FED DECISION DAY, 25BP OR 50BP?

The FED’s interest rate decision is set to occur later on today, with the majority of market participants anticipating the bank to cut by 50 basis points, with FFF currently implying a 63% probability for such a scenario to materialize. In our view, we would not be surprised to see the bank proceed with a 25bp cut, as the financial releases stemming from the US do not currently paint such a dire picture for the US economy which could warrant a 50bp cut over a 25bp rate cut.Over in Canada, the headline CPI rates for August came in as expected, implying easing inflationary pressures in the Canadian economy which may increase pressure on the BoC to continue on their rate cutting path. In turn, the implications of further rate cuts by the BoC could potentially weigh on the Loonie.Over in Europe, according to a report by Bloomberg, the German Finance Ministry plans to keep selling it’s Commerzbank shares. The report by Bloomberg should it be officially confirmed, may open the door for UniCredit to increase its stake in the bank following its announcement last week that it had accumulated 9% of the bank’s shares.In the US equities market, per Bloomberg, Microsoft (#MSFT) and BlackRock have teamed up to raise $30 billion for AI investment, with the report stating that the strategy appears to be in order to invest in data centers amongst other infrastructure in order to support AI. On a Geopolitical level, NHK has reported that a Chinese aircraft carrier temporarily entered Japan’s contiguous waters for the first time. The move could increase tensions in the region, yet under international law the vessel was within its rights to do so.

EUR/USD appears to be moving in a sideways fashion. We opt for a sideways bias for the pair and supporting our case is the break below our upwards moving trendline which was incepted on the 12^a. of  September, which may imply a disruption of the pair’s upwards motion. However, the RSI indicator below our chart currently registers a figure near 60, which may imply a bullish market sentiment. Nonetheless, for our sideways bias to continue, we would require the pair to remain confined between the 1.1110 (S1) support level and the 1.1150 (R1) resistance line. On the flip side, for a bullish outlook, we would require a clear break above the 1.1150 (R1) resistance line with the next possible target for the bulls being the 1.1200 (R2) resistance level. Lastly, for a bearish outlook, we would require a clear break below the 1.1110 (S1) support line with the next possible target for the bears being the 1.1050 (S2) support line.

XAU/USD  appears to be moving in an upwards fashion, having broken above our resistance and turned to support at the $2570 (S1)  per troy ounce level. We opt for a bullish outlook for the commodity and supporting our case is the RSI indicator below our chart which currently registers a figure above 60 which may imply a bullish market sentiment. For our bullish outlook to continue, we would require a clear break above the potential resistance level at 2620 (R1) with the next possible target for the bulls potentially being the 2670 (R2) resistance line. On the flip side, for a bearish outlook we would require a clear break below the 2570 (S1) support line with the next possible target for the bears being the 2520 (S2) support line. Lastly, for a sideways bias we would require the precious metal to remain confined between the 2570 (S1) support level and the 2620 (R1) hypothetical resistance line

Other highlights for the day:

During today’s European session we get the UK’s CPI rates, Sweden’s unemployment rate and the Eurozone’s final HICP rates all for August. In the American session we note the US Housing starts figure for the month of August and the US weekly EIA crude oil inventories figure. In tomorrow’s Asian session we get New Zealand’s GDP rates for Q2 and Australia’s employment data for August. On a monetary level, we note ECB member McCaul’s speech and highlight the Fed’s interest rate decision followed by Fed Chair Powell’s press conference.

EUR/USD H4 Chart

• Support:  1.1110 (S1), 1.1050 (S2), 1.0990 (S3)
• Resistance: 1.1150 (R1), 1.1200 (R2), 1.1250 (R3)

XAU/USD Daily Chart

• Support: 2570 (S1), 2520 (S2), 2470 (S3)
• Resistance: 2620 (R1), 2670 (R2),  2720 (R3)

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