Daily Forex Commentary

29 December 2016 - Dollar Index continues to strengthen despite thin trading volumes

By Matt Richardson

New Zealand Dollar: 

The New Zealand dollar Crept upward through trade on Wednesday bouncing of low side supports and moving back through 0.69. The Kiwi touched intraday highs at 0.6930, up half a percent as robust commodity prices and positioning into years end prompted investors to consolidate current positions and correct (to some extent) last week’s heavy sell off. The NZD remains under pressure when values against the world’s base currency and downside risks still loom large however the pace of the Greenbacks advance appears to be slowing. Attentions today turn to U.S macroeconomic indicators for direction amid thin volumes.

We expect a range today of 0.6840 – 0.6980


Australian Dollar:

The Australian dollar enjoyed mixed fortunes through trade on Wednesday rallying throughout the domestic session as a relatively healthy commodity market forced the Aussie toward intraday highs at 0.7219. Having come under increasing pressure through trade last week the AUD looked to consolidate its position and anchor supports at 0.7140 amid concerns Chinese growth prospect will be dampened in the face of protectionist U.S trade policies. Iron Ore prices slid and renewed demand for U.S treasuries forced the Aussie back through 0.72 to touch intraday lows at 0.7164. Having broken 9 month lows the Aussie remains vulnerable to wider weakness as the juggernaut that is the USD bullish uptrend remains intact and additional Greenback gains are still in play. Attentions today turn to key supports at 0.7140 and 0.7055 as markers for wider direction while topside resistance at 0.7230/40 will likely cap any upward shifts.  

We expect a range today of 0.7140 – 0.7240


Great British Pound:

The Great British Pound edged lower through trade on Wednesday approaching new lows as pressure on key supports builds and a consolidated break below 1.2200 opens. Touching intraday lows at 1.2201 Sterling came under fire as fears surrounding uncertainties associated with Brexit negotiations plagued investors outlook and markets looked to cover positions moving into the years end. Prime Minister Theresa May appears set to trigger Article 50 in the early New Year with the view of leaving the European Union by the end of March. Touching its lowest level in two months Cable will remain under pressure as the intricacies of what a British exit mean for the wider economy play out. Attentions and direction today will again be governed by thin holiday trade and positioning ahead of the New Year long weekend.    

We expect a range today of 1.7550 – 1.7850



Despite softer housing data the U.S Dollar index edged higher through trade on Wednesday as volumes across commodities, bonds and currencies all traded below average and holiday activity remained thin. The Dollar was buoyed by weakness across both the Euro and Great British Pound as investors looked to higher yields amid a widening concern the costs of propping up Italian Banks will escalate beyond current expectations, while Brexit negotiations weighed heavily on the minds of analysts leading into the New Year. The Gap between German Bund Yields and U.S Treasuries hit historic highs as the price of German Bunds continues to increase and the gap in borrowing rates touched 235.25 basis points. This burgeoning gap in treasury yields and the promise or expectation of growth through stimulus under President Elect Donald Trump continues to drive dollar strength. Touching one week lows at 1.0373 the Euro currently buys 1.0419 as attentions turn to U.S crude oil inventories for direction through trade on Thursday.


Data releases:


No Data

NZDNo Data


BoJ Summary of Economic Growth and Inflation Expectations

GBPNationwide HPI m/m


M3 Money Supply y/y, Private Loan’s y/y and Italian 10-Year Bond Auction


Unemployment Claims, Goods Trade Balance, Prelim Wholesale Inventories m/m and Crude Oil Inventories 

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