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USD Trading Outlook


 
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19th December

Currencies

  • The euro (EUR) picked up volatility on yesterday’s FOMC statement. The single currency moved from 1.3700 to 1.3812 against the dollar before collapsing again to 1.3651. The Federal Open Market Committee (FOMC) in the US has decided to reduce its monthly quantitative easing programme by USD 10 billion every month starting from January 2014. As part of QE3, the US Fed was injecting USD 85 billion into the US economy every month.
  • The US dollar (USD) moved higher against the Japanese yen (JPY), reaching 104.35 before correcting somewhat to 103.98 in early trading today. A stronger dollar was expected as the future supply of dollars will be significantly decreased due to the upcoming taper. Look ahead for today’s US unemployment data coming out this afternoon.

Equities

  • US stocks have taken the 10 billion taper well, with the US 500 (SPI) rising from 1761 to 1806 during the statement. The index may retest resistance at 1812 over the short term, alternatively support lies at 1760.

Commodities

  • Brent Crude (BRT) prices have retraced in mid-December from 113.00 dollars earlier in the month to 107.70 before correcting to 109.36.

Mover & Shaker with FX Options

  • Gold (XAU) prices fluctuated wildly during the FOMC statement, reaching 1244 dollars per ounce before dropping to 1216 dollars. The precious metal has been losing value as expectations of the upcoming tapering of monetary expansion reduces assets and commodity values.

  • Options Traders expecting lower gold prices may be constructing Bear Put spreads on Gold.
  • The Bear Put spread is constructed by buying an at-the-money Put and selling an out-of-the-money Put option on gold.

18th December

Currencies

  • The euro (EUR) rebounded back up to 1.3769 from 1.3723 yesterday against the dollar. Resistance for the single currency stands at 1.3780 and 1.3797.
  • The US dollar (USD) has depreciated against the Japanese yen (JPY), trading around 102.97, down from 103.87 on Monday. The dollar will be put to the test today as the upcoming FOMC statement and conference is likely to shed light on the future of US monetary policy and the supply of the dollar.

Equities

  • US stocks have retraced as the US500 (SPI) reach 1783. The upcoming statement by the FOMC will indicate dollar supply conditions. A potential early tapering of monetary policy could indicate at lower equity values.

Commodities

  • WTI Crude (OIL) is currently trading at 97.68 dollar per barrel, up from 96.25 some days ago. Look ahead for crude oil inventories data being released this afternoon.

Mover & Shaker with FX Options

  • Gold (XAU) has seen mixed trading over the short term as investors anticipate today’s FOMC statement. The price of gold has fluctuated from 1252 to 1227 dollar per ounce over the last 24 hours.

  • Options Traders expecting a pick-up in volatility due to the FOMC statement will be constructing Straddle strategies on Gold.
  • The Straddle is constructed by purchasing and at-the-money Call option and an at-the-money Put option.

16th December

Currencies

  • The euro (EUR) has picked up speed from 1.3710 late last week up to 1.3758 on opening against the dollar. Look ahead for manufacturing data comes out from key European countries this morning.
  • The US dollar (USD) has dropped from 103.87 to 102.81 against the Japanese yen (JPY). The pair may be going over a correction from the four year high it has reached last week.

Equities

  • US stocks continue their bearish trend with the US500 (SPI) touching 1760 before correcting slightly above 1766. Today’s manufacturing data releases in the US and Europe may help push equities higher.

Commodities

  • WTI Crude (OIL) remains bearish, having found support twice around 96.20. Energy prices remain under pressure with dollar tapering on the horizon.

Mover & Shaker with FX Options

  • Gold (XAU) has moved higher after finding support at 1221.00 dollars, The precious metal may be influenced by todays manufacturing data on both sides of the Atlantic as weaker data may push demand for safe haven assets.. Alternatively, the pair may retest its support over the short term.

  • Options Traders expecting weaker gold demand may consider constructing Bear put spreads to capitalise on the move.
  • The Bear put Spread can be constructed by purchasing an in-the-money Put while selling out an out-of-the-money Put on Gold (XAU).


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