Trump’s threats for new sanctions renew support for USD

The USD Index opened with a positive gap in today’s Asian session, witnessing the support the USD got against its counterparts. On a fundamental level, we note that Trump threatened on Saturday to impose 100% tariffs on US imports from countries that would continue to form a BRICS currency to replace the USD. On a macroeconomic level we highlight today the release of the US ISM manufacturing PMI figure for November and should the indicator’s reading rise as expected or more, it could provide some support for the USD, yet the critical issue is for the indicator’s reading to rise above the reading of 50 implying expansion of economic activity for the US manufacturing sector.

Across the Atlantic, we note that the political instability in France continues to weigh on the EUR and should we see the crisis escalating, the EUR could further weaken across the board. Overall European fundamentals seem to weigh on the common currency, as there is political instability in Germany and France, the ECB is expected to continue cutting rates and on macroeconomic level, growth seems to be low.      

EUR/USD dropped during today’s Asian session, testing the 1.0530 (S1) support line. We opt to maintain an overall bearish outlook and supporting our case is the RSI indicator below our chart which currently remains below the reading of 50, implying a slight bearish market sentiment. For our bearish outlook to continue we would require a clear break below the 1.0530 (S1) support level with the next possible target for the bears being the 1.0450 (S2) support line. On the flip side for a bullish outlook we would require a clear break above the 1.0670 (R1) resistance line.

Other highlights for the day:

In today’s European session, we get UK’s November’s Nationwide House prices and Germany’s final manufacturing PMI figure for November, while ECB President Lagarde speaks. In the American session, we get Canada’s S&P manufacturing PMI and the US ISM manufacturing PMI figures both being for November. On the monetary front, we note that Fed Board Governor Waller and NY Fed President Williams are scheduled to make statements. 

On a technical level, we note that USD/CAD seems to maintain its sideways motion between the 1.3960 (S1) support line and the 1.4110 (R1) resistance line. We tend to maintain a bias for the sideways motion to continue, yet note that the RSI indicator remains above the reading of 50, which may imply a slight bullish predisposition of the market for the pair. Should the bulls actually take over, we may see the pair breaking the 1.4110 (R1) resistance line and start aiming for the 1.4270 (R2) resistance level. Should the bears take over, we may see the pair breaking the 1.3960 (S1) support line and taking aim of the 1.3820 (S2) level.      

As for the rest of the week:

On Tuesday we November’s CPI rates for Turkey and Switzerland as well as the US JOLTS Job Openings for October. On Wednesday we get Australia’s GDP rate for Q3 and from the US the ADP national employment figure and the ISM non-manufacturing PMI figure both for November, while on the monetary front, ECB President Lagarde and Fed Chairman Powell are scheduled to speak. On Thursday we get Australia’s trade data, Germany’s industrial orders and Canada’s trade data all for October and from the US the weekly initial jobless claims figure. Finally on a busy Friday, we note the release of Japan’s All household spending for October, Germany’s industrial output also for October, UK’s Halifax House prices for November, Eurozone’s revised GDP rate for Q3, Canada’s employment data for November and from the US the preliminary University of Michigan consumer sentiment for December, while the crown of financial releases for the week is expected to be the US employment report for November.

EUR/USD Daily Chart

• Support: 1.0530 (S1), 1.0450 (S2), 1.0330 (S3)
• Resistance: 1.0670 (R1), 1.0775 (R2), 1.0935 (R3)

USD/CAD Daily Chart

• Support: 1.3960 (S1), 1.3820 (S2), 1.3600 (S3)
• Resistance: 1.4110 (R1), 1.4270 (R2), 1.4480 (R3)

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