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Today during the late American session (18:00, GMT), the FOMC will be releasing its interest rate decision. The market widely expects a 25-basis points rate cut lowering rates from current 2.00% to +1.75% and currently Feds Funds Futures imply a probability of 94.5% for such a scenario. Should the bank cut rates as expected we could see attention turning to the accompanying statement and J. Powell’s press conference (18:30 GMT) later on. Should the bank adopt a hawkish tone once again, by mentioning for example that the third rate cut may have concluded the supportive measures of the Fed, we could see the USD getting some support. We could see the bank setting a higher bar or some prerequisites for future rate cuts, should it fail to do so, we could see the USD weakening as door will still be open for future rate cuts that the market has not priced in yet. Please bear in mind that he event could have market moving effects on the USD, the stock-markets as well as commodities and precious metals. USD/JPY maintained a sideways motion yesterday after testing the 109.00 (R1) resistance line. Despite the sideways movement for the pair in the past few days, we could see volatility rising as two interest rate decisions are expected to affect it in the next 24 hours. Should the pair’s long positions be favoured by the market, we could see the pair breaking the 109.00 (R1) resistance line and aim for the 109.70 (R2) resistance level. Should the pair come under the selling interest of the market, we could see it aiming, if not breaking the 108.35 (S1) support line, aiming for lower grounds.
…but not before BoC releases its own rate decision…
Before the Fed in the American session (14:00, GMT) we get BoC’s interest rate decision, which is expected to remain on hold at +1.75%. Currently CAD OIS imply a probability of 96.98% for the bank to remain on hold and not follow the Fed in a rate cut. Given the recent strong employment data and the inflation rate (+1.9% yoy), which is near the bank’s median target of +2.00% yoy, we could see the bank maintaining a hawkish tone in its accompanying statement. On the flip side, still existing tensions in global trade conditions and slowing oil demand forecasts, could be advising caution for the bank. Should the bank adopt a hawkish tone in the accompanying statement and Governor Poloz’s press conference later on (15:15, GMT) we could see the Looney strengthening. USD/CAD rose a bit yesterday, yet in the grand scheme remained confined within the boundaries of the 1.3125 (R1) and the 1.3025 (S1) lines. As the pair is expected to take a double hit by two interest rate decisions today, we could see volatility for the pair, being high in the American session. Should the bears dictate the pair’s direction, we could see it breaking the 1.3025 (S1) support line and aim for the 1.2930 (S2) support level. If the bulls take over, we could see the pair breaking the 1.3125 (R1) resistance line and aim for the 1.3230 (R2) resistance level.
Other economic highlights today and early tomorrow
In today’s European session, we get France’s preliminary GDP growth rate for Q3, Germany’s employment data for October, Eurozone’s business climate indicator for October and later as the European session is about to end, we get Germany’s preliminary HICP rate for October. In the American session, we get besides the two prementioned interest rate decisions, the preliminary US GDP growth rate for Q3 and the EIA crude oil inventories figure. In tomorrow’s Asian session, we get Japan’s preliminary industrial production growth rate for September, New Zealand’s ANZ Business Confidence indicator for October, Australia’s Building approvals growth rate for September and China’s NBS manufacturing PMI for October. Last but not least, during the Asian session, BoJ is to release its own interest rate decision.
USD/CAD 4 Hour
Support: 1.3025 (S1), 1.2930 (S2), 1.2825 (S3)
Resistance: 1.3125 (R1), 1.3230 (R2), 1.3335 (R3)
USD/JPY 4 Hour
Support: 108.35 (S1), 107.75 (S2), 107.20 (S3)
Resistance: 109.00 (R1), 109.70 (R2), 110.50 (R3)
