All Eyes On The Fed

Jun 16 21, 10:39 GMT

Today all eyes are on the release of the Fed’s interest rate decision (18:00,GMT) and the bank is widely expected to remain on hold at 0.00-0.25% and currently Fed Funds Futures imply a probability of 95.70% for such a scenario to materialize. The Fed is to release also a new dot-plot and should the majority of the Fed’s policymakers indicate that an earlier rate hike is proper it could provide some support for the USD as it would imply an earlier tightening of the bank’s monetary policy. Also, markets are to focus on indications on whether the bank will signal that it may start discussing the tapering of its QE program, given that inflationary pressures are building up, despite the Fed characterizing them as transitory. Both issues are to be closely watched and if either of the two appears in the accompanying statement, the dot plot or Powell’s press conference half an hour later could support USD, while if not the markets could be disappointed, and the USD could weaken asymmetrically.

EUR/USD maintained a tight sideways motion yesterday, between the 1.2090 (S1) and the 1.2175 (R1) levels. We tend to maintain our bias a sideways motion, and for it to change in either direction, we would require a clear breaking of the prementioned levels. Please note that the RSI indicator below our 4-hour chart, is pretty close to the reading of 50, which may imply a rather indecisive market. Should a selling interest be displayed by the market, we may see the pair breaking the 1.2090 (S1) support line and aim for the 1.1990 (S2) level. Should the buyers gain control over the pair’s direction, we may see the pair breaking the 1.2175 (R1) resistance line and aim for the 1.2275 (R2) level.

CAD weakens despite oil prices rising

The Canadian Dollar seems to be weakening against the USD, despite oil prices still being on the rise. The possibility of Iranian oil flooding the markets, seems to be slowly fading away, limiting the supply prospect of black gold while the outlook for oil demand seems to be quite bright thus supporting its prices to new highs, yet seem to fail to impress CAD traders. Today we highlight Canada’s inflation measures for May as the CPI BoC Core rate on a year-on-year basis is expected to tick up and if so, could provide some support for the CAD as it could boost the confidence of the Bank of Canada. On the monetary front, we note the speech of BoC Governor Tiff Macklem and any comments of confidence for Canada’s economic outlook could support the Loonie.

USD/CAD rose yesterday distancing its price action from the 1.2140 (S1) support line. We tend to maintain our bullish outlook for the pair as long as it remains above the upward trendline which started to form since the 11th of June. The RSI indicator below our 4-hour chart, is higher than the reading of 50 and may be implying a slight advantage of the bulls. Should the bulls actually maintain control over the pair’s direction, we may see USD/CAD breaking the 1.2230 (R1) resistance line and aim for the 1.2320 (R2) resistance level. Should the bears take over, we may see the pair breaking the prementioned upward trendline and the 1.2140 (S1) support line and aim for the 1.2060 (S2) support level.

Other economic highlights today and the following Asian session:

Today during the European session, we note the inflation rates for May of the UK as well as China’s industrial output and retail sales also for May. In the American session, we get the US Building permits and housing starts for May as well as Canada’s CPI rates for May and the weekly US EIA Crude oil inventories figure. During tomorrow’s Asian session, we get New Zealand’s GDP rate for Q1 and Australia’s employment data for May. On the monetary front, ECB’s Luis De Guindos, Fed Chairman Jerome Powell, BoC Governor Tiff Macklem and RBA Governor Philip Lowe are scheduled to speak.

EUR/USD H4 Chart