- The dollar posted gains following the positive macro data release yesterday as U.S. ISM Manufacturing Index for December printed at 59.7, significantly higher than the previous reading and the consensus forecasts.
- Tax reform in U.S. and its economic implications still posed a big uncertainty to the setting of monetary policy amid low U.S. inflation, as indicated by FOMC meeting minutes released in the early hours of Thursday BJT.
The dollar managed to bounce back against a basket of six majors and broke above its H1-period trend resistance on Wednesday 3 January in the wake of positive economic indicator from U.S. as December ISM Manufacturing Index printed a significantly-higher-than the previous reading and the consensus forecasts at 59.7. The non-U.S. currencies and gold all retreated as the dollar staged a corrective rebound.
The dollar index (DXY) rallied in the corrective mode as expected and moved back toward circa 92. The index could potentially challenge its H4-period trend resistance and saw its short term moving averages turned convergent amid the upside momentum, however, its steep long term moving averages remained bearish and divergent.
（DXY H4 chart）
As to non-U.S. currencies, the euro staged a corrective down move and broke below its support at H1-period EMA60, targeting next trend supports on the 4 hour chart upon the extension of the corrective declines. The British pound closed lower with a large black body on the basis of daily closing after reacting off highs and mostly erased gains posted on Tuesday. The sterling could potentially trade in a wide range going forward. The Aussie dollar fell back following rebound with a double-top configuration and bearish divergence in the MACD indicator on the 1 hour chart. Whether or not the commodity currency could extend its corrective down move will be important to observe.
（AUDUSD H1 chart）
Let’s take a look at precious metals now. The gold declined below its H1-period EMA60 early this morning within a 3 bearish impulsive wave consequence. Its short term moving averages that went lower with strong downside momentum moved into its long term moving averages which contracted significantly. Whether or not the yellow metal could extend its corrective down move will be important to observe.
（Gold H1 chart）
By JasonZou —— Chief Analyst of AvaTrade China
Disclaimer: The views and opinions expressed in this article are those of the authors and for the purpose of reference only, and shall not be relied upon by investors in making any trading decisions.