Fed Members Are Starting to Become More Cautious

Trade optimism remained as China and the US extended talks for the third day in Beijing. The latest FOMC minutes overall suggested that Fed members were starting to become more cautious on the US economic outlook and path for policy at the December meeting. The US Dollar Index pushed lower on the Fed’s dovish message and touched its lowest level since mid-October at 95.15.

In the US, stocks rallied for a fourth straight session, led by energy producers. Investors gained confidence from the December 18-19 Federal Reserve meeting released minutes, which confirmed dovish signals that interest rates could be paused through March.

Asian indices were mixed with Japan’s Nikkei down 1.1%, Australian stock market has managed to extend gains for a fourth straight day despite Aussie shares trading lower for the majority of today’s session. The ASX 200 managed to spike on the close to end the day 17 points or 0.3% higher to 5795.3 and within touching distance of 5800 points, a mark not breached since mid-November 2018. Hong Kong’s Hang Seng Index made up early losses and was last up 0.3%. Also, the Shanghai Composite recovered from session lows and was 0.2% higher.

On the Lookout: In China, producer prices for December rose at their slowest rate since September 2016, as factories saw a slowdown in demand, according to data published by the National Statistics Bureau on Thursday. The producer price index rose 0.9% from a year earlier, compared to a 2.7 per cent rise in November. The consumer price index (CPI), meanwhile, gained 1.9 per cent in December from a year earlier, but this was down from a 2.2 per cent rise in November.

Australia’s NAB Online Retail Sales Index (NORSI) accelerated in November (+0.9% mom s.a.) slightly relative to October (0.7%) while the 12 months to growth slowed in November, with sales up 10.7% compared to October (15.5%).

USThe World Bank on Wednesday kept India’s gross domestic product (GDP) forecast unchanged at 7.3 percent for 2018-19 and 7.5 percent in 2019-20, but warned that escalation of the Sino-US trade war could have a profound impact on the emerging market and developing economies.

Trading Perspective: The EURUSD continues to trade higher with the pair taking a look above the 1.1550 key resistance (high from October 22nd). The breaks higher yesterday and today have increased the bullish momentum for the common currency. On the upside, the next target comes in at 1.1585 (61.8% retracement) and above that 1.1620 (high from October 16, 2018). The 200 day MA stands at 1.1644.  On the downside, first support can be found at the lows yesterday at 1.1435. All in all, our bullish scenario for Euro that we have mentioned in our previous reports came true, a wait and see stance is now appropriate for traders until the pair digest current levels.

USUSDCAD managed to find support at 1.32004 as the pair has reached oversold conditions snapping six consecutive days of losing streak. The immediate resistance the pair now faces is the 50-hour moving average at 1.3244, and next target can be the previous daily high at 1.3284. On the flipside, the first support is the Asian session low at 1.32 and next is the 100day moving average at 1.3163.