2019-11-11 • Updated
This week will bring us 3 central bank meetings. Let’s consider how they may turn out for market moves.
1. The first and the major event is the FOMC rate statement. The Fed will meet on December 19 at 19:00 GMT. The market anticipates an increase in the rate, however, the confidence isn’t as high as usual. Usually, the probability of the hike is more than 95% but this time it hardly exceeds 80%. Moreover, mostly when the central bank changes the interest rate, the market doesn’t consider the monetary policy statement a lot, but this meeting is anticipated to be different. Recent comments from Fed members that the central bank will tighten its rate hikes’ pace made traders worry. Moreover, Mr. Trump is still unsatisfied with the Fed monetary policy. As a result, the market will look for comments from Mr. Powell to get clues on the rate path in 2019.
How to trade on the FOMC statement.
Since the beginning of the week, the EUR/USD pair has been gaining based on the weak US dollar. However, the situation may differ ahead of the Fed meeting. If the Fed lifts the interest rate and gives clues on the future monetary policy, the USD will be supported. On the daily chart, we see the bearish pennant. As soon as the pair breaks below 1.1280, the further decline is highly expected. The next supports will lie at 1.1233 and 1.1164. Moreover, the parabolic SAR signals the strengthening downward movement.
However, we should remember about the strength of the market sentiment. If the Fed sounds cautious, the investors will be disappointed. In this case, after the rise based on the rate hike, the USD will depreciate. The EUR/USD pair will be able to stick above 1.1338; the resistances are at 1.1408 and 1.1513.
2. The second event is the BOJ meeting that will take place on December 20. Of course, the interest rate will be kept on hold, as the bank hasn’t tapered the quantitative easing. And in this case, it’s predictable that comments of the central bank will determine the direction of the Japanese yen. According to recent comments, the central bank doesn’t feel uncomfortable keeping the ultra-loose monetary policy. Neutral or cautious comments from BOJ will weaken the JPY especially if the USD rises after the Fed meeting.
How to trade on the BOJ statement.
The weakness of the USD pulled USD/JPY down. The further direction of the pair will depend on the Fed meeting. The hawkish US central bank will let the pair to recover. The resistances are at 113.10 and 113.98.
In the case of the negative outcome, the pair will keep falling. Technical indicators don’t signal significant reversals. As a result, the trade within the channel 112.49-113.98 is highly possible. However, a breakthrough of the 112.49 will pull the pair to 111.61.
3. And the last but not least, the BOE meeting holding on December 20 at 12:00 GMT. Same as the BOJ, the Bank of England doesn’t plan to change the interest rate. However, it is worth taking a look at MPC official bank rate votes. Any changes in the number of members voted for the increase in the rate will signal the coming rate hike. In addition, we should pay attention to the tone of the statement. The uncertainties around the Brexit deal may make the BOE cautious. Negative central bank’s comments will provoke a fall of the GBP.
How to trade on the BOE statement.
The rise of the USD will definitely pull the GBP/USD pair to lows of April 2017 that the pair met last week. Supports lie at 1.2605 and 1.2452. A break of 1.2452 will be dramatic for the pair, however, technical indicators don’t signal a plunge. If the USD isn’t that strong after the Fed meeting and the Bank of England forecasts the economic growth for 2019, the GBP will get a chance to fight against the USD. To break the sideways channel, the pair needs to rise above 1.2735, a breakthrough will support a further appreciation to 1.2888.
To conclude we can say that the Fed meeting will become the main driver for the markets. However, the BOJ and BOE meetings won’t go unnoticed. Follow the statements of the central banks and the market sentiment to predict the market moves correctly.
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Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.
Bearish scenario: Sell below 1.0820 / 1.0841... Bullish scenario: Buy above 1.0827...
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