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Dollar Selling Triggers A Tentative Break-Out From Recent Ranges

Renewed confidence in USD-selling on the back of last night’s FOMC Minutes and buoyant equity markets has finally pushed the USD down through major supports that have defined currency ranges for the past couple of weeks. EURUSD traded steadily higher through 1.5000 this morning before finally breaching 1.5045 resistance; however the quick rally through 1.5063 October highs failed just below 1.5100 and seems to carry the hallmarks of speculators triggering stop-losses rather than any genuine appetite to hold EUR, as the pair has drifted back to 1.5050 levels throughout the afternoon. The CHF also managed to pierce the psychologically important 1.0000 level during the session, touching a low of 0.9994; but once again the sell-off has been far from emphatic and the pair is now trading back towards 1.0030 prior support.

On the data front, Swedish Consumer Confidence convincingly trumped estimates with a 11.4 print against expectations for 8.5 (prior reading 7.5), but EURSEK enjoyed only a brief spike lower to 10.3080 before swift profit-taking set in, and since then the pair has rallied steadily to 10.3875 levels. Norwegian AKU Unemployment also impressed with a surprise drop to 3.1% against expectation of 3.3%, but again the currency benefitted very little from the figures, and is currently slightly lower on the day against the EUR at 8.4270. The second reading of UK Q3 GDP came out exactly in line with economists’ forecasts with a slight upward revision to -0.3% QoQ from the -0.4% initial print. Despite the YoY figures also coming in exactly in line with estimates at -5.1%, GBPUSD slumped from 1.6720 to 1.6675 as some speculative longs hoping for an upside surprise quickly exited their longs.

The afternoon’s plethora of US data has been generally positive; although this month’s Durable Goods Orders markedly missed forecasts with a -0.6% reading (+0.5% expected), the September numbers were revised up sharply from 1.0% to 2.0%. PCE measures were broadly in line or higher than forecast, both initial and continuing jobless claims fell further than estimates, and U.Mich Consumer Confidence came out at 67.4 (higher than the 67.0 forecast). Following the impressive Existing Home Sales on Monday, New Home Sales released today also smashed estimates at 6.2% MoM, and there were also upward revisions to last month’s data. The effect on the USD has been a slight retracement from the lows, but arguably little about the fundamental backdrop has changed and the FX reaction could very easily be attributed to frustrated investors cutting positions after a lack of follow-through from the technical break-outs.

With tomorrow’s US Thanksgiving holiday it is likely that exaggerated moves in thin liquidity will keep FX traders wary, but there is a limited data calendar to look forward to; headlined by BoJ Minutes, German regional CPI figures, and Eurozone M3.

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