USD awaiting Fed’s interest rate decision

Today, during the American session (19:00, GMT), we get FOMC’s first interest rate decision for 2020, with the new voting members as per the bank’s rotating system for the Reserve Bank presidents. The bank is expected to remain on hold at a range of +1.50%-+1.75% and Feds Funds Futures imply currently, a probability of 87.7% for such a scenario. Since the Fed’s last meeting in December, Fed officials have presented a nearly unified front supporting current rates, possibly for the rest of this year. Should the bank remain on hold as forecasted, we could see the market’s attention turning to the accompanying statement and the Fed’s Chair Jerome Powell which will be delivering a press conference later on (19:30, GMT). We could see the bank maintaining a neutral tone, yet some optimistic hints given the low unemployment rate and the expectations for the GDP growth rate to remain above 2% qoq, could be in the cards, while the inflation rate may be providing a shadow of a doubt for any tightening of the monetary policy. We expect that discussions may begin about the bank’s “QE Lite” program yet may require more meetings for a possible tapering of the program. Given the above we could see the USD getting some moderated support should a more optimistic tone be struck in the accompanying statement and Powell’s press conference. EUR/USD continued to slip towards the 1.0990 (S1), albeit during the late American and Asian session, there were some signs of stabilisation. We tend to maintain an outlook for a sideways movement for the pair, et today’s FOMC interest rate decision, could affect the pair’s direction. Should the pair come under the selling interest of the market, we could see it breaking the 1.0990 (S1) support line and aim for the 1.0940 (S2) support level. Should the pair’s long positions be favoured by the market, we could see the pair rising, breaking the 1.1050 (R1) resistance line and aim for the 1.1105 (R2) resistance level.

Aussie strengthens as markets reassesses coronavirus threat.

The Aussie strengthened a touch yesterday against the USD, as the markets seems to be reassessing the coronavirus threat. Chinese mainland markets are to remain closed while new virus cases are showing up in Europe and elsewhere and the efforts for containment of the virus are increased world-wide. Analysts tend to note that the markets may be weighing whether we have reached the peak of worries and peak fear making a pause. The first signs of stabilization remain fragile though as the news reeling in continue to be negative and could increase worries once again. The Aussie also got some support as the CPI rate for Q4, outperformed market expectations by a bit, improving the overall outlook for the Aussie. Should there be no fundamentally negative news we could see AUD strengthening further, while safe havens could remain stable if not weaken. AUD/USD rose yesterday breaking the 0.6755 (S1) resistance line now turned to support. We maintain a bias for a sideways movement (if not slightly bullish) for the pair, as the pair’s downward trendline incepted since the 24th of January has been broken. Please note that the pair’s direction seems to be quite fragile for the time being and more data may be required. Once again, the Fed’s interest rate decision could affect the pair’s direction substantially. Should the bulls maintain control over the pair’s direction we could see it breaking the 0.6790 (R1) resistance line and aiming for higher grounds. Should the bears take over, we could see the pair breaking the 0.6755 (S1) support line and aim for the 0.6723 (S2) support barrier.

Other economic highlights today and early tomorrow

During the European session, we get from the UK the nationwide HPI rate for January as well as Germany’s GfK consumer sentiment for January. In the American session, we get the US the trade balance figure, the pending home sales rate both for December and while later on we get the EIA crude oil inventories figure.

AUD/USD 4 Hour chart