The FOMC will determine the fate of the dollar

A contradictory report on employment in the US economy, published on Friday, did not allow the dollar to continue its rise.

The number of new jobs in November rose more than expected, recording an increase of 228, 000, which exceeded the average forecast of 195, 000. Also, the average working week increased from 34.4 to 34.5 hours, reaching a five-month high, which was also a surprise for analysts, who did not expect change. The share of the able-bodied population in the labor force remained unchanged at 62.7%, unemployment stood at 4.1%, and at its lowest level in more than 17 years.

These rather positive for the dollar data were overshadowed by the weaker than expected average wage growth. Growth relative to October was 0.2% with a forecast of 0.3%, as year-on-year growth was 2.47%, which is better relative to November's 2.3%, but worse than the forecast of 2.7%.

The weak growth of average wages casts doubt on the Fed's view that the labor market recovery will lead to an increase in inflation due to the growth of household incomes. Indeed, for the period of 2015- 2016. and it was, as is clearly seen in the graph below, but after the growth in wages in December 2016 reached 2.87% maximum since January 2009, the growth rate began to slow down, which immediately affected the fact that after this inflation began to slow down.

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On this, the troubles for the dollar did not end. The Atlanta Fed was forced to lower the US GDP growth rate estimate in the fourth quarter from 3.2% to 2.9%, and thus two of the three key indicators that the Fed is targeting in monetary policy-inflation, unemployment and GDP growth, were at stake.

Of course, these factors will not prevent the Fed from raising the rate at the next meeting on Wednesday, December 13, but may serve as a reason for fixing profits and pulling back the dollar from the achieved levels. The rate hike has long been taken into account in prices and is unlikely to have a significant impact on markets, but the issue is the intention of the Fed to raise the rate three times in 2018.

However, despite the fears, the dollar still remains the favorite in the upcoming week, the reason for this is a noticeable drop in tension in the political life of the United States. First, Donald Trump managed to pass through the Congress a tax reform project without any significant losses, the changes were superficial, which indicates that the Democrats have no substantial objections. Secondly, the issue of impeachment, which only recently seriously worried the president's team, was removed from the day's story. Thirdly, Trump managed to defend in the Constitutional Court a law prohibiting the entry of Muslim migrants into the country. These factors have significantly strengthened the political position of Trump, and therefore one should expect that the policy will go to the background and investors will focus on the economy, which for the dollar will be clearly a positive driver.

The level of optimism continues to be high, despite some slowdown. On Friday, the University of Michigan presented a preliminary result on consumer confidence in December, which showed a decline to 96.8p. against 98.5p a month earlier which was unexpected, but still much higher than before Trump's election as the president.

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Banks advise selling the dollar before the FOMC meeting. Deutsche Bank forecasts EURUSD to rise to 1.21, Danske Bank expects that trade will remain in the range 1.17-1.20 with a growth trend, Scotiabank sees support at 1.18 and suggests that a break above 1.19 will pave the way for further growth. These forecasts are largely based on the fact that the eurozone, unlike the United States, looks much better for a number of key indicators, and therefore the ECB at its meeting next week will announce a move to stop the stimulus program.

Thus, there is no consensus on the fate of the dollar next week. The chances for continued growth look slightly more preferable, but we must proceed from the fact that central banks are entering the game, which can completely change the alignment of forces by the end of the week.

The material has been provided by InstaForex Company - www.instaforex.com

Bitcoin analysis for December 08, 2017

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Bitcoin (BTC) has been trading downwards. The price tested the level of $13,696. Deutsche Bank has issued a market briefing for 2018. The document, created by Chief International Economist Torsten Slok, lists 30 possible threats that could disrupt global markets next year. Alongside entries like "North Korea" and "Brexit", is bitcoin. Its inclusion shows the extent to which the banking sector is eyeing the revitalized digital currency. While some institutional investors see bitcoin as an opportunity, many more consider it a threat. The technical picture is bullish.

Trading recommendations:

According to the 15M time frame, I found a potential double bottom formation and a broken supply trednline, which is a sign that selling looks risky. I also found a hidden bullish divergence on the moving average oscillator, which is another sign of strength. My advice is to watch for potential buying opportunities.

Support/Resistance

$17,120 – Intraday resistance (price action)

$16,065 – Objective 1

$17,120 – Objective 2

With InstaForex you can earn on cryptocurrency's movements right now. Just open a deal in your MetaTrader4.

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Global macro overview for 08/12/2017

The volume of British industrial production remained just at the September levels, which was widely expected by the surveyed market participants (consensus: 0.0% m / m). The factory production was just above expectations, which increased its annual dynamics by 1.2 pp up to 3.9%. A slight dose of surprise was provided by net exports, as the trade deficit widened by only GBP 328 million to GBP 10,771. A quite disturbing component turns out to be construction production, which in October recorded a monthly decline of 1.7%. against the expected increase of 0.1%.

The British Pound remains insensitive to the above data, thus expecting new reports related to the Brexit negotiations. Cable in the last few hours has recorded about 60 pips downslide. This fall is behind the headline of Bloomberg, who reports that it is unlikely that a trade agreement between the EU and Great Britain will be reached by March 2019.

Let's now take a look at the GBP/JPY technical picture at the H4 time frame. The bulls were able to push the price higher to the new highs at the level of 153.38, but the market quickly reversed and now is trading just above the technical support at the level of 151.91. The clear bearish divergence between the price and momentum oscillator support the bearish bias as the GBU remains highly sensitive to the Brexit negotiations rumors and news.

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GBP/USD analysis for December 08, 2017

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Recently, the GBP/USD pair has been trading downwards. The price tested the level of 1.3403. According to the 30M time – frame, I found that price broke the pivot level at 1.3426, which is a sign that sellers are in control. I also found a broken upward trendline in the background, which is another sign of weakness. My advice is to watch for potetnial selling opportunities. The downward targets are set at the price of 1.3370 (pivot support 1) and at the price of 1.3260 (pivot support 2).

Resistance levels:

R1: 1.3532

R2: 1.3590

R3: 1.3697

Support levels:

S1: 1.3370

S2: 1.3260

S3: 1.3202

Trading recommendations for today: watch for potential selling opportunities.

The material has been provided by InstaForex Company - www.instaforex.com

EUR/USD analysis for December 08, 2017

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Recently, the EUR/USD pair has been trading downwards. The price tested the level of 1.1731. According to the 15M time – frame, I found an intraday trading range between the price of 1.1747 and the price of 1.1730. Since the trend is bearish, my advice is to watch for potential breakout of 1.1730 for selling opportunities. The downward targets are set at the price of 1.1715 and at the price of 1.1665.

Resistance levels:

R1: 1.1800

R2: 1.1825

R3: 1.1843

Support levels:

S1: 1.1755

S2: 1.1745

S3: 1.1715

Trading recommendations for today: watch for potential selling opportunities.

The material has been provided by InstaForex Company - www.instaforex.com