Forex news for North American trading on December 5, 2016.

  • US crude oil futures settle at $51.79/BBL
  • BOE Carney on Channel 4 in the UK
  • Fed's Bullard: St Louis model shows one fed hike through 2019
  • Italy PM Renzi asked to delay resignation until budget passed
  • EURGBP runs into the 200 hour MA
  • Dusselbloem: Does not expect Staff Level Agreement (SLA) before year end
  • ESM Reigling: Will start ST implementation of Greek debt relief measures
  • France's Sapin: Eurogroup adopted short-term measures to reduce Greek debt: EURUSD to new highs
  • The US dollar is falling off with the EURUSD at high/USDJPY at low
  • BOE's Carney: It's too costly to fully offset GBP impact on CPI
  • European stocks end higher (with the exception of Italy).
  • Feds Evans: We're on the cusp of a period of rising interest rates
  • Feds Dudley on CNBC: Need to see what fiscal policy is enacted first
  • It would be good if interest rates were higher says Fed's Evans
  • November 2016 US ISM non-manufacturing PMI 57.2 vs 55.4 exp
  • November 2016 US Markit services PMI final 54.6 vs 54.7 prior
  • ECB's Weidmann is worried that reforms could slow in Italy
  • Yellen should serve her full term says Dudley
  • Oil keeps gushing higher as non-OPEC producers line up to join in
  • The turnaround in the euro is a great sign for the bulls
  • Fed's Dudley: Favours somewhat less accommodation over time
  • The strongest and weakest currencies as NA traders and for the day

In other markets:

  • US stocks closed higher in trading today: S&P +0.58%, Nasdaq +1.01%, Dow +0.24%.
  • European stocks were higher with the exception of Italy: German Dax, +1.63%. France CAC +1.00%, UK FTSE +0.24%, Spain Ibex +0.67%, Italy Mib -0.21%
  • US 2 year note, 1.1198%, +2.4 BP, US 5 year note 1.8423%, +2.1 BP, US 10 year note 2.3868%, unchanged. US 30 year bond 3.0558%, unchanged
  • Spot gold $1169.70, -$7.55 or -0.64%
  • Crude oil futures, $51.15, -$0.57 or -1.10%

The Italian referendum reaction was kinda like the US election.

A "No" result was expected to send the EUR tumbling much like a Trump victory would send the dollar tumbling.

However, after an initial fall at the opening of the trading day, the buyers emerged and slowly took the EUR back higher.

Perhaps it was a squeeze - remember the speculative shorts remain in the market at least according to the CFTC commitment of traders. There also seems to be more chatter (at least to me) about the parity word for the EURUSD.

When the market is sure (or almost sure) of an outcome and the position is there to support that outcome, when the market does not do what it is expected to do, that is the recipe for a squeeze.

For the EURUSD that is what happened and the subsequent explosion higher was good for 292 pips from the low to the high. Specifically, the move saw the EURUSD move from a new year low (and a low that also took out the triple bottom at the 1.0517 level ) at 1.0503, to a high at 1.0795 - just 5 pips short of the 1.0800 level. That's a pretty good move, in the other direction. PS another help was the news that they will restructure the Greek debt.

The question now is "Is that it for the buyers?"...

I think on a correction if the "old" year low from the first few days of January 2016 at the 1.0708 holds, that would be more bullish. What is resistance? The 1.0815-22 is topside resistance in the new day. The 200 bar MA and the 38.2% of the move down from the Election day high comes in at that area.

A rally or fall in the EURUSD might be dependent on the price action of the EURGBP. This pair has been moving down and up since last Thursday (see post here). Friday was the down day. Monday was the up day as nearly all the decline was gobbled back up. The pair did stall on the topside at the 200 hour MA at the 0.8475 level. The 100 hour MA is below at 0.8446 and that has held support into the close. A move back below the 100 hour MA may not only weaken the EURGBP technical picture but could also weaken the EURUSD as well. If the support holds and the 200 hour MA is broken, the chances are the EURUSD is moving higher too. Keep an eye on the EURGBP for clues.

The USDJPY is another pair that found the 200 hour MA as a key technical level in the NY session. IN the USDJPYs case, the 200 hour MA acted as support (the EURGBP it was resistance). IN the NY afternoon, the USDJPY cracked the 100 hour MA and headed down to the 200 hour MA at 113.20. Support buyers came in against the level and moved the pair higher. The day is ending with the price above the higher 100 hour MA at 113.74 which should be more dollar bullish if the price can remain above that level. If not, look for a retest of the 200 hour MA (a break should solicit stop selling). On a continued move higher in the USDJPY, the 114.44-54 and then 114.86 remain key upside targets. They were highs from March 2016 and mid Feb 2016. The 114.44-54 area has been broken on 4 separate occasions on the hourly chart (including Monday), but each break stalled ahead of the 114.86 level. That technical story, therefore, remains in tact.

IN other news today, the non manufacturing ISM was better than expectations and the highest reading in 2016 a (at 57.2). Good end to the year. Dudley, Evans and Bullard expect rates to move higher (with a December hike next week a certainty). Bullard is sticking to his guns saying rates will then remain on hold until 2019. Bullard will not vote in 2017. Evans and Dudley will be voting members. By the way, the black out period before the Fed decision is in effect in the new trading day. So we are done with the Fed chatter until the decision next Wednesday.

In the new trading day, the RBA will keep rates unchanged. The AUDUSD rallied to the 0.7500 area - well just short of it at 0.7498. That high was within a pip or two of the high from last week at 0.7497. A move above should solicit stops in the new trading day. ON the downside, the 0.7431 is the 100 and 200 hour MAs. A break below would be more bearish. The decision is due out at 10:30 PM ET or 0330 GMT.

Below is the % change of the major currencies toward the end of the trading day. The EUR is the strongest. The JPY is the weakest.