Forex News and Events

FOMC to stay on hold (by Arnaud Masset)

Six weeks ago the Federal Reserves decided it was time to start the tightening process, confirming its confidence in the economy. Since then financial markets experienced a massive storm with equity indices plummeting across the globe. Interest rates were also under pressure as the low inflation prospect together with a weak global growth outlook, prompting investors to buy bonds. So what should we expect from this FOMC meeting?

First of all, the odds that the Fed pursues the tightening process today are very (very) low; especially given the current market turmoil. The most hawkish Fed members were expecting four rate hikes in 2016; however, over the last few weeks several Fed members lowered the number of expected rate hikes down to two, realising that the Fed may have bitten more than it can chew. The market will be very sensitive to the wording used in today statement; we expect the Fed to acknowledge that the current market turmoil had modified the path of tightening. We believe it would already be a miracle if the Fed can hike rates two times this year - the odds for a March hike are now around 30% - meaning that a second step June is the more likely (roughly 50% chance). In conclusion, the market will try to read between the lines but with one eye already looking at the next meeting.

Higher Australian CPI provides some room to the RBA (by Yann Quelenn)

A week before the Australian rate decision, the consumer price index was released last night higher than expectations at 1.7% y/y vs 1.5 y/y. We must say that the continued decline of the Australian dollar versus the greenback has, in our minds, sent inflation higher. In 2015, the AUDUSD lost almost 13% of its value. The cost of imported items has increased and the current CPI increase is consequently mostly due to the weakening of the currency.

Nonetheless we have to note low commodities prices are still largely weighing on the Australian economy. Yet, we remain optimistic as the demand for Australian commodities is far from being weak. Next week, the Reserve Bank of Australia will fix its Cash Rate Target.

We believe that it should remain at 2%. Markets are pricing in a 94% likelihood that the rates will be kept on hold. The central bank is achieving its dual mandate; inflation is growing and jobs market conditions are largely improving. In 2015, around 300k jobs were added to the market and the unemployment rate is holding at 5.8%.

GBP/USD - Bullish Breakout.

GBPUSD

















































































Today's Key IssuesCountry/GMT
Nov Total Mortgage Lending YoY, last 12,50%EUR/08:00
Nov House Mortgage Approvals YoY, last 7,10%EUR/08:00
Jan Manufacturing Confidence s.a., exp 110,1, last 114,3, rev 115,1SEK/08:00
Jan Consumer Confidence, exp 97,5, last 98,7, rev 98,6SEK/08:00
Jan Economic Tendency Survey, exp 108, last 110,1, rev 110,3SEK/08:00
ECB Executive Board Member Coeure Speaks in FrankfurtEUR/08:00
Jan Consumer Confidence Index, exp 117, last 117,6EUR/09:00
Jan Business Confidence, exp 103,8, last 104,1EUR/09:00
Jan Economic Sentiment, last 105,8EUR/09:00
ECB's Lane Speaks at Conference in DublinEUR/09:15
BOE's Andrew Bailey speaks in DublinGBP/09:25
Dec BBA Loans for House Purchase, exp 45500, last 44960GBP/09:30
Jan FGV Consumer Confidence, last 75,2BRL/10:00
ECB Board Member Mersch Speaks in MunichEUR/11:00
janv..22 MBA Mortgage Applications, last 9,00%USD/12:00
Dec Personal Loan Default Rate, last 5,80%BRL/12:30
Dec Outstanding Loans MoM, last 0,60%BRL/12:30
Dec Total Outstanding Loans, last 3177bBRL/12:30
janv..25 CPI Weekly YTD, last 0,50%RUB/13:00
janv..25 CPI WoW, last 0,20%RUB/13:00
Abras December Supermarket SalesBRL/13:00
ECB Board Member Lautenschlaeger Speaks in FrankfurtEUR/13:00
Currency Flows WeeklyBRL/14:30
Dec New Home Sales, exp 500k, last 490kUSD/15:00
Dec New Home Sales MoM, exp 2,00%, last 4,30%USD/15:00
BOE's Minouche Shafik speaks in LondonGBP/16:30
Dec Total Jobseekers, exp 3576.9k, last 3574.8kEUR/17:00
Dec Jobseekers Net Change, exp 0, last -15EUR/17:00
janv..27 FOMC Rate Decision (Lower Bound), exp 0,25%, last 0,25%USD/19:00
janv..27 FOMC Rate Decision (Upper Bound), exp 0,50%, last 0,50%USD/19:00
janv..28 RBNZ Official Cash Rate, exp 2,50%, last 2,50%NZD/20:00
Dec Trade Balance, exp -131m, last -779mNZD/21:45
Dec Exports, exp 4.38b, last 4.08bNZD/21:45
Dec Imports, exp 4.48b, last 4.86bNZD/21:45
Dec Trade Balance 12 Mth YTD, exp -3584m, last -3678mNZD/21:45
Dec Eight Infrastructure Industries, last -1,30%INR/23:00
FOMC Holds Two-Day Policy Meeting and Issues Policy StatementUSD/23:00


The Risk Today

Yann Quelenn

EUR/USD lies in a short-term downtrend channel. Hourly resistance may be found at 1.1096 (28/10/2015 low) while hourly support can be found at 1.0524 (03/12/2015). Expected to show further very short-term increase. In the longer term, the technical structure favours a bearish bias as long as resistance holds. Key resistance is located region at 1.1453 (range high) and 1.1640 (11/11/2005 low) is likely to cap any price appreciation. The current technical deteriorations favours a gradual decline towards the support at 1.0504 (21/03/2003 low).

GBP/USD has exited the downtrend channel. Hourly resistance at 1.4363 (22/01/2016 high) has been broken but the pair failed to hold above it. Stronger resistance can be found at 1.5336 (19/11/2015 high). Expected to show further monitoring around 1.4350. The long-term technical pattern is negative and favours a further decline towards the key support at 1.3503 (23/01/2009 low), as long as prices remain below the resistance at 1.5340/64 (04/11/2015 low see also the 200 day moving average). However, the general oversold conditions and the recent pick-up in buying interest pave the way for a rebound.

USD/JPY is trading mixed. Hourly resistance lies at 123.76 (18/11/2015 high). Hourly support lies can be found at 115.98 (20/01/2016 low). Expected to show further weakness. A long-term bullish bias is favored as long as the strong support at 115.57 (16/12/2014 low) holds. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) is favored. A key support can be found at 116.18 (24/08/2015 low).

USD/CHF's uptrend momentum is still lively. Yet, the pair remains in the upward channel. Hourly support is located at 0.9876 (14/12/2015 low) and hourly resistance can be found at 1.0184 (24/01/2015 high) and at 1.0328 (27/11/2015 high). Expected to show continued strength. In the long-term, the pair has broken resistance at 0.9448 and key resistance at 0.9957 suggesting further uptrend. Key support can be found 0.8986 (30/01/2015 low). As long as these levels hold, a long term bullish bias is favoured.


Resistance and Support:





















EURUSDGBPUSDUSDCHFUSDJPY
1.15611.53361.1138135.15
1.13871.52421.0676125.86
1.10951.49691.0328123.76
1.08761.42941.0148118.2
1.05241.40.9786115.57
1.04581.36570.9476105.23
11.35030.9259100.82

This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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