The main market tendency today is that the US dollar is rising against its major peers and riskier assets such as stocks and oil are plummeting.
Daily News: a lot of movements
- The Federal Reserve surprised with its statement. No, nothing surprising with the interest rate (a hike as anticipated), however, the Fed’s Chairman Mr. Powell introduced a series of changes that give him more flexibility in the years ahead. Firstly, Mr. Powell signaled last month he sees less need for the Fed to continue providing guidance about the likely path of rates. Secondly, the Chairman is going to hold a press conference after every meeting starting in January 2019. There were also some changes in the June statement compared to the May one. “Economic activity has been rising at a solid rate” instead of “economic activity has been rising at a moderate rate”. Also, the Fed said“growth of household spending has picked up”, compared to “growth of household spending moderated from its strong fourth-quarter pace”. The central bank deleted the statement: "Market-based measures of inflation compensation remain low".
In the end, Mr. Powel announced that “the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run”.
- What about the US dollar index? Although the Fed raised the interest rate (from 1.75% to 2.0%), the index fell. First of all, the rate hike was priced in. Secondly, today the European Central bank will release its statement (15:30 MT time). Traders anticipate that the ECB will announce a tapering of the QE. It is supposed to boost the euro, and as a result, put pressure on the USD. Today US retails sales data will be released at 15:30 MT time. The forecast is encouraging, however, the pressure of the euro is greater.
On Wednesday, the index couldn’t break the psychological level at $94. Up to now, the index is trading below $93.40. The support is at $93.20.
- As we said above, the ECB meeting will influence the euro’s strength today. On Wednesday, EUR/USD managed to rebound from the pivot point at 1.1750. Today the pair broke the psychological level at 1.18 and is moving further because of the positive forecast for the ECB meeting. The next resistance is at 1.1855. On the weekly chart, 100-week MA is crossing 200-week MA bottom-up that is a positive signal for EUR/USD.
- Good times for the Japanese yen. On Wednesday, USD/JPY reached the resistance at 110.85 (61.8 Fibo level), however, couldn’t break it and rebounded. Up to now, the pair is trading below the resistance at 110.20 (200-day MA). The support lies at 109.70.
- The Australian dollar is moving down as the economic data were negative. Although unemployment rate showed a positive change, employment change was much weaker than anticipated. Chinese data were weaker as well. It affected the Australian dollar too. Moreover, Mr. Trump is supposed to impose new tariffs on Chinese goods not on Friday, but today. It will affect the Chinese economy and the aussie.
AUD/USD is moving to the support at 0.7550 (200-hour MA). On the daily chart, 50-day MA (0.76) is a strong resistance for the pair. As a result, the pair is anticipated to trade within 0.7550-0.76.
- Oil moved up after the Wednesday’s release of crude oil inventories data. The actual figure appeared to be much weaker than anticipated (-4.1M vs -1.4M). As a result, Brent closed above $75.90, WTI broke the resistance at $66.45. However, a significant rise isn’t anticipated. 100-hour and 200-hour MAs near $76.70 are weighing on Brent.
The resistance (100-hour MA) for WTI is at $67.
That is all for today. Follow markets news with us!
The European Central Bank will publish the monetary policy statement with the interest rate decision on January 21, at 14:45 MT time.
Joe Biden is going to unveil a Covid-19 relief package of about $2 trillion. After this announcement, the 10-year Treasury yield rose, adding support for the USD.
The US dollar’s weakness offered a boost to emerging-market currencies and oil.