Fed’s meeting in focus

The USD edged lower against its counterparts yesterday as the market’s attention increasingly turns towards the Fed’s interest rate decision later today. The bank is expected to hike rates by 25 basis points and currently, Fed Fund Futures imply a probability of 97% for such a scenario to materialise. Yet the market also expects the bank to remain on hold after the July decision and proceed with rate cuts in March next year. It should be noted that some Fed policymakers in the past month, in contrast to market expectations, had highlighted the possibility of another rate hike after the July meeting. Hence should the bank deliver the 25-basis points rate hike as expected, we expect market attention to turn towards the forward guidance included in the accompanying statement. Should the bank maintain a strong hawkish tone favouring another rate hike, we may see the USD getting some asymmetric support as the market will have to reposition itself. On the flip side should the bank signal that it has reached the end of its rate hiking cycle, justifying the market’s expectations we may see the USD weakening somewhat. Furthermore, we would highlight Fed Chairman Powell’s press conference about half an hour later. The Fed Chairman may try to ease any possible extreme market reactions and calm the markets. Please note that the release is expected to have wider ripple effects beyond the FX markets, like on the price of gold and a possible hawkish release could support the USD yet weigh on Gold’s price and at the same time weigh on US stockmarkets and vice versa.

EUR/USD bounced on the 1.1020 (S1) support line. For the time being the pair remains below the downward trendline guiding it since the 18 of July hence we maintain our bearish outlook. Yet today’s bounce allowed the RSI indicator to rise from the reading of 30, implying that the bearish sentiment is fading away and implying that the bearish tendencies may ease and the pair may stabilise. Should the bears maintain control, we may see EUR/USD breaking the 1.1020 (S1) support line and aim for the 1.0920 (S2) support base. Should the bulls take over we may see EUR/USD breaking the prementioned downward trendline in a signal that the downward movement has been halted and then proceed to break the 1.1145 (R1) resistance line if not higher.

Despite some hesitation US stock markets tended to be on the rise yesterday with Dow Jones remaining relatively unchanged and S&P 500 and Nasdaq gaining. The release of the earnings reports seemed to provide some confidence to stock traders, especially of Google and Microsoft. In both cases both the EPS and revenue figures rose beyond market expectations. Yet Microsoft’s share price seems to be under pressure as a slowing growth was reported for its cloud business segment. Today we note the release of Meta and eBay.

Microsoft’s (#MSFT) share price got some support yesterday after halting its drop on Monday on the 341.00 (S1) support line. We note that the share’s price movement is guided by an upward trendline incepted since the 13 of March. The RSI indicator remains above the reading of 50 implying some slight bullish sentiment on behalf of the market. Should the buying interest be maintained, we may see the share’s price aiming if not breaching the 367.00 (R1) resistance line by the end of the current week and if not then the beginning of next week. On the other hand we note that the the R1 practically represents a historic peak and may cause the bulls to hesitate. Should the bears take over, we may see the share’s price breaking the prementioned upward trendline and the 341.00 (S1) support line aiming for the 326.50 (S2) support level.

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In today’s European session, we note the release of France’s July consumer confidence indicator and in the American session we get the US new home sales for June while oil traders may be more interested in the release of the EIA weekly crude oil inventories figure. On the monetary front, besides the Fed’s interest rate decision, we note the release of BoC’s monetary policy deliberations statement.