The USD weakened substantially against its major counterparts yesterday and during today’s Asian session as Fed Chairman Powell made some dovish comments. Specifically Fed Chairman Powell stated in a speech yesterday that interest rates are just below a neutral level of 2.5-3.5%. The comment was interpreted as implying that the Fed would be near the end of its rate hike cycle as it is in strong contrast to prior comments that the bank may raise rates past neutral. Volatility could continue for the USD as the FOMC’s last meeting minutes are to be released today and the document could be scrutinized by the market and analysts for clues on further rate hikes.
EUR/USD rallied yesterday, as it broke consecutively the 1.1305 (S2) and the 1.1345 (S1) resistance lines (now turned to support) and tested the 1.1385 (R1) resistance level. Today the pair could prove sensitive to the financial releases affecting the EUR, while at the same time the USD related financial data releases as well as the release of FOMC last meeting minutes could influence the USD side of the pair. Should the bears dictate the pair’s direction, we could see the pair, breaking the 1.1345 (S1) support line and aim for the 1.1305 (S2) support level. On the other hand should the bulls continue to reign the over the pair’s direction after yesterday’s rally, we could see the pair breaking the 1.1385 (R1) resistance line and aim for the 1.1425 (R2) resistance hurdle.
Sterling drops as BoE’s Brexit expectations are released.
BoE released its financial stability report yesterday and warned that the UK may be hit harder than the last financial crisis, should it leave the EU in a disorderly manner, according to media. The bank also sees a more rapid decline of the economy than the UK government, should the UK leave the EU without a deal and also warned that the pound may reach or even break below parity level with the USD, always according to media reports. Despite BoE governor being considered as too gloomy by hard Brexiteers, we see the case for the warning to mount pressure on the UK political scene. We could see the pound continuing to trade in a choppy manner as more Brexit headlines are expected.
Cable rose as yesterday after some choppy trading, as it broke the 1.2780 (S1) resistance line (now turned to support) and tested the 1.2850 (R1) resistance line. We could see the pair reacting more intensely should there be further Brexit headlines, as well as on the US financial releases and the release of the FOMC last meeting minutes, later today. Should the market continue to favor the pair’s long positions, we could see it breaking the 1.2850 (R1) resistance line and aim for the 1.2920 (R2) resistance barrier. Should on the other hand, the pair come under the market’s selling interest, we could see the pair, breaking the 1.2780 (S1) support line and aim for 1.2700 (S2) support area.
In today’s other economic highlights:
On a busy Thursday, in the European session, we get Germany’s unemployment data for November as well as the preliminary HICP rate for November. From the Eurozone we get the Final consumer Sentiment, Economic Sentiment and Industrial Sentiment all being for November. In the American session, we get from the US the Core PCE price index, the personal spending rate and the pending home sales figure (all for October). Also in the American session we get Canada’s current account figure for Q3. Please be advised that the release of the FOMC’s meeting minutes, could potentially have market moving effects, especially after Fed Chairman Powell’s speech yesterday.
GBP/USD H4
Support: 1.2780(S1), 1.2700 (S2), 1.2630 (S3)
Resistance: 1.2850 (R1), 1.2920 (R2), 1.3000 (R3)
EUR/USD H4
Support: 1.1345 (S1), 1.1305 (S2), 1.1255 (S3)
Resistance: 1.1385 (R1), 1.1425 (R2), 1.1470 (R3)
