Key Focus Before Thanksgiving: The Dollar Strengthened, but Adjustment Pressures Take Hold in the Forex Market
Current Situation: Dollar Strength But Adjustment Pressures Rising
This week, trading started strong for the U.S. dollar, driven by reports on Trump’s tariffs. However, the momentum has since faded. In the forex market, USD/JPY was capped around the 155 level and has since softened into the low 152 range. EUR/USD is stagnating around 1.0500, and GBP/USD is facing resistance around the 1.26 level.
Forex Market Movements:
- USD/JPY: Failed to break through the 155 resistance level, fell to the low 152 range.
- EUR/USD: Directionless around 1.0500.
- GBP/USD: Attempts to break above 1.26 met with limited upside.
- Cross JPY: With yen strength, EUR/JPY broke below 160, and GBP/JPY dropped to the 191 range.
Market Overview:
- Concerns about Trump’s policies remain in focus, particularly inflationary pressures from high tariffs and the risk of a renewed trade war, which are influencing the U.S. dollar’s movement.
Key Focus Moving Forward:
- Trump’s Policies Impact:
- Positive Dollar Impact: Expectations of widening U.S. interest rate differentials supporting the dollar.
- Negative Dollar Impact: Trade war concerns could negatively impact global economies and potentially lead to yen strength.
Markets are paying close attention to which aspect will dominate, with selling pressure on USD/JPY and cross yen pairs emerging.
Today’s Focus: U.S. Economic Data Rush
Ahead of Thanksgiving tomorrow, many key economic indicators are scheduled to be released during New York trading hours. Although a one-way movement is unlikely, a mix of bullish and bearish sentiment is expected.
Key Indicators:
- MBA Mortgage Applications Index (Nov 16-22)
- Real GDP (revised, Q3 2024)
- Wholesale Inventories (preliminary, October)
- Durable Goods Orders (preliminary, October)
- New Jobless Claims (Nov 17-23)
- Chicago PMI (November)
- Pending Home Sales Index (October)
- Personal Income and Spending (October)
- PCE Deflator (October)
The PCE Core Deflator at 24:00 GMT is a particularly important indicator to gauge U.S. inflation trends.
Speaking Events:
- Lane, ECB Chief Economist, will attend a macroeconomic discussion session in New York in the afternoon.
- Silk, Deputy Governor of the Reserve Bank of New Zealand, will attend a Parliamentary Expenditure Committee session in early morning Japan time.
Geopolitical Risk:
- Reports on ceasefire talks between Israel and Hezbollah.
- Developments in the Ukraine situation.
U.S. Bond Auction:
- U.S. 7-year bond auction ($44 billion) results could influence market interest rates.
Strategy: Focus on Adjustment Pressures and Key Data
- USD/JPY: Watch for support around the low 152 level and monitor movements post-PCE deflator release at 24:00 GMT.
- EUR/USD: Consider short-term range trading based around the 1.0500 level.
- GBP/USD: Maintain a bearish stance as resistance at 1.26 persists.
- Cross JPY: Consider short positions with the prevailing yen strength.
- Gold (XAU/USD): If geopolitical risks rise, consider buying gold as a risk-off asset.
Summary: Today, with important U.S. economic indicators ahead of Thanksgiving, pay close attention to how the market reacts to the PCE deflator and GDP data. Additionally, monitor the impact of Trump’s policies and geopolitical risks, as they continue to shape the market environment. Flexibility in trading is required, given the adjustment pressures currently dominating the market.
