FX Weekly

FX Weekly Update – December 6th, 2021

Posted Under: Weekly updates

A crazy week sets this coming week, and month, up to be a volatile one. The dollar had little change from week before but the yield on the 10-year treasury fell to 1.35%. Equity markets fell big, rallied then fell again. The headline number for the U.S. employment situation was a disappointing non-farm job number of +210k (forecast +550k) but the rate fell to 4.2% and average hourly earnings rose by 0.3%. The internals of this release were very positive. Oil prices plunged to $61/bbl., but open this week at $67/bbl. The omicron virus has markets very nervous. Will its spread cause another dip in demand and push the global economy into recession? Or will this be a mild variant? Will this cause the Fed to roll back their rate hikes? Inflation numbers in the U.S., Europe and the U.K. are high and there is real concern that this pressure may continue to impact the consumer. The ECB has maintained a more hawkish stance but now they are talking about hiking rates!

This week will be highlighted by both the CPI and PPI (Thursday and Friday). The forecasts are pointing toward a 40-year high!

EUR (1.1300): Little activity last week for the euro. It is maintaining support at 1.1200 but activity has been quiet. As we mentioned above, the ECB is beginning to find itself backed into a corner. The omicron virus forced a shutdown in Germany. GreenShootsFX continues to look for the single-currency to move lower, possibly to 1.1000. This type of move may cause long euro positions to get liquidated and push the currency closer to 1.0500!

GBP (1.3230): Technically, the pound looks weak and the bearish triangle on the hourly chart is pointing to a target of 1.3180. This would most likely lead to more selling, that will push the sterling toward 1.3100. This weakness can be attributed to the strength of the dollar. Either way, this weakness does provide an opportunity to save cash, because sterling payments are cheaper.

JPY (113.00): Volatility has really increased with USD/JPY widening its weekly range. Following the yield on the 10-year, the yen is strengthening, but then, it is being sold to fund global investments. This back and forth will most likely continue until the central banks begin adjusting rates. Support continues near 112.00, resistance at 113.75 and then again at 114.35. Deal around that range!

CAD (1.2820): The Canadian dollar is holding up well given the volatility in the oil market. Two ways to look at this: 1) the Canadian dollar does not believe oil prices are going to stay this low for any period, or 2) there is some catching up to do and the Canadian will weaken to 1.3200. Canadian expenses are cheap. This is a great time to purchase the currency, and if it weakens further, that only improves expense management.

MXN (21.2500): The peso is not dealing in any direction. The ranges are becoming smaller, which means that the next directional move is preparing itself. Resistance is at 21.8000, while 20.800/21.0000 is support.

CNY (6.3750): Little to discuss here. The PBOC is keeping a tight rein on the currency as it works through real estate issues, higher inflation, and its own logistic worries. Keep an eye on the 6.3500 level. Below this level, the next area of support is 6.2500.