- The dollar rally on Monday hit its resistance at H4-period EMA60 and retreated. Given that the dollar could potentially continue to whipsaw in the short term, we shall employ a cautious strategy.
- GBP could face more downward pressures going forward as Brexit deal fell short, leaving little time for the first phase of the negotiation.
- We will get interest rate decision of RBA at 1130 BJT and keep an eye on its implication to the Aussie dollar on the day.
The dollar whipsawed against a basket of six majors below its H4-period EMA60 on Monday 4 December and retreated in late session after the failure to stage a bullish breakout. With uncertainty over the final version of the tax bill, a possible government shutdown and the on-going investigation on Russia’s involvement in the U.S. election, the dollar could continue to struggle in the short term. In addition, the fate of the British pound still hinges on the Brexit negotiation as Brexit deal fell short due to the Northern Ireland border issue in the first phase of talks which caused the sterling nosedived by as much as 100 pips in the mid session. Theresa May, the British Prime Minister, has to etch out a final deal with EU before 14-15 December when EU leaders will meet in Brussels for their summit, not for a long time yet.
The dollar index (DXY) reacted off resistance in the short term. Given that its short term moving averages turned convergent again after depressing by its long term moving averages which remained bearish and divergent though started to flatten on the 4 hour chart, it will be interesting to watch whether or not they could turn bearish and divergent going forward.
（DXY H4 chart）
As to non-U.S. currencies, the euro saw its trading range contracted through consolidation after finding support at its H4-period rising trend line without a clear trend signal. Therefore, patience is required. The British pound traded in a narrow range above its H4-period moving averages in a choppy Monday amid Brexit talks. The Aussie dollar staged s a swift rally thanks to the better-than-expected Chinese PMI early this morning to its daily trend resistance after trading in a narrow range in choppy Monday session. Keep an eye on the RBA decision.
（GBP H4 chart）
Let’s take a look at precious metals now. The gold traded in a narrow range and inched higher below its H1-period moving averages in late session. Without a breakout, we should tread cautiously in the short term, watching the development in the short-term and long-term moving averages both on the 1 hour and 4 hour chart going forward.
（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.