The FOMC as was widely expected decided to remain on hold at +2.5% in a unanimous decision. The USD weakened across the board, as the dot plot showed that no rate hike was to be expected in 2019, while one rate hike could be expected in 2020, dovishly surprising the market. The Fed also trimmed its forecasts for economic growth and inflation implying that the US economy could slow down even further. Fed Chair Powell though, in his press conference reiterated that the US economy is in a good place and the goal is to sustain expansion. Analysts point out that the strong majority for no rate hikes in 2019 and the overall package delivered by the Fed yesterday matched the most dovish expectations. The bank seems to be waiting to see what the economic developments will be in China and the Eurozone, as to be able to draw safer conclusions of a possible global economic slowdown and its repercussions on the US economy. In such case the US-Sino negotiations could prove of the essence for the bank’s next moves. We could see the USD being more data driven in the near future, with US economics being in focus. EUR/USD rallied yesterday, breaking the 1.1390 (S1) resistance level (now turned to support) and tested the 1.1430 (R1) resistance line, stabilising during the Asian session below it. We could see the pair correcting lower today as the RSI indicator is over the reading of 70 in the 4 hour chart, implying a rather overcrowded long position for the pair. Also today’s financial releases could provide some support for the USD side of the pair. Should the pair come under the selling interest of the market, we could see it aiming if not breaking the 1.1390 (S1) support line. Should on the other hand the pair find fresh buying orders along its path, we could see it breaking the 1.1430 (R1) resistance line and aiming for the 1.1480 (R2) resistance level.
Pound remains under Brexit pressure.
The pound weakened yesterday as the UK PM asked for a Brexit delay until the 30th of June. The request faced resistance from the EU and Reuters reported that an EU Commission document was stating that a possible extension could be either until May 23rd or a long delay, of a year or even more, in which case the UK would have to take part in the EU Parliament elections. Such a scenario was categorically rejected by the UK until now. The EU warned the UK that a short period extension would mean that the UK would have to pass the existing deal in order to avoid crashing out of the EU. We see the case for Theresa May trying to push the UK Parliament into a dilemma between her deal or a no Deal Brexit and should that be the case, stakes could not be higher for the pound. An EU summit will be taking place today and more clarity on the issue is to be expected. Analysts avoid taking any directional views currently, however the pound had tended to react rather positively in scenarios of a long Brexit delay in the past. Cable dropped yesterday testing the 1.3175 (S1) support line, yet failing to clearly break it and remaining above it during today’s Asian session. We could see the pair maintaining a sideways movement, yet Brexit developments along with financial releases, could keep the pound under pressure, providing for some bearish tendencies for the pair today. Should the bears actually take over, we could see cable breaking the 1.3175 (S1) support line and aim for the 1.3070 (S2) support barrier. Should on the other hand the bulls take over, we could see the pair breaking the 1.3265 (R1) resistance line and aim for the 1.3350 (R2) resistance barrier.
Other economic highlights, today and early tomorrow
In today’s European session we get from Switzerland SNB’s interest rate decision, form Norway the Norgesbank’s interest rate decision and from the UK the retail sales growth rates for February, as well as the BoE interest rate decision. In the American session we get the US the Philly Fed business index and Eurozone’s preliminary Consumer Confidence indicator, both for March. During tomorrow’s Asian session, we get Japan’s inflation rates for February.
EUR/USD
Support: 1.1390 (S1), 1.1340 (S2), 1.1300 (S3)
Resistance: 1.1430 (R1), 1.1480 (R2), 1.1530 (R3)
GBP/USD H4
Support: 1.3175 (S1), 1.3070 (S2), 1.2970 (S3)
Resistance: 1.3265 (R1), 1.3350 (R2), 1.3450 (R3)
