The recovery on the US dollar remains on track as Janet Yellen last night all but confirmed that the FOMC would go ahead and hike again in December. The Fed chair stated that it could be ”imprudent to keep monetary policy on hold until inflation hit two %”. This implies that the Fed and its two % inflation target mandate are playing with a game of chicken. Instead the bank is now interested in normalisation of monetary policy. In effect Yellen is indiing that inflation could be here for a while. The effects of this was to push briefer dated 2 year yields to record highs, and although the 10 year return was also greater, a ”bear flattener” continues on the return curve. Whilst Yellen's comments are positive for short term yields, it could point to lower terminal speeds in the Fed. Regardless of this, the Dollar Index currently stands on the brink of a turnaround that is key down this morning since there is a six month downtrend breaking to the upside. Holding above 93 on Dollar Index can become crucial now. This all comes as key pairs such as EUR/USD, USD/JPY and GBP/USD all begin to find traction in favour of the dollar bulls.

Wall Street has started to form some support once again, with all the SP 500 closing all but flat at 2497, although Asian markets were mixed immediately (Nikkei -0.3%) whilst European markets also seem to form support too. In currency, the buck is currently gaining across the major pairs with sterling weakness getting the standout underperformer. The yellowish metal is flat so far, although with the dollar power last night we saw golden falling into the near. Oil has been backed, trading up around half a percent as hints persist that Turkey could turn off the tap to a pipeline to the Kurds in Northern Iraq

It's another silent morning for European financial information and the US core Durable Goods prices at 1330BST is initial in focus. The expectation is that ex-Transport Durable Goods will grow by 0.2% on the month (down from 0.6% a month). US Pending Home Sales are at 1500BST and are predicted to fall by a further -0.5% (later falling by -0.8% a month). The EIA petroleum inventories are at 1530BST and are expected to show crude stocks to construct by a further 1.8m barrels, even although distillates are expected to drawdown by -2.5m barrels and the gasoline stock drawdown by -0.8m barrels. The Reserve Bank of New Zealand will declare financial policy at 2100BST and is expected to hold rate stable at 1.75%.



Chart of the Day -- USD/CAD

The set has been dring higher in a recent recovery. As there will be contradictory forces at work, with all the dollar recovery fighting against the positive read through this is an interesting pair. The rebound on USD/CAD has attained something of a crossroads now, although the dollar recovery is currently winning over at the moment. The older crucial floor of the July low around 1.2410 is a previous support that is presently a basis of immunity. The rally hit this immunity and backed off on the appearance. However, the reaction would suggest the bulls have not given up. The market is also at a confluence of immunity using a three month downtrend also a barrier at this degree. The momentum indiors have been improving in the past few months but it is interesting to see the RSI also back around 50 which is around where the rallies have failed because the big sell-off started back in May (specifically in June and again in August). The market is at a key junction then and a close back above the 1.2410/1.2440 immunity would start to show a near term improvement turning into something more medium term. The immunity at 1.2662 would then be open. The hourly rate cahrt shows strong momentum configuration with all the average. The market has published a series of higher lows in the past few months, the latest at 1.2310 although the support at 1.2250 needs to hold to keep this nascent uptrend.



EUR/USD

The euro has finished is best reversal pattern. A close below $1.1820 has formed a 1 month head and shoulders shirt that implies a drawback corrective target of 270 pips in the coming few weeks towards $1.1550. This comes as the market has also broken the channel support that has been a guiding hand for the past five months. Indiors are increasingly corrective with the MACD lines quickening back towards neutral, although the momentum that is negative is reflected by the Stochastics under 20 and the RSI at the lowest since April. The key test now becomes the August low at $1.1660 as a violation of this support would actually add the momentum to a correction, being a 2nd crucial reaction low broken. The neckline of the greatest pattern now becomes immunity at $1.1820 and there is a long term ”sell zone” between $1.1820/$1.1860. Technically the decrease reaction high at $1.2030is your level to watch for bull control for a series of lower highs and lower lows is currently in formation.



GBP/USD

The aid of the recent 200 pip range had been creaking at $1.3450 however, the market seems to currently be about the drift lower and increasingly into correction mode. As yet there hasn't been a critical close below $1.3450 to affirm the breakdown, however, the move in the past few days is all but suggesting that this is the case. Intraday breaches are critical and the market is again under in early movements now. A final break of $1.3450 would imply 200 pips of drawback towards $1.3250 and a retreat to the key July high at $1.3265 will be on. The momentum indiors are beginning to obtain some traction in a correction too, with the Stochastics beginning to pull at lower and that the correction is on when means of a signal on the MACD lines confirms the sell signal. The hourly graph indies a run of lower highs can be developing now under the key $1.3655, with $1.3570 and currently $1.3515. Momentum is also corrective with all the RSI failing under 60 and the MACD lines. There is minimal support until $1.3265, besides a minor level at $1.3330.



USD/JPY

The yen strength never actually looked decisive about the recent correction and the support has come in once more above 111.00. The sharp uptrend since the September low at 107.30 was always going to fight at some stage however, the bulls are apparently set to depart another greater low set up at 111.45 as yesterday's bullish candle has re-asserted the recovery. Finding support above the moving averages is a sign, although a configuration that is strong is retained by the momentum indiors MACD lines rising above Stochastics and neutral above 80. A retest of the recent high at 112.70 is back on now as the market has opened with gains now. The graph indies the trend break for a consolidation and a sense is that this is a consolidation to assist develop for the break with the hourly RSI consistently finding lows. There is a slight recoil at 111.85 which is a basis of support for intraday adjustments to be bought into now. An upside fracture above 112.70 implies 125 pips of breakout and re-opens the crucial July high at 114.50 again.



Gold

Yesterday was a crucial test of the Industry position on gold. The safe haven bid is the most important factor preventing a continuing gold correction for now, and a sounding Janet Yellen has pulled. A strong endure candle has cancelled out Monday's bullish rebound for golden, putting pressure back to the disadvantage once again and reasserting the resistance. I talked about a revived near $1300 being a bearish signal for gold and it has been observed. Rallies are a opportunity to sell, with the highs racking up and the very long term pivot band $1300/$1310 apparently once more being viewed. Together with the rally failing yesterday at $1313.50 the overhead pressure is mounting. The momentum signs have resumed with MACD lines, all the RSI failing at 50 and Stochastics set below 20 in their configuration. There is a near term flooring of support but the market should continue to correct back towards the support group $ 1267 / $ 1278, once this is gone.



WTI Oil

Having busted ardently higher on Monday that the bulls simply took their foot off the gas during yesterday's session and the industry just corrected back slightly. However WTI remains a strongly configured in an ever improving bull trend and corrections stay a opportunity to purchase. This comes with momentum indiors strongly configured using the RSI in the mid to high-60s lines and the Stochastics configured. A greater low above the $50.50 breakout will be thought of as a great opportunity for the bulls to re-enter a strong market. The uptrend comes in today at $50.40. The graph indies the buyers tend to resume control around 40 on the hourly RSI and around neutral on hourly MACD lines which reveals a configuration that is strong. The bulls appear to be reacting positively once again and yesterday's low at $51.45 is originally supportive for corrections to be bought into.



Dow Jones Industrial Average

The recent drift lower back in the brand new all-time high at 22,420 helps to renew upside potential and provide the bulls another greater low for a opportunity to purchase. The tendency channel is inviting at 21,945 now but any unwind in the support group of the migraines at 22,039/22,179 seems like a good entry point. However, the current market is dring slowly back at the moment and in spite of all the rising tensions there seems little desire. A Bad candle yesterday with a small real body shows The bulls are at a fantastic place. The hourly chart indies the RSI and MACD lines have unwound. First support is, with resistance.