Firm US CPI supports Fed lift-off expectations

The Dollar acquired some stability following a firm US CPI of 0.2% in October which supported the growing expectations that the Fed may raise US rates in December. In the month of November data from the US economy has illustrated employment picking up, and now with inflation on the route to recovery this may have reduced some concerns investors held about the potential slowdown in economic momentum in the States. Dollar sensitivity remains rife to interest rate expectations and with the rising optimism around the Fed acting in the near future, the Dollar bulls have been empowered once more. If hawks show face in this evening’s FOMC meeting minutes, the USD may appreciate as expectations inflate further of a US interest rate increase in December.

In the commodity arena, Gold slumped to fresh five year lows of $1065 this morning as expectations mounted around the Fed taking action to increase interest rates in the December meeting. The direction of Gold continues to be dictated by US interest rate expectations and Dollar appreciation has attributed to the factors repelling investors from this metal. The likelihood of the Fed raising US rates in 2015 is high as the Fed futures predict a near 65% probability, this has left the yellow metal depressed, vulnerable and open to further losses. If the central bank does move forward with a rate hike in December, then Gold sellers may be offered an opportunity to send this precious metal back down to $1050 and lower.

WTI Oil continues to be threatened by the reoccurring theme concerning the aggressive oversupply of oil, and this may be reflected in prices which have plunged to its lowest level in over two months at $40.00. The recent statement from the OPEC that oversupply was at its highest in a decade is going to weigh on investors’ minds and, as a result, curb any hopes of a significant rebound in prices. Although the commodity is finding tough support around the $40, WTI remains heavily bearish on the daily timeframe and a breakdown below $40 may open the gates for sellers to send prices towards $39.

Currency spotlight EURUSD
The strong divergence in both monetary and economic sentiment between the United States and Europe has sent the EURUSD declining to fresh seven-month lows of 1.0630. This pair is technically bearish and the increasing expectations that the ECB may ease monetary policy once again in December has encouraged sellers to attack the currency pair. Any hopes of a strong bounce back have been repressed due to the emerging concerns that geopolitical tensions may impact consumer confidence in Europe. Prices are declining towards the 1.0550 support and if the Dollar continues to appreciate this week on the back of the growing US interest expectations, this may accelerate the decline lower on the EURUSD.

AUDNZD
The AUDNZD is technically bullish on the daily timeframe. Prices are trading above the daily 20, 50 and 200 SMA and the MACD has crossed to the upside. Previous resistance at 1.0900 may act as a dynamic support which should encourage buyers to send prices towards the next relevant resistance based at 1.1150.

EURGBP
The EURGBP is technically bearish on the daily timeframe as there have been lower lows and lower highs. Prices are trading below the daily 20 SMA and the MACD is deep into the downside. Previous support at 0.7050 may act as a dynamic resistance which may encourage sellers to send prices towards the next relevant support at 0.6930.

AUDCHF
The AUDCHF is technically bullish on the daily timeframe and prices are trading above the daily 20 SMA. The next relevant resistance is based at 0.7300.

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