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FOREX: USD Holds Firmer in Thin Trade

FOREX
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  • The USD gained in thin trade on Monday, with volumes light and participation muted given the proximity to market closures on Dec24 for the holiday period. The USD Index retook the 108.00 handle after early weakness, keeping the cycle high and bull trigger within range at 108.541. Thinner markets were encapsulated by the soft volumes across currency futures posted Monday, evident in EUR futures trade holding over 25% below average, JPY futures 45% below average and GBP futures over 30% below expectations.
  • Despite slippage into the Friday close, USDCAD remains well toward the upper-end of the recent range, with 1.4467 the initial target ahead of 1.4508 - the 3.236 proj of the Oct 17 - Nov 1 - 6 price swing. CAD GDP data did little to cap USD/CAD gains today, as political uncertainty (including the building argument within the Liberal Party for Trudeau to step down as prime minister. BoC minutes are due later today - covering the Dec11 rate decision at which the bank cut the lending rate by 50bps to 3.25%. Key for the release could be any expansion of the communications from the closing paragraphs of the Dec policy statement; that the BoC "will be evaluating the need for further reductions in the policy rate".
  • The grind higher in US Treasury yields at the NY crossover added extra weight to GBP/USD, which ebbed lower slowly, but surely, over the European morning. The revision lower for Q3 GDP (down to flat for Q3) won't be helping, but the decline was been largely USD-led. The fade in the pair is still well clear of the Friday low, however prices are now back below the 1.2533 support - the 23.6% retracement for the post-Fed slip lower in the pair. Support seen more significant into 1.2476.
  • The schedule Tuesday is understandably quiet, with many European markets closed, and an early close for UK assets. Markets don't return in earnest until Friday, Dec27.
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  • The USD gained in thin trade on Monday, with volumes light and participation muted given the proximity to market closures on Dec24 for the holiday period. The USD Index retook the 108.00 handle after early weakness, keeping the cycle high and bull trigger within range at 108.541. Thinner markets were encapsulated by the soft volumes across currency futures posted Monday, evident in EUR futures trade holding over 25% below average, JPY futures 45% below average and GBP futures over 30% below expectations.
  • Despite slippage into the Friday close, USDCAD remains well toward the upper-end of the recent range, with 1.4467 the initial target ahead of 1.4508 - the 3.236 proj of the Oct 17 - Nov 1 - 6 price swing. CAD GDP data did little to cap USD/CAD gains today, as political uncertainty (including the building argument within the Liberal Party for Trudeau to step down as prime minister. BoC minutes are due later today - covering the Dec11 rate decision at which the bank cut the lending rate by 50bps to 3.25%. Key for the release could be any expansion of the communications from the closing paragraphs of the Dec policy statement; that the BoC "will be evaluating the need for further reductions in the policy rate".
  • The grind higher in US Treasury yields at the NY crossover added extra weight to GBP/USD, which ebbed lower slowly, but surely, over the European morning. The revision lower for Q3 GDP (down to flat for Q3) won't be helping, but the decline was been largely USD-led. The fade in the pair is still well clear of the Friday low, however prices are now back below the 1.2533 support - the 23.6% retracement for the post-Fed slip lower in the pair. Support seen more significant into 1.2476.
  • The schedule Tuesday is understandably quiet, with many European markets closed, and an early close for UK assets. Markets don't return in earnest until Friday, Dec27.