Latest FX market analysis and trade views: Three haevyweight elephants on the stage next week.

The past trading week has been definitely in risk-on mode. The greenback strengthened against all major currencies on positive news about tax cut deal and strong economic reports. NFP payrolls report showed 228K jobs added in November, unemployment rate remained at 4.1% low level and wage growth slightly missed the expectations: +0.2% vs +0.3% expected. However, the currency market players did not have any major reaction on the report, USD index had a temporary retracement right after the report, bouncing back up at daily high levels. US stock indices continued the bullish run on Friday, S&P and DOW had historical high close, while NASDAQ recovered after tech sell-off earlier this week.

All eyes on Fed meeting and Chairwoman press-conference scheduled for Wednesday, December, 13. The big question for the greenback bulls will be not only the interest rate decision itself, which is already priced in by the markets, with Fed Interest rates Futures showing 98% chances. Investors and traders will watch the statement, economic projections and Yellen’s comments, to understand the next moves from the regulator. In case if Fed Chairwoman will confirm her hawkish sentiment about to continue increasing the level of interest rates, the greenback could continue it’s run. But if she will express concerns and cautiousness about low inflation and wages growth, we will see a sell-off or retracement.

There are two important inflation reports to be released before the meeting: November PPI on Tuesday and CPI on Wednesday. Both reports could have a big impact, changing the sentiment of the statement in last moment. One more supportive factor for the greenback could be a traditional year-end repatriation. Lot’s of US based corporations have businesses abroad and usually they are interested to bring the profit back home before year end, just to decrease taxes. Such a flow could create an additional demand for USD.

Technical picture for USDJPY remains bullish on the daily chart below. One important condition for bullish trend continuation has been occured on Friday by the price closing the day above Ichimoku span. Next condition to complete the reversal pattern is for the green line to cross the blu one and for both brown and blue lines to get out of the span. Next resistances for daily close prices is local highest daily CLOSE at 114.15 (NOV-01) and local highest daily HIGH at 114.73 (NOV-06). We expect the prices to test this resistance range BEFORE the FOMC meeting with a pullback to follow.

Two more major Central Banks hold their meetings, interest rate decisions and press-conferences on Thursday: Bank of England and European Central Bank. The british pound exchange rate suffered after the divorcement decision between two big economies in 2016. The British economy had uncertainty concerns and there are lots of European financial companies, withdrawing the capital and offices from UK. But british economy continues to show strong performance, despite the Brexit story. BoE has been forced to hike one time this year and MPC has the question about further tightening still open.

The latest news from politicians were mostly positive last week. Seems like there is a light at the end of the Brexit tunnel. At least they have deadlines now, and some ranges about possible compensation to the EU from UK. The sterling has been buoyant recently, but the momentum is unusual for the pound assets, traditionally sky rocketing on bullish sentiment. We can see many pullbacks of the pound after achieving some modest gains. Anyway, further movement will depend on Brexit talks, FOMC and BoE possible divergence in tightening policy and performance of economies on both sides of the Atlantic. Key UK reports to watch before the BoE: CPI, Average Earnings Index, Claimant Count Change and Retail Sales.

The GBPUSD rates are supported by median red line from May 2017. The latest blue pattern has also a continuation character, with current prices closer to the lower range. Fast oscillator RSI14 is also supported, staying above 50% bullish mark. Key ranges to monitor: 1.3319/55 as support and 1.3521/52 as resistance.

ECB is expected to continue the era of extremely cheap capital resources. They made decision to continue the quantitative easing, injecting billions of euros to the system. The recent economy performance is strong, but the inflation remains below the regulator’s long term target. I read this and realize how boring is Super Mario. We should think about to change TV channel during his press-conference on Thursday :)

EURUSD fundamentally mostly depends on the greenback in a recent pullback. We bet, ECB is really glad that they have managed to hold euro against the second test of 1.2000 level. They won the battle but they did not win the war! Like a blind man said: ‘We will see”.

Short term technical outlook for EURUSD leaves the risks for the downside. You can find below compressed H4 chart. The middle blue line used to be the support for upside trend since French election in May 2016. Parallel higher and lower clones of the line also work well as you may see. The prices have bounced down to the lower line, but both bullish and bearish scenario could take place before two Central Banks meetings in the upcoming week. There is a chance to go north upto resistance SMA89 at 1.1832 as the prices bounced right before the end of the Friday trading session and the week. But Further weakness is also possible due to the risk appetite and strength of the greenback. Key support range is settled between 1.1667 and 1.1554.