Time to Consider Divergent Monetary Policies

December 18, 2015

Time to Consider Divergent Monetary Policies?:
Following the initial equities euphoria, the stops above swing highs survived and sanity prevailed. Interest rates up – Stocks down… Yes, that’s how it’s meant to go!

US Dollar strength is accelerating as it starts to sink in that no matter the speed of any subsequent rate hikes, the US is still the only major economy in the midst of a rate hiking cycle. With this latest round of risk-off buying, commodities have continued to sell off, with the most notables in Oil and Gold both sitting on their lows.

But sticking with Forex on this quiet Friday morning, it was interesting to note that UK Retail sales nearly TRIPLED expectations, but Cable stayed stubbornly weak. I’ve said it before and I’ll say it again: USD really is king.

“GBP Retail Sales m/m +1.7% v 0.6% expected.”

GBP/USD Daily:
Click on chart to see a larger view.

It wasn’t that long ago that we were talking about the Bank of England being the next to raise rates, and that storyline is sure to make headlines again soon enough. Especially with data beating expectations like that!

Now that the Fed has moved, diverging monetary policies from different central banks will give us plenty to trade around heading forward and Cable at both a long term horizontal support zone as well as short term channel support, this chart has got my attention again.

With FOMC out of the way and the Fed finally putting us out of our misery, you can enjoy your easy Friday to end the week. Take the opportunity to maybe clean up and re-set the short term levels marked on your MT4 charts.


On the Calendar Friday:
NZD ANZ Business Confidence
JPY Monetary Policy Statement
JPY BOJ Press Conference

CAD Core CPI m/m


Chart of the Day:
USD/CAD continues to be the best performing currency pair on the Vantage FX Market Watch, breaking decade old swing highs and refusing to let up.

USD/CAD Daily:
Click on chart to see a larger view.

Following the immediate post-Fed USD drop, the Dollar bulls stepped it up a gear and wrestled back control. This Dollar strength combined with lower oil prices has seen USD/CAD go parabolic.

With Canadian CPI numbers out tonight, do you see opportunity fading USD/CAD into resistance?

Dane Williams – @VantageFX

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