Riksbank and CNB to cut rates

The USD edged lower against its counterparts yesterday and during today’s Asian session. The greenback seems to be guided by the market’s expectations for further easing of the Fed’s monetary policy. Given the lack of high-impact financial releases from the US today, maybe with the exception of the number of August’s new home sales figure, we expect the USD to be moved primarily by fundamentals. On the flip side, gold’s price continued to rise reaching new record high levels primarily due to the weakening of the USD and the drop of US yields, albeit some safe-haven inflows for the precious metal, given the possibility of war between Hezbollah-Iran and Israel are also possible, while an escalation of the conflict to a regional war, could provide substantial support oil prices, as the supply chain of the international oil market would be threatened.

On the monetary front we note the release of Riksbank’s interest rate decision from Sweden. The bank is expected to cut rates by 25 basis points lowering the interest rate to 3.25%. Overall, the market tends to expect the bank to continue lowering its interest rate at every meeting until the end of the year. Yet the Swedish economy seems to be recovering hence the bottom for the interest rate may not be far. Should the bank cut rates as expected and at the same time signal that more rate cuts are to come we may see the SEK slipping, while signals from the bank that it’s preparing to end its monetary policy easing may support the Swedish Krona.

USD/SEK dropped yesterday testing the 10.1050 (S1) support line, yet during today’s Asian session edged higher. We tend to maintain our bearish outlook for the pair as long as the downward trendline guiding the pair since the 12 of September remains intact. We note that the RSI indicator remains between the readings of 50 and 30, implying a bearish predisposition of market participants. Should the bears continue to lead the pair, we may see USD/SEK breaking clearly the 10.1050 (S1) support line and aiming for the 9.9100 (S2) support level. Should the bulls take over, we may see the pair reversing course, breaking initially the prementioned downward trendline and aiming if not breaching the 10.2500 (R1) resistance line.

Staying in Europe we also note from the Czech Republic, CNB’s interest rate decision. The bank is expected to cut rates by 25 basis points in today’s meeting while the market seems to be currently pricing in a possible outsized rate cut in the November meeting. Please note that the bank had consistently cut rates in its past six meetings and should it signal further rate cuts to come we may see CZK weakening somewhat as the market’s expectations could be partially verified.

USD/CZK dropped yesterday, yet refrained from breaking, or even testing the 22.3200 (S1) support line. We tend to maintain a bias for a sideways motion for the pair between the 22.3200 (S1) support line and the 22.8000 resistance level. On the other hand, we note that the RSI indicator remains between the readings of 50 and 30, which tends to imply a bearish predisposition of the market for the pair’s direction. For a bearish outlook to emerge, we would require the pair to break the 22.3200 (S1) support line which provided support for the pair on the 26 of August and at the beginning of the year and even lower we note the 21.9660 (S2) support level. Should the bulls take over, we may see the pair reversing course and breaking the 22.8000 (R1) resistance line while even higher we set the next target for the bulls the 23.0450 (R2) resistance base.

今日其他亮点

Today in the European session, BoE policymaker Greene is scheduled to speak. In the American session, we note from the US the number of new home sales for August, while oil traders may be more interested in the release of the weekly EIA crude oil inventories figure. During tomorrow’s Asian session, we note that BoJ is to release the minutes of the July meeting and RBA is to release its financial stability review.