The dollar remains firm on Tuesday and holding near nine-month highs against a basket of major currencies, supported by solid U.S. manufacturing activity that reached one-year high this month and hawkish comments from a Federal Reserve officials that further boost expectations of a U.S. rate hike by the end of the year.
The dollar index that measures performance of US dollar against its major world counterparts retested its Monday’s high at 98.81, on track for strong monthly close, as it gained 3.57% so far this month.
Comments from Chicago Fed President Evans on Monday that Fed could raise rates three times from now until the end of 2017, as long as inflation numbers and labor market continue to improve, adding on to earlier hawkish comments from NY and SF Fed Presidents, both of whom hinted at a looming rate increase.
The Euro remains at the back foot on Tuesday and consolidates above fresh low of Monday at 1.0858, capped under 1.0900 barrier. The single currency came under fresh pressure last week after the European Central Bank left the door open for more stimulus and sidelined speculation about tapering QE program. The Euro eyes early March lows at 1.0820, as fresh weakness in October made so far losses of 3.28% against dollar.
Traders see the Euro lower in coming weeks and speculate about extension towards lows at 1.05 zone, posted in December 2015, once the single currency lost psychological 1.1000 handle.
The dollar also performed well against Japanese yen, as bullish acceleration on Monday closed above 104 barrier and today’s fresh extension higher cracked important technical barrier at 104.43, en route towards recent recovery peak at 104.62.
Elsewhere, Australian dollar remains within 60-pips range for the third day, after recent sharp fall was contained at 0.7885 zone and recovery attempts repeatedly rejected at 0.7650 area. Lack of data from Australia keeps the Aussie in directionless near-term mode, but strong US dollar threatens resumption of steep downmove from last week’s peak at 0.7732.
Gold edged up on Tuesday, following bumpy ride on Monday, when the yellow metal rallied and spiked at $1271 and fully reversed gains on subsequent sharp fall back to Friday’s low at $1261. Fresh strength is supported by rising demand for gold, but increasing probability that Fed would raise interest rates soon and firm US dollar, keep gold’s gains limited and in near-tem range-trading.
US Oil price is regaining traction on Tuesday and holding firm above $50 handle, following Monday’s fall, after Iraq said it wanted to be exempt from any production freeze deal by the Organization of the Petroleum Exporting Countries.
Oil price is heading towards strong resistance at $51.00, as hopes of production cut remain alive among traders, but analysts are sceptical about the plan after OPEC reached an agreement to limit production.
Asian shares were mixed on Tuesday after South Korea third quarter GDP came in better than expected, despite a string of major corporate mishaps in the past few months.
Australian stocks rose 0.72%; Japan’s Nikkei 225 was up 0.71%, while Shanghai index dipped near 0.1% and South Korea’s Kospi fell 0.7%.
European Stocks were mixed on Tuesday. German DAX opened lower and slid 0.17% from opening, easing from Monday’s fresh multi-month high at 10816. French CAC40 was down 0.2% on Tuesday, after hitting fresh high at 4577, the highest level since April.
British FTSE100 opened higher on Monday and rose 0.29% since opening, after falling to 6952 on Monday, on repeated failure to sustain gains above psychological 7000 barrier.

Highlights of the day

Europe
German Ifo Business Climate data for October are in focus of European session. No changes are expected, as forecast for October remains unchanged from September’s release at 109.50.
Data is due at 08:00 GMT.
America
Highlights from American session are House Price Index which is expected to stay unchanged at 0.5% in Aug and due at 13:00; S&P / CS Composite 20 HPI, expected to tick to 0.1% in Aug from 0.0% in July, due at 13:00 and US Consumer Confidence that is expected to fall in October, according to the forecast at 101.00, compared to Sep release at 104.1.
Data is due at 14:00.

Important levels

USDJPY
The pair closed above 104 handle on Monday and extended rally to 104.47 so far, cracking important Fibo 61.8% barrier at 104.43. Immediate focus lies at 104.62 / 74 (13 Oct peak / bull-channel resistance), with firm break here, following recent repeated rejections, needed to open way towards next targets at 105.00/60.
Initial support lies at 104.08; followed by 103.88 and key n/t support at 103.50.

GOLD
Gold is higher on Tuesday, after support at $1261 contained sharp fall from Monday’s spike-high at $1271. Fresh rally requires firm break and close above 200SMA at $1269, to open way through recent high a7 $1274 and possible extension towards $1280 target.
Repeated failure under 200SMA barrier would keep risk at the downside and firm break below strong $1261/60 supports would weaken near-term structure., Market Analysis