The Fed kept interest rates steady, as was widely expected yesterday at +2.25% and kept a hawkish tone in the accompanying statement. The bank confirmed its policy of monetary tightening and paved the way for the next rate hike in December. With the Fed reaffirming their stance yesterday, it means that December is very much a closed case for a rate hike. Also, there could be high probabilities following up in similar fashion in 2019. Analysts turned their attention to the divergence of the various bank’s policies with the widening interest rate differentials providing worries. Volatility for the USD is expected to continue and could strengthen further as its main rivals seem rather weak.
USD/JPY strengthened following the Fed statement overnight, testing the 113.95 (R1) resistance line. Should the bulls dictate the pair’s direction we could see it breaking the 113.95 (R1) resistance line and aim higher for the 114.55 (R2) resistance level. Should on the other hand, the bears take over the pair’s direction we could see it aiming for the 113.25 (S1) support line and could even move lower to the 112.72 (S2) support barrier. The pair has shown bullish signs of since the start of November. The pair may prove sensitive to the US financial releases today.
Theresa May targeting a Brexit deal within the next days
PM Teresa May is under pressure to deliver a plan for the Irish border. Eurosceptic ministers fear May’s blueprint risks tying the U.K. into the EU’s customs rules forever. Attorney General Geoffrey Cox is the person who will write the document, and a final view will be made by the Parliament in order to vote on whether to accept or reject it. The Irish border remains in the focus as Britain may have to continue to follow EU regulations regarding competition rules, state aid and environmental regulations. However, pro-Brexit campaigners in May’s party reject these rules and favor Britain to have full control of laws in the pre mentioned regulation.
Cable dropped to session lows after the FOMC meeting yesterday and followed up with the same trend in today’s European opening. However, Brexit headlines could move the pair significantly but at the same time the financial releases today could prove to be important for the pair’s direction. If the pair finds fresh buying orders along its path we could see it breaking above the 1.3075 (R1) resistance line and aim for the 1.3160 (R2) resistance level. On the opposite should the pair come under the market’s selling interest, we could see it breaking below the 1.3015 (S1) support line and aim for lower grounds.
In today’s other economic highlights:
In the European session, we get Norway’s and the Czech Republic’s CPI rates for October, from the UK the GDP for Q3, Trade balance figure for September, as well as the industrial and manufacturing output growth rates also for September. In the American session we get from the US the Core PPI rates for October, the preliminary Michigan consumer sentiment for November and last week’s Baker Hughes Oil rig count. As for speakers, ECB’s Benoit Coeure, BoE’s Andy Haldane and Fed’s Williams, Harker and Quarles speak.
USD/JPY H4
Support: 113.25 (S1), 112.72 (S2), 112.15 (S3)
Resistance: 113.95 (R1), 114.55 (R2), 115.10 (R3)
GBP/USD 4H
Support: 1.3015 (S1), 1.2920 (S2), 1.2850 (S3)
Resistance: 1.3075 (R1), 1.3160 (R2), 1.3240 (R3)
