The dollar was strongly up overnight boosted by comments from Fed Chair Janet Yellen who gave strong signals that US interest rates will likely increase by the end of the year. Although Yellen did not explicitly say that Fed will hike on its December meeting, the message she has given that rate hike is likely relatively soon, was enough to strongly boost the greenback.

Additional support to the dollar was provided by Thursday’s upbeat data from the housing sector, as well as weekly jobless claims that fell to 43-year low.
The data pushed up yields on U.S. Treasury notes and underpinned the dollar. Yields have been on an uptrend since last week’s U.S. election, amid speculation that the Trump administration will embark on inflationary policies.

The gap between 10-year government bonds in the U.S. and Germany widened to 200 basis points, its widest level since at least 1990, as investors expect the European Central Bank will keep monetary policy loose to stoke euro zone inflation.

The ECB’s rate-setting meeting last month agreed on the need to maintain unprecedented monetary stimulus and to decide in December whether to extend the ECB’s 1.74 trillion euro asset buy.
The dollar index that measures performance of US dollar against the basket of six major currencies, surged on Yellen’s comments on Thursday and extended rally after opening with gap-higher on

Friday, posting fresh nearly 14-year high at 101.43. The index was up 0.53% in Asia, on extension of steep ascend that continued for the tenth straight day. Thursday’s close well above psychological 100.00 barrier, generated another bullish signal, as the index took out strong technical resistances at 100.38/53 and came ticks ahead of another strong technical barrier at 101.50.

The Euro fell further on Friday, down 0.27% in Asian, on extension of steep descend after US elections. The single currency broke below 1.06 handle on the latest bearish acceleration and is heading towards critical supports at 1.0519/1.0461.
The dollar/yen approached 111.00 barrier, on extension of Thursday’s rally that eventually took out psychological 110.00 resistance. The pair was up 0.52% in Asia on Friday, on extension of steep post-US election rally that eyes technical resistance at 111.36, as the pair is on track for the second consecutive strong weekly bullish close.

Expectations of yield differentials also helped the dollar gain on the yen, in the wake of the Bank of Japan’s move on Thursday to buy unlimited bonds. That move underscored to markets it is serious about keeping the yield on Japan’s benchmark 10-year government bond in its bid to control the yield curve and keep borrowing costs low.
Antipodean currencies remained under strong pressure on Friday, driven lower by rallying dollar that received an additional boost from strong US data and further signals of US rate hike this year.

Australian dollar fell 0.34% in Asia on Friday, extending steep descend of past two days that took out strong supports at 0.7440/0.7385 and being on track for the biggest weekly fall since beginning of May.

Spot Gold is approaching key support at $1200 after break below four-day consolidation. The yellow metal was down 0.82% in early Friday’s trading. Strengthening dollar could drive gold price further down, after strong risk-on sentiment was established after US election, neutralized gold’s safe-haven appeal.

Oil prices fell further on Friday, as a strengthening dollar beat back renewed hope that OPEC might finally agree production cuts.

US crude oil futures were down or 0.73% from Friday’s opening, while Brent oil fell 0.46%, extending losses for the third consecutive day.

Asian shares were mixed on Friday, with Shanghai Composite index being down 0.15%; Hong Kong’s Hang Seng index rose 0.30%, while Japan’s Nikkei 225 was up 0.81%.

European stocks were in red in early Friday’s trading. FTSE100 was down 0.29%; DAX slid 0.17% and CAC40 was down 0.18%

Highlights of the day

Europe
Eurozone’s current account surplus is expected to widen in September, according to forecast of 31.3 billion Euros, compared to Augusts’ surplus at 29.7 billion

America
Inflation in Canada is expected to rise in October, according to m/m forecast at 0.2%, compared to 0.1% in September. Core inflation is expected to stay unchanged at 0.2% (m/m) and 1.8% (y/y).

Important levels
USDJPY
The dollar rallied near 111.00 barrier vs yen on strong acceleration that eventually close above psychological 110.00 level. Extension above 111.00 would look for next targets at 111.35 and 111.80, followed by strong barrier at 112.10. Initial support lies at 110.40, followed by 110.00 and 109.75 which guard 108.53 support.

EURUSD
Steep descend extended below 1.0600 handle on Friday and approaching critical supports at 1.0519/1.0461 (lows of Dec / Mar 2015). Strong bearish sentiment is looking for attack at these supports, break of which would open way towards parity level. Resistance lay at 1.0665; 1.0700 and 1.0745/58., Market Analysis