Fed’s meeting minutes under the spotlight

The greenback edged higher yesterday, supported by market worries about the Fed’s hawkish intentions yet the bullish tendencies tend to remain unconvincing for the time being. On the contrary, US stock markets tumbled, with all three major US stock market indexes, namely the Dow Jones, S&P 500 and Nasdaq being deeply in the reds for the same reasons, while also the rise of US yields tended to weigh as well. Fed policymakers in the past week had highlighted the need for the bank to raise interest rates further and maintain them at a high level for a prolonged period of time, a scenario, which could intensify the negative effect on the US economy. Today we highlight the release of the Fed’s meeting minutes, which is expected to provide fresh clues about the bank’s intentions and is expected to be scrutinized by market participants and analysts. Should the document be characterized by a confident, hawkish tone, we may see the USD getting some support as the market’s hawkish expectations would be verified, while at the same time, such a scenario could have an adverse effect on US stock markets. Back in the FX market, we note the release of RBNZ’s interest rate decision and the bank hiked the cash rate by 50 basis points as was widely expected by the market and maintained a hawkish tone in the accompanying statement. It was noted in the accompanying statement that “The Committee agreed that the OCR still needs to increase” which declared the bank’s hawkish intentions, that supported the Kiwi at the time of the release. Across the Tasmanian sea, the Aussie weakened against the USD, suffering an adverse effect from the risk-off sentiment, of the market but also the slower-than-expected acceleration for the wages price index for Q4 allowed for Aussie’s weakening to be maintained during today’s Asian session. The release may have eased the pressure on RBA to maintain its aggressive hawkish stance. Staying in the FX market, we also note that the pound found some support yesterday, as the preliminary PMI figure for the services sector of the UK rose exceeding market expectations and showed growth in economic activity of the key sector once again. Also on a fundamental level, the possibility of the UK Government reaching a new Brexit deal with the EU seems to be supporting the pound as progress is marked in new negotiations. Yet a new deal could prove to be a double-edged sword, as it may cause political uncertainty within Sunak’s government.

GBP/USD was on the rise yesterday yet seems to be finding considerable resistance at the 1.2115 (R1) level. We highlight the upward movement of cable yet before adopting a bullish outlook we would require the pair to clearly break the 1.2115 (R1) resistance line, and for the time being the sideways bias seems to remain. Should the bulls actually take over, we expect the pair to break the 1.2115 (R1) resistance line and aim for the 1.2270 (R2) resistance level. Should the bears be in charge we may see the pair reversing course and reaching if not breaching the 1.1925 (S1) support level.

AUD/USD dropped yesterday aiming for the 0.6800 (S1) support line. We tend to maintain a bearish outlook for the pair given also that the RSI indicator has reached almost the reading of 30, implying a bearish sentiment of the market currently. Should the selling interest persist, we may see AUD/USD breaking the 0.6800 (S1) support line and aim for the 0.6720 (S2) level. Should the pair find fresh buying orders along its path we may see it breaking the 0.6900 (R1) resistance line, aiming for higher grounds .     

Other highlights for the day:

Today in the European session, we note the release of Germany’s final HICP rate for January as well as Germany’s Ifo indicators for February. During tomorrow’s Asian session, we note the release of Australia’s capital expenditure growth rate for Q4 and New York Fed President Williams speaks. 

GBP/USD H4 Chart

Support: 1.1925 (S1), 1.1740 (S2), 1.1565 (S3)

Resistance: 1.2115 (R1), 1.2270 (R2), 1.2465 (R3)

AUD/USD H4 Chart

Support: 0.6800 (S1), 0.6720 (S2), 0.6625 (S3)

Resistance: 0.6900 (R1), 0.7010 (R2), 0.7125 (R3)

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