Good morning

	High	Low			High	Low
EUR/USD	1.0888	1.0811		USD/ZAR	14.4300	14.3100
GBP/USD	1.5117	1.5053		GBP/ZAR	21.80	21.59
EUR/GBP	0.7216	0.7171		USD/RUB	70.08	66.90
GBP/EUR	1.3945	1.3858		USD/ILS	3.8594	3.7932
USD/JPY	123.45	123.07		S&P 500	2096	2084
GBP/CHF	1.5109	1.5046		Oil (Brent)	43.65	42.89
GBP/AUD	2.0647	2.0556		Gold	1087.0	1082.0

A game of 2 halves – ECB President Draghi disappointed the market massively on Thursday by “not going the distance”, while the FED were all smiles on Friday when the NFP data exceeded expectation at +211K (+200K expected). Unfortunately Thursday’s bombshell > Friday’s NFP which left the USD battered and bruised which to tell you the truth caught just about everyone wrong footed. Short-covering by FX traders globally sent the USD into freefall and left FX traders licking their wounds. What was Draghi was thinking!!! Extending QE to 2017 and lowering interest rates by only 0.10% one would have thought would be EUR negative. But it seems the combination of extended QE and smaller rates change caused the opposite to happen and the EUR rallied – truth is I think the market has been MEGA short EUR and the disappointing ECB news was the catalyst that drove the USD into freefall.

With 10 days to go before the FED (FOMC) meeting traders will now be thinking as the news is out there that the FED are going to raise rates what else can drive the USD higher again. To be honest good old demand (more buyers than sellers) is pretty much all we can now hope for. I don’t expect any positive or negative rhetoric from the FED so close to the meeting and I don’t expect anything more from the ECB either. So best case scenario now is to trade with tight stops and hedge when necessary because the future is uncertain and risk is not something you should consider.

CB rate decisions in Swiss, SNB (Thursday -no change), UK, BoE (Thursday – no change), New Zealand RBNZ (Thursday – No change), and Russia, RUB (Friday – no change) will be the focus this week. Honestly, the only rate decision that counts is the FED. The other Central bank meetings above are not likely to cause any fireworks.

As a large Bank noted in their commentary and which sums up what I have noted above; “We expect more muted market movements this week, after sharp market reactions were triggered by the ECB’s policy under-delivery, and ahead of the all important FOMC meeting on 16 December. We prefer to sit on the sidelines in EURUSD positions for now, but will continue to look for catalysts or better entry levels to re-engage in strategic short EURUSD positions. After the ECB, the market’s attention will shift to other major central banks. We expect the SNB to take a ‘wait and see’ approach that would accompany a less aggressive ECB. Nevertheless, we still see CHF weakness ahead. The BoE is expected to stay on hold this Thursday as well, with no new information coming from the minutes. Finally, we expect RBNZ to cut its rate 25bp. With the cut not fully priced by the market, NZD is vulnerable”. I do not agree with their opinion that RBNZ will cut. I think the RBNZ will prefer to wait till after the FED meeting before acting on NZ interest rates.

In summary, as per the comment above I think the USD should rally SMALL’s over the coming days as traders look for new entry points to go LONG the USD. But as we have previously noted I think the USD could potentially come under pressure POST FED meeting (if they hike as expected). Overall I am still SHORT TERM VERY USD BULLISH.

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