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Forexlive Americas forex news wrap: Dollar higher but off the highs as the NY begins

Forex news and NY trading headlines for January 3, 2017.

In other markets:

  • S&P index +19 points or 0.85%
  • NASDAQ composite index +45.969 points or 0.85%
  • Dow Jones industrial average 119.16 points or 0.60%
  • two-year note 1.2141%, +2.5 basis points
  • 10 year note 2.446%, unchanged
  • 30 year bond 2.446%, unchanged
  • Spot gold plus $6.50 or 0.55%
  • WTI crude oil futures -2.29%
  • Naturall gas tumbled nearly 11% on the day
  • European stocks were mixed: DAX -0.12%, France's CAC up 0.35%, UK FTSE +0.49%, FTSE MIB +0.04%
  • European 10 year bond yields rise sharply: Germany 0.264%; +7.5 basis points; France 0.778%, +11 basis points; UK 1.330%, +9 basis points; Italy 1.86%, +12 basis points

Fundamentally, the US economic data was supportive of growth. The ISM manufacturing PMI for December rose to 54.7 versus an estimate of 53.6. The prior month came in at 53.2. Prices paid increase sharply to 65.5 from 55.5 estimate. The employment index was also higher at 53.1 versus 52.5 estimate. Finally new orders surged to 60.2 from 53.0 estimate. Not a bad set of numbers from the manufacturing market to end the 2016.

Construction spending was also released in the US with spending rising by 0.9% versus 0.3% estimate. The better data helped do send the USD higher. However, profit takers did enter (stocks fell and that hurt the JPY pairs) and the dollar gave back some of their gains.

The EURUSD tumbled to new 14 year lows - taking out the December low of 1.03517 (the low reached 1.0339 before bouncing back higher. It was not until the price moved above the 1.0375 level (London session morning session low) when sellers turned back to buyers. The corrective really took the price to to the 200 bar MA on the 5 minute chart at 1.0433, and stalled. That MA ended up putting a lid on the rally on a 2nd test a bit late, and the pair wandered back down to 1.0400 at the close of the day. In the new trading day that MA will be eyed at 1.0414 currently (and moving lower). Stay below is more bearish.

The USDJPY is another pair that got a big boost off of the better US data. Its move higher off the data and made it briefly above the 118.51 level - to a high of 118.60. Remember in December, the high reached 118.658 and fell back down. Reaching 118.60 - short of that peak- and falling off is not that convincing for the bulls. So they exited. Stocks also started to retreat from their early strong gains and that helped to push the pair lower. By the time the selling was done the entire move higher on the day was erased (the price went from 118.60 to 117.20). That fall was just above the 100 hour MA at 117.17 (not using trading from Monday January 2nd). Other support at 117.08 to 117.13 was also not far behind. In the new trading day a move back above 117.86 would be positive.

The GBPUSD had an up and down session, then moved to test the lows from last week at the 1.2200 level once again after the better US data. That level held support and the pair quickly rallied to 1.2271 in the next hour or so of trading. The 100 hour MA at 1.2268 helped to stall the rally, and a rotation back toward 1.2225 took the market into the close. The 1.2227 was the low from Dec 23rd. The 1.2219 was the low from December 29th. That area will be eyed as close support in the new trading day. A move below, and sellers will be more in control. The 100 hour MA at 1.2267 currently will need to be broken above to turn the momentum around now....

The NZDUSD traded the range where MOST of the trading has taken place over the last 11 or so trading days. That comes between 0.6882 and 0.6974. The low today 0.6884, while the high stalled at 0.6974. In between those extremes, traders will watch the 0.6924-33 for bullish/bearish bias clues (see prior post here )

Despite oil getting clobbered (down 2.33%), the USDCAD was little changed and overall, the CAD was higher against the EUR, GBP, JPY, CHF and NZD. Typically, you would expect the CAD to weaken not strengthen when oil prices are lower. Perhaps the relatively sideways oil prices, with $50 as a floor and $55 as a ceiling, has traders ignoring the up and down oil price swings. The price of crude oil closed at $52.33 - near the midpoint of the recent trading range.

IN the new trading day, there will be services PMI coming out of Europe. UK will release construction PMI and mortgage/lending data. The EU will release CPI flash estimates. Today the German CPI was stronger than expectations . In the US tomorrow, US car sales will be released along with the FOMC meeting minutes from December. The Fed raised rates in December of course (that will be released at 2 PM).

Below is a snapshot of the % changes of the strongest and weakest currencies at the end of the trading day.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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