What happened in the US session?
As widely expected, the Federal Reserve held the Fed Funds rate steady at 5.50% at September’s FOMC meeting but Chairman Jerome Powell’s hawkish press conference spooked markets. The Federal Reserve signaled that rates are likely to stay higher for longer, holding monetary policy at a restrictive level until they are “confident that inflation is moving down sustainably”. In addition, forecasts now show 12 out of 19 FOMC officials are of the opinion that there is still one more 25-bps hike to take place in the last quarter of this year. The dollar index (DXY) jumped from a low of 104.70 to 105.45 in the aftermath of the statement release and press conference.
What does it mean for the Asia Session?
The DXY hit 105.63 this morning and started to pull back slightly at the start of Asian trading hours. As Asia markets digest the latest bazooka from Federal Reserve Chairman Jerome Powell. Demand for the greenback is likely to remain strong and keep DXY elevated.
The Dollar Index (DXY)
Key news events today
Unemployment Claims (12:30 pm GMT)
What can we expect from DXY today?
Unemployment claims in the US have printed lower than the forecast over the past four weeks which signal a resilient labour market despite higher interest rates. Should claims print lower than the forecast again, demand for the US dollar should pick up once more following yesterday’s hawkish rhetoric from Federal Reserve Chairman Jerome Powell during his FOMC press conference.
Central Bank Notes:
- The Federal Funds Rate target range remained at 5.25% to 5.50%.
- The Committee is strongly committed to returning inflation to its 2.0% target.
- The Committee will adjust monetary policy if risks emerge that could hinder achieving its goals.
- Various factors will be considered, including labour market conditions, inflation pressures, inflation expectations, and international and financial developments.
- Next meeting runs from 31 October to 1 November 2023.
Next 24 Hours Bias
Strong Bullish
Technical
The DXY (US Dollar Index) chart currently exhibits a bullish overall momentum, with several factors contributing to its upward trajectory. A significant factor in this bullish sentiment is the price’s position above the bullish Ichimoku cloud, indicating the potential for further bullish movement.
In this context, there’s a plausible scenario where the price may experience a bullish continuation towards the 1st resistance level at 105.89.
The 1st support at 104.86 is of notable importance, characterized as an overlap support, signifying its historical relevance as a potential strong support zone. Similarly, the 2nd support at 104.43 is identified as an overlap support, further reinforcing its role as a key support level.
On the resistance side, the 1st resistance at 105.89 assumes a pivotal role, categorized as a swing high resistance, and it aligns with the presence of the 161.80% Fibonacci Extension, highlighting its potential as a point of resistance. Additionally, there’s an intermediate resistance level at 105.65, marked as a swing high resistance, further emphasizing its significance.
The Euro (EUR)
Key news events today
ECB President Lagarde Speaks (2:00 pm GMT)
What can we expect from EUR today?
ECB President Christine Lagarde is due to speak at the Mediterranean meetings in Marseille where her comments and remarks could add further volatility for the Euro. Following yesterday’s hawkish FOMC statement release and press conference, the Euro tumbled hard to slide down towards 1.0600 this morning.
Central Bank Notes:
- The ECB raised the three key interest rates by 25 basis points.
- Economic growth projections have been slightly lowered.
- The Governing Council will ensure interest rates are sufficiently restrictive to achieve the inflation target and keep them at those levels as long as needed.
- Rate decisions will be data-dependent, considering inflation outlook, economic data, underlying inflation dynamics, and monetary policy transmission strength.
- Next meeting is on 26 October 2023.
Next 24 Hours Bias
Strong Bearish
Technical
The EUR/USD chart currently maintains a bearish overall momentum, with several factors contributing to its downward trajectory. One key factor influencing this bearish sentiment is the price’s position below the bearish Ichimoku cloud, indicating the presence of bearish market conditions.
However, there’s a potential scenario where the price may experience a short-term rise towards the 1st resistance level at 1.0694 before reversing and heading downwards towards the 1st support at 1.0634.
The 1st support at 1.0634 is of significant importance, identified as a multi-swing low support, and it aligns with the presence of the 127.20% Fibonacci Extension, underscoring its role as a strong support zone. Similarly, the 2nd support at 1.0604 is characterized as an overlap support, further emphasizing its potential as a key support level. This support level also aligns with the presence of the 161.80% Fibonacci Extension and the 100% Fibonacci Projection, indicating a high degree of Fibonacci confluence.
On the resistance side, the 1st resistance at 1.0694 plays a pivotal role, categorized as a pullback resistance, and it may serve as a point of resistance in the short term. Beyond the 1st resistance, the 2nd resistance at 1.0736 is identified as a swing high resistance, further highlighting its significance. Additionally, there’s an intermediate resistance level at 1.0673, marked as a pullback resistance.
The Pound (GBP)
Key news events today
BoE Monetary Policy Summary (11:00 am GMT)
BoE Official Bank Rate Announcement (11:00 am GMT)
What can we expect from GBP today?
The Bank of England (BoE) will be the third major central bank this week to release its monetary policy statement and adjust its official bank rate. With inflation remaining stubbornly high in the UK, the BoE is expected to raise its rates by 25 basis points, bringing it up to 5.50%. Following yesterday’s hawkish FOMC statement release and press conference, this latest move could provide some much-needed support for the Pound.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted to increase the Bank Rate by 0.25 percentage points to 5.25%.
- One member preferred to maintain the Bank Rate at 5.0% while another two preferred to increase it by 0.5 percentage points.
- CPI inflation is expected to fall significantly to around 5% by the end of the year, accounted for by lower energy prices but services price inflation is projected to remain elevated in the near term.
- The updated projections show that CPI inflation is expected to decline to 2.0% and 1.9% at the two and three-year horizons, respectively.
- Next meeting is on 21 September 2023.
Next 24 Hours Bias
Strong Bearish
Technical
The GBP/USD chart currently maintains a bearish overall momentum, with key factors contributing to its downward trajectory. One significant factor influencing this bearish sentiment is the price’s position below a major descending trend line, which serves as a resistance and suggests the presence of bearish momentum.
In this context, there’s a plausible scenario where the price may experience a short-term rise towards the 1st resistance level at 1.2372 before reversing and heading downwards towards the 1st support at 1.2309.
The 1st support at 1.2309 is identified as a swing low support, and it aligns with the presence of the 127.20% Fibonacci Extension, indicating its role as a strong support zone. Similarly, the 2nd support at 1.2276 is characterized as a swing low support and aligns with the presence of the 161.80% Fibonacci Extension, further emphasizing its potential as a key support level.
On the resistance side, the 1st resistance at 1.2372 assumes a pivotal role, categorized as a pullback resistance, and it may serve as a point of resistance in the short term. Beyond the 1st resistance, the 2nd resistance at 1.2417 is identified as a multi-swing high resistance, underlining its significance.
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
Following yesterday’s hawkish FOMC statement release and press conference, demand for the greenback surged causing USD/CAD to jumbo as high as 1.3500 overnight. This currency pair is expected to remain elevated today.
Central Bank Notes:
- The Bank of Canada held its target for the overnight rate at 5.0%.
- Canada’s economy was more substantial than expected in the second quarter of 2023, with GDP growth of 3.3%.
- The Bank expects CPI inflation to ease to around 3.0% in the summer, but concerns have increased about inflation staying above the 2.0% target.
- Next meeting is on 25 October 2023.
Next 24 Hours Bias
Medium Bullish
Technical
The USD/CAD chart is currently exhibiting an overall bullish momentum, indicating an upward trend with price making a bullish continuation towards the 1st resistance level.
The 1st resistance level at 1.3499 is identified as an overlap resistance that aligns with a confluence of Fibonacci levels i.e. the 38.20% retracement and the 61.80% projection levels. Higher up, the 2nd resistance level at 1.3549 is marked as a pullback resistance that also aligns with a confluence of Fibonacci levels i.e. the 50% retracement and the 78.60% projection levels.
To the downside, the 1st support level at 1.3387 is identified as an overlap support, indicating that it has previously acted as a strong support zone.
The Australian Dollar (AUD)
Key news events today
Flash Composite PMI (11:00 pm GMT)
What can we expect from AUD today?
The Composite PMI reading in Australia has contracted over the past two months as services activity again fell at a faster pace than manufacturing output along with new orders. Combined with a hawkish Federal Reserve following yesterday’s FOMC meeting, the Aussie could remain under heavy pressure today.
Central Bank Notes:
- The RBA kept the cash rate target unchanged at 4.10% for the third consecutive meeting.
- Inflation in Australia has passed its peak and is trending lower but needs to return to the target range.
- Further tightening of monetary policy may be necessary.
- Next meeting is on 3 October 2023.
Next 24 Hours Bias
Strong Bearish
Technical
The AUD/USD chart is currently displaying an overall bearish momentum, suggesting a bearish continuation towards the 1st support level.
The 1st support level at 0.6402 is identified as an overlap support that aligns close to the 127.20% Fibonacci extension level while the 2nd support level at 0.6365 is identified as a pullback support.
To the upside, the intermediate support level at 0.6429 is identified as an overlap resistance while the 1st resistance level at 0.6472 is identified as a pullback resistance.
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
Despite New Zealand’s economy growing 0.9% in the second quarter, which was higher than the forecast of 0.4%, the Kiwi dived sharply overnight as a hawkish Federal Reserve reignited demand for the US dollar. Further downward pressures are expected to build for the Kiwi today.
Central Bank Notes:
- The Monetary Policy Committee kept the OCR unchanged at 5.50% for the third meeting in a row.
- The Committee believes that interest rates at a restrictive level for some time will bring inflation back within the 1% to 3% target range while supporting maximum sustainable employment.
- Headline inflation and inflation expectations have declined but the core reading remains too high.
- Next meeting is on 4 October 2023.
Next 24 Hours Bias
Strong Bearish
Technical
The NZD/USD chart is currently displaying an overall bearish momentum, suggesting a bearish continuation towards the 1st support level.
The 1st support level at 0.5891 is identified as an overlap support while the 2nd support level at 0.5859 is marked as pullback support that aligns close to the 127.20% Fibonacci extension level.
To the upside, the 1st resistance level at 0.5936 is identified as an overlap resistance. Further up, the 2nd resistance level at 0.2984 is marked as a swing-high resistance that aligns with the 78.60% Fibonacci retracement level.
The Japanese Yen (JPY)
Key news events today
National Core CPI (11:30 pm GMT)
What can we expect from JPY today?
Core CPI in Japan slowed from 3.3% in June to 3.1% YoY in July. Although still higher than the 2% target, inflation in Japan is relatively tame as compared to other developed economies. Continued fall in CPI readings would allow the Bank of Japan to maintain its ultra-dovish monetary policy stance. Combined with a hawkish Federal Reserve following yesterday’s FOMC meeting, USD/JPY surged as high as 148.35 overnight and is expected to remain elevated today.
Central Bank Notes:
- The bank will continue with QQE with Yield Curve Control to achieve the price stability target of 2.0%.
- The Bank of Japan decided on the following measures:
- Yield curve control: Negative interest rate of -0.1% on policy-rate balances and purchase of Japanese government bonds to keep 10-year JGB yields around +0.5%.
- Inflation is expected to decelerate temporarily but is projected to accelerate moderately later, supported by improvements in the output gap and inflation expectations.
- Japan’s economy is expected to recover gradually.
- Next meeting is on 22 September 2023.
Next 24 Hours Bias
Medium Bullish
Technical
The USD/JPY chart currently maintains a bullish overall momentum, with several factors contributing to its upward trajectory. A significant factor in this bullish sentiment is the price’s position above a major ascending trend line, suggesting the potential for further bullish movement.
However, there’s a plausible scenario where the price may experience a short-term drop towards the 1st support level at 147.54 before bouncing from there and rising towards the 1st resistance at 148.46.
The 1st support at 147.54 is identified as an overlap support, signifying its historical relevance as a potential strong support zone. Similarly, the 2nd support at 146.56 is characterized as an overlap support, further reinforcing its role as a key support level.
On the resistance side, the 1st resistance at 148.46 is noted as a point of significance and is associated with the presence of the 127.20% Fibonacci Extension, highlighting its potential as a point of resistance. Beyond the 1st resistance, the 2nd resistance at 149.17 is also important and corresponds to the presence of the 161.80% Fibonacci Extension, further emphasizing its significance.
