Market Update – December 20, 2016

Market Update – December 20, 2016

The week after the Federal Reserve of the United States lifted the interest rate with another 25 basis points seems to show the same general direction: a higher U.S. dollar. The Fed delivered the promised rate hike and the dollar sits at 14-year highs.


Is this going to continue moving towards the end of year trading? Chances are that it is, and the purpose of this article is to go through the main currency pairs and discuss the current levels and possibilities moving forward.


The EURUSD is on everyone’s mind as the road to parity seems to shorten with every trading day. The so-called triple bottom around 1.0460 area has been cleared and now all the bounces above the 1.04 are being used for new shorts.


Because of the fact that it is not being able to bounce meaningfully from this area, the most likely outcome will be that slowly but surely it will find its way to the parity level. Considering the fact that there are no meaningful economic releases all the week and that the liquidity will dry, it is possible that the parity level will come sooner than many expect.


AUDUSD is on a falling trend as well as by the time the 0.75 has been broken, the market pushed in one direction and one direction only: the downside. If you compare the two currency pairs, the EURUSD, and AUDUSD, the second one is heavier.


This is due to the fact that the whole time the AUDUSD fell, the EURAUD cross moved to the upside for more than two hundred pips. As a consequence, the fall in the AUDUSD pair was stronger than the one in the EURUSD.


Now that the AUDUSD is trading around 0.7200 level, expect more and more people to talk about 0.70 as possible option expiry for the end of the year. If that is going to be the case, and considering the EURAUD bullishness, it means that AUDUSD will still travel faster than the EURUSD.


This week has no important economic releases with the exception of the US GDP. However, it should be considered a second tier data as this is the final print and market participants already have an idea about the actual number. When it comes to GDP, the advanced figure is the one that brings the most volatility.


With fundamentals out of the way, look for the U.S. dollar to still push higher and for the overall bullish trend to continue.

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