All Eyes On The Fed

Sep 22 21, 09:11 GMT

All lights are expected to be on the release of the Fed’s interest rate decision and the bank is widely expected to remain on hold at 0.0-0.25%. It should be noted that recent financial releases allowed for expectations that the Fed may taper its QE program rather sooner than later, to be maintained, yet August’s soft employment data tended to suggest caution. The FOMC’s interest rate decision is expected to shed more light on the matter, and attention turns to any clues which are to show when the bank may actually start tapering its massive quantitative easing program. Exactly whether the bank’s policymakers are in the mood for any possible earlier rate hikes will be revealed in the bank’s new dot plot, so we expect that document to be also closely scrutinized. Please note that the balance of power in the Fed, regarding the timing of rate hikes remains thin. We would also like to see whether the bank will alter its economic projections in regards of the US economic recovery, and we’ll get a chance to have a glimpse at the expectations for 2024. Last but not least, we highlight Fed Chairman Powell’s press conference which is to follow shortly after the release.

EUR/USD stabilised somewhat yesterday just above the 1.1695 (S1) support line. We tend to maintain a bias for a sideways movement currently, yet the Fed’s interest rate decision could increase volatility and alter the pair’s direction. On the other hand, it should be noted that the RSI indicator below our 4-hour chart is between the readings of 50 and 30, providing an advantage for the bears to take over. Should the bears actually take over, we may see the pair breaking the 1.1695 (S1) support line and aim for the 1.1615 (S2) level. Should the bulls be in charge of the pairs’ direction we may see the EUR/USD breaking the 1.1785 (R1) resistance line and aim for the 1.1885 (R2) resistance level.

Evergrande worries ease yet remain present

US stockmarkets try to recover after their wide drop on Monday, as the worries for the ripple effects of a possible default of Evergrande, one of China’s largest developers seem to ease, yet are still present. It should be noted that a number of analysts and investors seem to expect the crisis to be manageable, yet the uncertainty is still wide and present for the markets putting a lid on any clear upward price action. Should there be further signs that the crisis is manageable, we may see US stockmarkets recovering some ground. On the other hand, gold’s price seems to feed from the uncertainty as it was in the greens since the issue started on Monday. Should the uncertainty persist, the precious metal may continue to enjoy safe haven inflows, yet for now all of the market’s attention turns to the Fed’s interest rate decision later today.

Dow Jones dropped a bit more yesterday yet seems about to recover somewhat for now in the premarket hours. For the time being we expect the stabilisation to solidify maybe even see the index gaining some ground yet the situation is still quite fluid. Should a selling interest be displayed once again, we may see the index breaking the 33740 (S1) support line and aim for the 33340 (S2) support level. Should the buyers be in charge of the index’s direction, we may see Dow Jones breaking the 34060 (R1) resistance line and aim for the 34400 (R2) resistance level.

Other economic highlights today and the following Asian session:

During today’s American session, we get Eurozone’s preliminary consumer confidence for September and the US existing home sales for August. Oil traders on the other hand may be more interested in the release of the EIA crude oil inventories figure, while later on we get the Fed’s interest rate decision, which could create considerable volatility for the markets. During tomorrows’ Asian session, we get from Australia the preliminary PMI readings for September.

EUR/USD H4 Chart