So what happens when there are no new fresh headlines from the US / Iran confrontation? Thursday would be the day to find out. While investigations continue into the cause of the Ukrainian Air crash in Tehran, little else of note is hitting the news services. Once again, no news is good news with equity markets benefitting – the Nikkei was up 2.3% in Tokyo trading. European shares also gained with the DAX up over 1.2% prior to the Wall Street open. For FX it was once again a story of increasing USD strength during the European session. USDJPY would rally to 109.50, EUR would fall to 1.1097 and GBP to 1.3013. XAU took out some weak longs heading as low as $1,541.

The US session began with a higher open for equities, the DJ rising 150 points at the opening bell. Even after last year’s powerful rally to new all-time highs, the current Iran situation and the many market commentators that say the US equity markets are due a reversal, it’s amazing how investors are jumping at any opportunity to pile in. And as the day progressed so did the rally with the DJ up 230 points at one point. Then came a US media report that Iran had indeed accidentally shot down the Ukrainian airliner. For those of us that do not believe in coincidences this not overly surprising but its enough to take the gloss of the USD rally with EURUSD back to 1.1110, GBP 1.3070 and USDJPY down to 109.40. XAU barely reacts and continues to trade either side of $1,550. However US equities trim some of their earlier gains, the DJ now up 140 points. However, the reaction is short-lived and by the close on Wall Street, the DJ is back up by over 210 points. For FX, its been a very quiet day in the US with EURUSD not breaking a 27 point range, ending the day at 1.1105. GBP finishes well off its worst levels at 1.3065 and USDJPY ends just off its highs at 109.52. Time to put Iran to one side and focus on Friday’s NFP data for December!

Today was another day of USD strength albeit in confined ranges. Friday sees potentially the biggest USD moving economic data release that we see each month so will we get more of the same? We also have Canadian employment data so look for extra volatility for USDCAD. The current technical picture for USDCAD is rather unclear as moves for 2020 have been tied to the volatility in OIL. However, we have defined a base below 1.2960 and reject a high at a resistance of 1.3105 today. If we get a couple of extreme numbers, keep an eye on these levels. Also, watch for headlines that could affect the price of oil  – nothing worse than trading technicals for it to be undone in a heartbeat because of a news headline.

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David Hannigan

A graduate of the Cass Business School, Dave's career began with Credit Suisse as an Equity Options Trader on the London Stock Exchange, before moving into the world of FX with Chemical Bank and Citibank. 1994 saw him join National Australia Bank, first as a Senior Dealer, then Senior Vice President and Chief Dealer.

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