Reappointment of Fed Chair boosts USD

The reappointment of Jerome Powell as the Chairman of the US Federal Reserve calmed nerves and his commitment to stop inflation from getting entrenched saw the US Dollar reach a 54-month high against the Japanese Yen. His commitment was supported by other Fed members and by the US Treasury Secretary Janet Yellen.

Both currencies are considered safe havens, so this is a significant shift in the face of concern over rising Covid cases. It is also a sign that the markets perceive Chairman Powell as being more likely to push tighter monetary policy in the US than the alternative candidates for his job. The USDJPY rate hit Y115.15 overnight but profit-taking has pulled that down half a Yen in the early European session.

South Australia has opened up after 5 months of lockdown to the relief of everyone involved. This news hasn’t directly affected the GBPAUD rate yet. This pair is caught in a flat pattern between AUD 1.8475 and AUD 1.86. We have a speech from the Assistant Governor of the Reserve Bank of Australia later tonight, so that could shift things. Rate hikes and the timing thereof are all anyone wants to hear from Michele Bullock. Let’s see if she delivers any hints on that.

NZD drops on retail sales dive

The New Zealand Dollar got a bit of a pasting overnight after a savage drop in retail sales. The GBPNZD rate shot up by nearly two cents after data was released showing an 8.1% drop in retail activity in the three months to September. So GBPNZD starts Tuesday at NZD 1.93 or thereabouts.

The Pound appears to have found its top for now against the Euro. €1.1930 has capped this pair since last Wednesday and the rate has settled into a narrow channel between that top and a support line at €1.1860. So we have a pattern within which we can trade for now. The day ahead is full of purchasing managers indices from both sides of the channel and all are forecast to be slightly less optimistic than the previous set. However, the early releases were French manufacturing and service sector PMIs and both beat the forecasts. So perhaps we will see some shift in the direction of GBPEUR.

The EURUSD rate is subject to the US Dollar’s renewed strength. That pair is down to $1.1250 and was slightly lower overnight. There is a little bounce underway as traders take profit, prompted by the improved French data. So that may continue if other EU states post improved data too.

The GBPUSD rate is a cent lower than where it ended last week. That positive news re the Fed Chair will have helped here. There are GBP buyers of around $1.354 and that is supporting Sterling right now. We will see the US PMIs later and the forecasts are quite positive. Whether the $1.34 support for Sterling will last will be an interesting feature of today.

Happy Fibonacci Day

And today is World Fibonacci Day. A day to celebrate the golden ratio, Fibonacci number progressions, and the fact that the mathematical percentages can be seen in everything from nautilus shells to pinecones and from calculations of the human body structure to bee colonies and Dan Brown books. We, chartists, use the numbers to predict how traders will behave at particular exchange rates and share prices. There are few ‘all pervasive’ things in life but Fibonacci numbers are just such a thing.

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