that John McCain now supports the Senate tax-bill. The Yen actually traded higher despite an in-line read on PCE and better than expected Jobless Claims, Personal Income and Chicago PMI. With persistent weakness to close out the week this trade must be closely watched. However, equity markets pared a significant amount of their gains into and after the bell. Traders should keep an eye on the potential for further losses in equites which would be bullish the Yen as well as the Rex Tillerson situation. Though it was assumed for quite sometime that he was on his way out, this gives tremendous traction to the idea and potentially much, much sooner. The issue with this is that he was more diplomatic with North Korea than President Trump wanted to be. Furthermore, a potential replacement for Tillerson is Pompeo who is more of an aggressor like Trump; we will let you draw your own conclusion as to what this means for North Korea. Tonight, the Tokyo CPI read was in-line with expectations and Household Spending was in-line. Japanese Manufacturing PMI is due out at 6:30 pm CT and the Chinese Caixin Manufacturing is due at 7:45.

Technicals: A close below major three-star support at .8915 has begun to neutralize our near-term bullish stance, however, we remain long term bullish. Furthermore, the ever-present threat of North Korea remains and potentially heightened this week, the Yen is one catalyst away from sparking a major short-covering rally, squeezing the largest short positions since 2007. We will watch the .8915 level very closely into tomorrows close, as it must hold in order to maintain the most recent uptrend. The next support at .8880-.8883 aligns the 50% retracement with the 50-day moving average, another very important level.

Bias: Bullish

Resistance - .8959**, .8996**, .9018-.9045***, .9119**, .9321-.9359****

Pivot - .8915

Support - .8880-.8883**, .8845*, .8801**, .8730***

Aussie (December)

Session close: Settled at .7565, down 11 ticks

Fundamentals: The Aussie was putting together a strong session, trading to a high of .7594 before the U.S Dollar spread its wings on data and tax-reform. The reads out of Australia were solid and Chinese PMIs were better than expected. Manufacturing and New Home Sales is due out of Australia tonight. Though the case of the Aussie to stabilize is being made, a strong U.S Dollar on data would likely put further pressure on the Aussie into next weeks RBA meeting.

Technicals: After what was ultimately an inside day, major three-star support at .7530-.7550 remains pivotal as price action hammers at it to close out the week. A hold here with no strong surprises out of the U.S could lead to a consolidation back at the .7578-.7581 level into next Tuesday.


Resistance - .7578-.7581*, .7605-.7607**, .7645-.7677***, .7726-.7755**, .7824**, .7891-.7893***

Support - .7530-.7550***, .7390****

Canadian (December)

Session close: Closed at .7752, down 32 ticks on the session

Fundamentals: Tomorrow is a big session for the Canadian with GDP and Job data both due out at 7:30 am CT. Slight weakness in Crude Oil has weighed on the trade but this is U.S Dollar strength, NAFTA talks and and recent Canadian data weakness that has longs on edge ahead of tomorrows critical reads.

Technicals: The close below .7790-.7803 is bearish and brings our near-term stance to Neutral. Recent swing lows come in at the .7730-.7745 support and this level will be key to watch into Fridays close to avoid the bears having the clear upper hand.

Bias: Neutral/Bullish

Resistance .7851-.7856**, .7897**, .7950-.7960***, .8019-.8035**, .8293****

Pivot - .7790-.7803***

Support -.7730-.7745**, .7671**, 7550***

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Bill Baruch is President and founder of Blue Line Futures a leading futures and commodities brokerage firm located at the Chicago Board of Trade. Blue Line’s mission is to put the customer first and bring YOU the best customer service, consistent and reliable research and state of the art technology. Bill has more than a decade of trading experience. Working with clients he focuses on developing trading strategies that present a clear objective for both long and short-term trading approaches. He believes that in order to properly execute a trading strategy, there must be a well-balanced approach to risk and reward.

Prior to Blue Line, Bill was the Chief Market Strategist at iiTRADER which followed running a trade desk at Lind Waldock and MF Global.

Bill is a featured expert on CNBC, Bloomberg and the Wall Street Journal as well as other top tier publications.

Contributing author since 10/6/17 

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