Market Update – November 22, 2017

Market Update – November 22, 2017

With the U.S equity markets back at historical highs, chances are the Thanksgiving weekend in the United States will show the same appetite for stocks and trends are unlikely to change on the currency market too.

 

The market evolves in a range with no currency pair being able to break the levels it developed in the last months. The FOMC Minutes later today may result in a bit of volatility, but there’s unlikely we’ll see a significant break.

 

As a rule of thumb, trends are unlikely to change ahead of the Thanksgiving weekend. If anything, the end of November holiday is a reminder of the major theme during the year, and the focus will shift towards the end of the year positioning.

 

Euro Paid for German Politics Instability

 

The German coalition is in a deep crisis, with some, including Mrs. Merkel, calling for fresh elections. However, considering the far-right threat, it is unlikely we’ll see polls anytime soon. More likely a compromise of some sort will be reached.

 

With events escalating over the weekend, it was no surprise to see the Euro falling across the board. EURUSD led the way, followed by the EURJPY and the EURGBP pairs.

 

But the three pairs failed to break the ranges they evolved in the last months. This makes the overall move merely a pullback in otherwise a robust bullish trend that the pairs were in for the whole 2017.

 

The EURUSD pair seems to form a bullish flag on the daily chart, with the 1.17 level being a cornerstone. A break higher above 1.1850 puts the pressure on the all-mighty 1.20 level. I wouldn’t be surprised at all to see that level print until the end of the year, as the EURUSD stubbornness to fall is quite impressive.

 

If one thinks of the interest rate differential between the two major currencies, there’s no apparent reason for the pair to remain so bid. Except, of course, for the GDP differential between the two countries and the current account one too.

 

Conclusion

 

All in all, expect ranges to dominate the currency market until the end of the year. At least that’s the most likely scenario.

 

If we are to see any move, it should be a higher Euro move. The risk to this last outcome is the Federal Reserve of the United States, as it is expected for the major central bank in the world to lift, yet again, the rates on the dollar.

 

But what if the move is already priced in?

 


Also published on Medium.

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