The FOMC is expected to hike rates today (19:00 GMT) by 25 bp elevating its interest rate to the level of 2.50%, and currently FFF currently imply a probability for such a scenario of 71.9%. Should the bank hike rates as expected the market’s attention could turn to the bank’s future intentions and forecasts about the US economy. Caution seems to be dominating the market, as it currently prices in only one rate hike in 2019 enhancing worries that the Fed might slow down its rate hike path for 2019 and/or revise its forecasts for the US economy downwards. President Trump’s critical comments, provided further confusion, however it should be noted that in the past the Fed had ignored such criticism. Analysts point out that the scenario of a dovish rate hike, currently keeps the USD in check and should today’s decision surprise the market we could see increased volatility for the USD. Please be advised that volatility for the USD could also extent during Fed Chairman Powell’s press conference (19:30, GMT). USD/JPY kept a sideways movement yesterday, staying between the 112.72 (R1) resistance line and the 112.15 (S1) support line. Yesterday’s range bound movement, was considered as calmness before the storm, as the pair could prove sensitive to the FOMC interest rate decision today and should the market be surprised either way we could see increased volatility affecting the pair. Should the pair come under the selling interest of the market, we could see it breaking the 112.15 (S1) support line and aim for the 111.65 (S2) support barrier. Should on the other hand, the market favor the pair’s long positions, we could see the pair breaking the 112.72 (R1) resistance line and aim for the 113.25 (R2) resistance hurdle.
Is Italy close to a deal with Brussels?
Media, report that Italy may be close to a preliminary deal with Brussels regarding the level of its budget deficit. The reports stated that according to Italian sources, the Italian government has reached a technical deal with the EU which still needs to be ratified by the EU though. Parameters of the prementioned deal seem to show agreement being reached midway, as the Italian government has shaved off its spending plans. Should the reports be correct, we could see announcements being made even today, ahead of the Eurogroup meeting and could provide a positive sentiment for the common currency. EUR/USD rose yesterday testing the 1.1385 (R1) resistance line. Technically the pair’s upward trend, incepted since Friday afternoon, could argue for a bullish outlook for the pair’s direction, however we expect the FOMC interest rate decision, as well as European fundamentals to influence the pair’s direction. Should the bulls continue to reign over the pair’s direction, we could see it breaking the 1.1385 (R1) resistance line and aim if not break the 1.1425 (R2) resistance level. Should on the other hand the bears take over, we could see the pair, breaking the 1.1345 (S1) support line and aim for the 1.1305 (S2) support zone.
In today’s other economic highlights:
During the European session today, we get Germanys PPI growth rate for November and the UK inflation measures, also for November. In the American session, we get from the US the current account balance for Q3 and the number of existing home sales for November. From Canada we get the main inflation rates for November and just ahead of tomorrow’s Asian session, we get New Zealand’s GDP growth rate for Q3 and the trade balance figure for November. Also please bear in mind that the EIA crude oil inventories figure will also be released and could affect oil prices. Should be interest in the recent drop of oil prices and the fundamentals surrounding black gold, please refer to our weekly outlook, due out later today.
EUR/USD H4
Support: 1.1345 (S1), 1.1305 (S2), 1.1265 (S3)
Resistance: 1.1385 (R1), 1.1425 (R2), 1.1465 (R3)
USD/JPY H4
Support: 112.15 (S1), 111.65 (S2), 111.15 (S3)
Resistance: 112.72 (R1), 113.25 (R2), 113.95 (R3)
