USD Trading Outlook (19-12-2013)

Currencies

• The euro (EUR) picked up volatility on yesterday’s FOMC statement. The single currency moved from 1.3700 to 1.3812 against the dollar before collapsing again to 1.3651. The Federal Open Market Committee (FOMC) in the US has decided to reduce its monthly quantitative easing programme by USD 10 billion every month starting from January 2014. As part of QE3, the US Fed was injecting USD 85 billion into the US economy every month.

• The US dollar (USD) moved higher against the Japanese yen (JPY), reaching 104.35 before correcting somewhat to 103.98 in early trading today. A stronger dollar was expected as the future supply of dollars will be significantly decreased due to the upcoming taper. Look ahead for today’s US unemployment data coming out this afternoon.

Equities

• US stocks have taken the 10 billion taper well, with the US 500 (SPI) rising from 1761 to 1806 during the statement. The index may retest resistance at 1812 over the short term, alternatively support lies at 1760.

Commodities

• Brent Crude (BRT) prices have retraced in mid-December from 113.00 dollars earlier in the month to 107.70 before correcting to 109.36.

Mover & Shaker with FX Options

• Gold (XAU) prices fluctuated wildly during the FOMC statement, reaching 1244 dollars per ounce before dropping to 1216 dollars. The precious metal has been losing value as expectations of the upcoming tapering of monetary expansion reduces assets and commodity values.

• Options Traders expecting lower gold prices may be constructing Bear Put spreads on Gold.

• The Bear Put spread is constructed by buying an at-the-money Put and selling an out-of-the-money Put option on gold.