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While the bank did keep rates on hold while posing only mild changes to last month’s statement, global risk markets did not seem to take that meeting in stride as the bullish outlay from the early portion of the week was stopped dead in its tracks, followed by a pullback Friday.
Next week sees another large risk item come back to light, and that’s the brewing situation between Italy and the European Commission. Tuesday marks the due date for the revised Italian budget and, going on comments over the last couple of days, it does not appear that the two sides are yet nearing a compromise.
This is the same theme that delivered a dose of risk aversion in April and May, and again in late-September running into October; and next week brings a similar backdrop of worry as attention will shift back towards a rather pensive situation still brewing in Europe.
The US Dollar is putting in another test of the 97.00 level and, much like last week, that Dollar strength appears to be unevenly distributed. For next week, I want to continue to look for USD strength through the Euro while directing strategies for USD-weakness elsewhere.
Over the past two weeks, I’ve looked at both AUD/USD and NZD/USD for such plays, and the door remains open on each of those as I discussed in yesterday’s webinar. Those setups are largely in a similar spot as yesterday, so in the aim of avoiding redundancy, I will direct this week’s short-side USD setups elsewhere.
US DOLLAR EIGHT-HOUR PRICE CHART: BACK TO 97.00 AFTER EARLIER-WEEK TREND-LINE TESTus dollar usd eight hour price chart
EUR/USD will likely be a focal point for the FX market next week as the situation between the European Commission and Italy comes into further view. This has been my preferred venue for USD-strength over the past few weeks, using a zone of prior support as fresh resistance that runs from 1.1448-1.1500.
The level of 1.1448 came in last Friday to help mark the high and the 1.1500 handle came into play on Wednesday of this week, helping to quell the bullish move that had shown so far through November trade.
EUR/USD has been selling off over the past two days but, as of yet, sellers have been unable to take-out 1.1300, and this can make matters of entry difficult given proximity to support and resistance. For next week I want to look at short-side EUR/USD strategies in one of two different ways:
Either a down-side break of the 1.1300 low, which can open the door for bearish breakout strategies. Or, a pullback to lower-high resistance around a level of prior support. Such an area exists from 1.1395-1.1430, which could allow for risk levels to be set outside of this week’s high at 1.1500.