Narrower trade gap pushes the dollar higher….again!

The dollar made yet another push against the majors as the Trade Balance came out higher than expected today. November’s trade balance narrowed to -$58.2B from $58.8B in October which was better than the consensus of -$60.0B.

The narrower trade balance was due to a 0.9% (compared to a 0.3% increase in October) increase in exports, mainly from the increased shipments of civilian aircrafts.

Remember, higher exports means increased domestic production, which is good for the economy. In theory, this suggests that manufacturing should be better moving forward and adds to the list of reasons that the Fed will most likely hold on cutting interest rates.

Coming Up:

GBP Interest Rate Statement
7:00 am ET; 12:00 GMT
Previous= 5.00%; Consensus= 5.00%

EUR Interest Rate Statement
7:45 am ET; 12:45 GMT
Previous= 3.50%; Consensus= 3.50%

Chart Analysis:

EUR/USD

The Euro is currently at 2960. Both 4hr and daily stochastics are reading oversold so my short term guess would be that the pair is headed up. The question is where? Well the closest target is 3000 and if the pair can break that, then it will probably head back to its 38% Fib line on the daily chart which also happens to be where the 50 SMA is as well.

Trade Idea:

Buy at market (2960); Stop loss= 2920; Target= 3000; Target 2= 3025

GBP/USD

Like its Euro brethren, the Cable is also reading oversold on both the 4hr and daily chart. The closest targets are its 50 SMA on the daily chart and then 9400. All signs are pointing for this pair to move up.

USD/CHF

The dollar has made a ridiculous run against the Swissy and it looks like it might be time for the Swissy to make up some ground. 4hr and daily stochastics are overbought and the pair seems to be headed down to 2400. I’d like to short the pair now (2440) and target 2400 with a stop loss at above its most recent high that it made yesterday, which is at 2477.

Trade Idea:

Short at market (2440); Stop Loss= 2480; Target= 2400; Target 2= 2375 (100 SMA)

USD/JPY

The dollar has been killing the Yen once again and it’s still not clear whether or not the beating is over. Daily stochastics has just entered overbought territory again so it may have a little more momentum to the upside before eventually falling again. If it can break its most recent high at 119.77 then it will most likely hit 120.00 before retracing.

Conclusion:

Although we have no major US fundamental reports out tomorrow, we do have interest rate statements from the BOE and ECB. Although they are most likely holding rates steady, they could still cause some movement in the markets.