USD Remains Stable As The Fed’s Meeting Nears

Dec 13 21, 09:22 GMT

The USD remained steady against a number of its peers on Friday despite the US releasing the highest CPI rates for nearly four decades for the month of November. On the monetary front, FOMC’s interest rate decision on Wednesday seems to be standing apart from a high number of central bank interest rate decisions this week and expectations that he Fed may start tightening its monetary policy earlier may have risen. Today given the light calendar after the Japanese releases we expect fundamentals to take the lead, while TRY traders may be keeping an eye out for Turkey’s current account balance, especially after another CBT market intervention was reported on Friday. The pound seems to have stabilised against the USD amidst warnings from UK PM Johnson for a “tidal wave” of omicron infections in the UK and an intense effort to boost vaccination, while on the monetary front BoE’s interest rate decision is due out on Thursday. Oil prices seemed to remain supported as the markets viewed the possible effects of the Omicron variant as limited on Friday. Gold’s price edged higher after the release of the US inflation rates for November as the rising prices tended to increase the appeal of the shiny metal as it’s being also used as a hedge against inflation. US stockmarkets were in the greens on Friday and remained there also during today’s Asian session as S&P 500 reached new record highs despite the release of the 40-year record high inflation.

The US index continued to revolve around the 96.15 (S1) line. We tend to maintain a bias for a sideways motion currently given also that the RSI indicator below our 4-hour chart is near the reading of 50 implying a rather indecisive market yet the direction could alter either way. Should the bears take control over the index, we may see it breaking the 96.15 (S1) and take aim if not break the 95.60 (S2) support level. Should the bulls be in charge, we may see the USD Index aiming if not breaking the 96.65 (R1) resistance level.

GBP/USD edged higher on Friday taking aim of the 1.3280 (R1) resistance line. As the pair’s price action has broken the downward trendline incepted since the 29th of October we switch our bearish outlook in favour of a sideways bias. On the other hand we note that the RSI indicator below our 4-hour chart is at the reading of 50, yet with a downward inclination. Should the selling interest for cable regain momentum we may see it breaking the 1.3160 (S1) support line and aim for the 1.2990 (S2) level. On the other hand, should the pair find fresh buying orders along its path we may see cable breaking the 1.3280 (R1) resistance line and aim for the 1.3430 (R2) level.

As for the rest of the week

On Monday no major releases are expected besides Japan’s machinery orders and the Tankan indexes for Q4. On Tuesday, we note the release of UK’s employment data. On Wednesday we get China’s industrial output, UK’s, France’s and Canada’s CPI rates all being for November while from Canada we also get the number of House Starts for November and from New Zealand Q3’s GDP rate. On the monetary front the highlight is expected to be the release of the Fed’s interest rate decision. On a packed Thursday, in the Asian session we get from Australia the preliminary PMI figures for December and November’s employment data, from Japan we get the preliminary Jibun Bank manufacturing PMI figure for December as well as Novembers’ trade data. In the European session we highlight the release of France’s, Germany’s, Eurozone and the UK’s preliminary PMI figures for December while in the American session we get from the US the weekly initial jobless claims figure, the preliminary Markit PMI figures for December, the Philly Fed Business index for December and the industrial production for November. On the monetary front we highlight the release of ECBs’ and BoE’s interest rate decisions, yet we also note the release of SNB’s and CBT’s interest rate decisions. On Friday we note the release from Japan of BoJ’s interest rate decision while from Germany we get Ifo Business climate for December and from the Eurozone November’s final HICP rate.

USD Index H4 Chart