Intraday Market Thoughts

Into the Ebb and Flow

by Adam Button
Dec 20, 2016 23:32

The US dollar slacked off on Tuesday after touching the best levels since 2002. The Canadian dollar was the top performer on the day while the Japanese yen lagged in the aftermath of the BOJ. Australian vacancies and Japanese industry data are due later. The latest Premium Video focuses on what went wrong with EURUSD and Gold, and what is the next course of action.

The US dollar index is generally a poor representation of the broad US dollar because it's not trade weighted but it's still the most popular measure of the USD. On Tuesday it touched a resh 14-year high.

Later, the dollar edged back 30 pip across the board. That's a drop in the bucket compared to the recent moves but it underscores how the market will bob and chop for the next two weeks.

Economic data was limited to Canadian wholesale sales for October. They rose 1.1% compared to 0.5% and – along with a small rise in oil prices – that helped to boost the Canadian dollar.

The rule of thumb for quiet periods is that the market tends to drift in the direction it was headed previously. In general, that means US dollar strength, higher stock markets and weakening bonds. But that's interspersed by periods of headline risk and flows.

Considering the time of year, the overall ranges in FX were impressive on Tuesday with many exceeding 60 pips. Expect that to narrow in the days ahead.

Minor economic indicators can also cause outsized moves. On the calendar in the hours ahead is the Australian November skilled vacancies report for November. The prior reading was -0.4% m/m. Other data includes the October Japanese all-industry activity index. The consensus is for a 0.1% m/m rise.

Act Exp Prev GMT
Wholesale Sales (m/m)
1.1% 0.3% -1.5% Dec 20 13:30
All Industries Activity (m/m)
0.1% 0.2% Dec 21 4:30

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