The USD weakened yesterday ahead of the FOMC’s interest rate decision on Wednesday, as it may be expecting a more cautious tone for the US economic outlook by the Fed. The Fed is expected to hike rates in its upcoming meeting however all eyes are to be on possible signals about its future rate hike path. Analysts have underscored the possibility of the market expecting a dovish hike and pointed to a possible bearish market for the USD, as long positions are being reduced. The worries about the US outlook, were intensified by signs of a possible economic slowdown in Europe and China, as well as trade war concerns. Analysts also are pointing out that investors may be looking to a speech of Chinese president Xi, for further clues. Volatility for the greenback could continue as the FOMC’s interest rate decision, draws near. USD/JPY tumbled yesterday, breaking consecutively the 113.25 (R2) and the 112.72 (R1) support lines (now turned to resistance). We could see the pair dropping further should the USD continue to weaken due to the bearish sentiment of the market. Technically it should be noted that pair’s RSI indicator in the 4 hour chart, reached the reading of 30, implying a possibly overcrowded short position. Should the pair continue to be under the market’s selling interest, we could see the pair, breaking 112.15 (S1) support line and aim for the 111.65 (S2) support barrier.
GBP gets some support as Theresa May reschedules Brexit vote
The pound got some support yesterday as PM Theresa May rescheduled a vote in parliament about Brexit, for the week beginning 14th of January. Labor party leader Corbyn, proposed a no confidence vote motion on Theresa May, citing her delay in giving parliament a vote on the Brexit deal, however the result is to be uncertain. The pound seems to remain under pressure, despite the four weeks breather for the UK parliament’s vote, as the uncertainty surrounding the issue deepens. Analysts point out that there are still more downside risks for the pound, as the March deadline approaches. With Theresa May facing a possible defeat in parliament about Brexit and the EU maintaining a tough position, voices for a second referendum grow. We maintain our view that the pound could remain under pressure as the Brexit uncertainty continues. Cable rose slightly yesterday reflecting the weakening of the USD side, however gains remained in check, due to Brexit uncertainty, as the pair proved to unable to break the 1.2630 (R1) resistance line, after continuous testing. The pair could prove sensitive to any further Brexit headlines, as well as a bearish sentiment for the USD, ahead of the FOMC meeting tomorrow. Should the bulls continue to dictate the pair’s direction, we could see it breaking the 1.2630 (R1) resistance line and aim for the 1.2700 (R2) resistance hurdle. Should on the other hand the bears take over, we could see cable breaking the 1.2555(S1) support line and aim for the 1.2485 (S2) support level.
In today’s other economic highlights:
During the European session today, we get Germanys Ifo Business Conditions indicator for December and later on New Zealand’s milk auction figure. In the American session, from the US we get the number of building permits and housing starts for November, while from Canada, we get the manufacturing sales growth rate for October. Later on New Zealand’s current account balance for Q3 will be released and the API weekly crude oil inventories figure is due out and could influence oil prices.
GBP/USD H4
Support: 1.2555 (S1), 1.2485 (S2), 1.2415 (S3)
Resistance: 1.2630 (R1), 1.2700 (R2), 1.2795 (R3)
USD/JPY H4
Support: 112.15 (S1), 111.65 (S2), 111.15 (S3)
Resistance: 112.72 (R1), 113.25 (R2), 113.95 (R3)
